In a new Advice Memorandum, the general counsel of the National Labor Relations Board (NLRB) declared that Uber drivers are independent contractors and not employees.
Multiple charges were filed with the NLRB by UberX and UberBLACK drivers, seeking to be classified as employees of the app-based ride-sharing platform. Applying the common law agency test set forth in a January 2019 agency case, SuperShuttle DFW, Inc., Associate General Counsel Jayme L. Sophir of the NLRB’s Division of Advice concluded that the drivers are independent contractors.
SuperShuttle established ten nonexhaustive common law factors enumerated in the Restatement (Second) of Agency to consider when making an inquiry into whether a worker is an employee or independent contractor:
“(a) The extent of control which, by the agreement, the master may exercise over the details of the work; (b) Whether or not the one employed is engaged in a distinct occupation or business; (c) The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision; (d) The skill required in the particular occupation; (e) Whether the employer or the workman supplies the instrumentalities, tools and the place of work for the person doing the work; (f) The length of time for which the person is employed; (g) The method of payment, whether by the time or by the job; (h) Whether or not the work is part of the regular business of the employer; (i) Whether or not the parties believe they are creating the relation of master and servant; and (j) Whether the principal is or is not in business.”
In the shared-ride and taxicab industries, the board also noted that it gives “significant weight” to the extent of the company’s control over the manner and means by which drivers conduct business, as well as the relationship between the company’s compensation and the amount of fares collected.
The most important factor: the level of company control in the context of its effect on entrepreneurial opportunity, the NLRB explained.
Considering all of the factors, the board found the drivers were independent contractors. “The drivers had significant entrepreneurial opportunity by virtue of their near complete control of their cars and work schedules, together with freedom to choose log-in locations and to work for competitors of Uber,” according to the Memorandum. “On any given day, at any free moment, drivers could decide how best to serve their economic objectives: by fulfilling ride requests through the App, working for a competing ride-share service or pursuing a different venture altogether.”
Drivers had “virtually unfettered freedom” to set their own work schedules, controlled their work locations and could—and often did—work for competitors, the NLRB emphasized, three factors that imbued the drivers with “significant control over their earnings.”
Uber did maintain minimum service standards and provide customer feedback channels to learn of customer service issues, the Memorandum acknowledged. But these facts did not indicate significant employer control nor interfered with the drivers’ economic opportunities.
Other factors weighed in support of independent contractor status, including that drivers provided the principal instrumentality of their work (the car) and were responsible for expenses such as gas, cleaning and maintenance; operated without supervision by Uber; and understood their relationship to be one of independent contractor (with Uber providing IRS 1099 forms to drivers and not withholding taxes or Social Security).
A few factors pointed toward employee status—such as the fact that no special skills or experience were required to drive for Uber and that drivers worked as part of Uber’s regular business of transporting passengers—but these lacked the strength of the evidence found in the other factors, the NLRB said.
“Considering all of the common law factors through ‘the prism of entrepreneurial opportunity’ set forth in SuperShuttle, we conclude that [the drivers] were independent contractors,” according to the Memorandum.
To read the Advice Memorandum, click here.
Why it matters: The NLRB Advice Memorandum will have an impact not just on Uber and other ride-sharing companies, but on the greater gig economy, as the board found that the business model reflected an independent contractor relationship and not one of employer/employee. Uber still faces litigation from drivers across the country, however, who are seeking classification as employees (and the accompanying benefits).