Uber Drivers are Independent Contractors – NLRB and Department of Labor Weigh In
Carol Keough May 15, 2019An Advice Memorandum from the Associate General Counsel from the National Labor Relations Board (General Counsel) issued on May 14, 2019 concluded that UberX and UberBlack drivers were independent contractors by applying a common-law agency test. In an opinion letter from the Department of Labor (DOL) issued on April 29, 2019, the Department of Labor found that service providers for an online/smartphone virtual marketplace-based referral service who were paid on a per job basis were independent contractors under an economic realities test.
More and more companies are currently looking at hiring workers who contract for short term assignments to reduce labor costs. The NLRB General Counsel determined that Uber drivers did not meet the definition of employees for purposes of filing an unfair labor charge or establishing and organizing a union under federal law. The DOL Wage and Hour Division determined that service providers (including transportation services) for a virtual referral service did not meet the definition of employees for purposes of payment of minimum wage and overtime. These opinions do not prevent states from providing greater protections to the workers in their states under state law such as California, New York and Massachusetts. However, these opinions are significant in Texas as employers analyze whether a worker can be properly classified as an independent contractor or an employee.
In both the instances of the Uber drivers and the service providers, the company and the workers had a service agreement which defined the relationship of the companies and the workers. However, that alone was not a deciding factor. The NLRB General Counsel reviewed all the common-law factors through a “prism of entrepreneurial opportunity” and found significant that UberX drivers had “entrepreneurial opportunity” by the complete control of their cars, work schedules, freedom to choose log-in locations and to work for competitors of Uber. The DOL also looked at the factor of control of the referral service over the service providers (right to compete or work for a competitor) and permanency of the relationship as shown by a working relationship that was not exclusive. The Uber drivers and service providers could accept or reject work offered and service providers also controlled “when, where, how and for whom they worked.”
For employers, the opinion letter and the memorandum provide insight into how to conduct a careful analysis of a potential worker’s classification. Although all factors of the common law agency test (in the memorandum) and the economic realities test (in the opinion letter) were considered, control over the work, right to work for competitors of the company and the right of the worker to control how well they did economically were significant if finding independent contractor status for the Uber drivers and the service providers.