NLRB Says Uber Drivers Are Independent Contractors

NLRB Says Uber Drivers Are Independent Contractors

The National Labor Relations Board (NLRB or Board) is the latest to weigh in on whether gig economy workers are independent contractors or employees. The NLRB recently published an advice memorandum concluding that UberX and UberBlack drivers are independent contractors. Accordingly, they are not covered under the National Labor Relations Act (NLRA) and may not form a union for the purposes of collective bargaining and filing unfair labor practices charges.

National Labor Relations Act

The NLRA grants employees the right to form or join unions; engage in protected, concerted activities to address or improve working conditions; or refrain from engaging in these activities. Section 7 specifically guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right “to refrain from any or all such activities.”

Most employees in the private sector are covered under the NLRA. However, the NLRA’s definition of “employee” expressly excludes “any individual having the status of an independent contractor.”

NLRB’s Uber Decision

In its advice memorandum, the NLRB’s General Counsel concluded that UberX and UberBLACK drivers are independent contractors. In reaching its decision, the NLRB applied the ten nonexhaustive common-law factors enumerated in the Restatement (Second) of Agency:

• The extent of control which, by the agreement, the master may exercise over the details of the work.
• Whether or not the one employed is engaged in a distinct occupation or business.
• 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.
• The skill required in the particular occupation.
• Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.
• The length of time for which the person is employed.
• The method of payment, whether by the time or by the job.
• Whether or not the work is part of the regular business of the employer.
• Whether or not the parties believe they are creating the relation of master and servant.
• Whether the principal is or is not in business.

As set forth in its memorandum, the Board gave significant weight to two factors: (1) the extent of the company’s control over the manner and means by which drivers conduct business and (2) the relationship between the company’s compensation and the amount of fares collected. It also relied heavily on its decision in SuperShuttle DFW, Inc., in which the Board altered its factors for the independent contractor inquiry to place greater emphasis on “entrepreneurial opportunities” rather “economic realities.”

“Drivers’ virtually complete control of their cars, work schedules, and log-in locations, together with their freedom to work for competitors of Uber, provided them with significant entrepreneurial opportunity. On any given day, at any free moment, UberX 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,” the memorandum stated. “The surge pricing and other financial incentives Uber utilized to meet rider demand not only reflect Uber’s “hands-off” approach, they also constituted a further entrepreneurial opportunity for drivers. Although Uber limited drivers’ selection of trips, established fares, and exercised less significant forms of control, overall UberX drivers operated with a level of entrepreneurial freedom consistent with independent-contractor status. “

The Board’s General Counsel further concluded that the drivers’ lack of supervision, significant capital investments in their work, and their understanding that they were independent contractors also weigh heavily in favor of that status. It also downplayed the importance of factors that suggested employee status. “Although Uber retained portions of drivers’ fares under a commission-based system that may usually support employee status, that factor is neutral here because Uber’s business model avoids the control of drivers traditionally associated with such systems and affords drivers significant entrepreneurial opportunity,” the memo stated. “The other factors supporting employee status—the skill required and our assumption that drivers operated as part of Uber’s regular business, and not in a distinct business or occupation—are also of lesser importance in this factual context. Accordingly, we conclude that UberX drivers were independent contractors.”

Given its conclusion, the NLRB’s General Counsel advised that it will not prosecute unfair labor practices under the NLRA on behalf of Uber workers. It directed the Board’s regional offices to dismiss all pending charges, absent withdrawal.

Key Takeaway for Businesses With Gig Workers

The NLRB’s memo is good news for Uber and other gig economy businesses because it concludes that workers are not entitled to unionize and benefit from the other protections of the NLRA. Nonetheless, it is also important to recognize that other federal agencies, such as the IRS, have their own guidelines to determine who is and isn’t an independent contractor. In addition, many states, including New Jersey, have their own independent contractor tests as well. To avoid facing liability for misclassification or other employment issues, it is imperative to consult with experienced counsel.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Liana M. Nobile, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.