Since the emergence of the “gig economy” in the last decade, courts and government agencies have grappled with the question of whether gig workers should be classified as employees or contractors.  The answer to that question has enormous consequences for employee coverage under various federal and state employment laws, ranging from anti-discrimination statutes like Title VII to wage-and-hour laws like the Fair Labor Standards Act.  Generally, these laws usually only cover employees, and exclude contractors.

The National Labor Relations Board, which administers the National Labor Relations Act, recently weighed in on the issue.  The Division of Advice, which is within the office of the NLRB’s General Counsel, recently published a memorandum describing the reasons why Uber drivers are considered to be contractors, not employees for purposes of the NLRA.  This means that Uber Drivers do not enjoy the protections of the NLRA, including, among other privileges, the right to strike and organize with fellow employees to try to improve wages and working conditions.

Like other employment laws, the NLRA applies only to employees, and expressly excludes independent contractors from its coverage.  When a worker’s classification as an employee or contractor is in question, the NLRB applies a factor test that is rooted in the common law of agency.  Of the many factors that may be considered (the list of factors is non-exhaustive), the NLRB especially looks to the extent of control by the purported employer over the worker and the extent of “entrepreneurial opportunity” of the worker.  The greater the worker’s entrepreneurial control, the more likely the worker will be considered a contractor, rather than an employee.

The memo found that Uber drivers are contractors for two core reasons.  First, Uber does not exert a sufficient amount of control over drivers to be consider their employer.  The drivers have “near complete control” of their schedules, and can log on or off the platform at any time for any reason.  Uber does not assign rides to particular drivers, provide cars or other equipment (drivers supply their own cars), or supervise drivers while they are logged into the app and working, which is essentially outsourced to the passenger rating system.  Indeed, Uber has a “hands off” approach to its drivers.

Second, the system created by Uber for drivers generally allows for drivers to control their own entrepreneurial destiny.  Uber’s lack of control provides room for the drivers to serve their own economic objectives and interests (i.e., the more you work, the more you can potentially earn and vice-versa).  Of note, Uber’s rules allow for drivers to utilize other ridesharing apps or pursue other transportation-related businesses in addition to driving for Uber.

Due to Uber’s lack of control over drivers and the entrepreneurial opportunity of drivers, the General Counsel found that the drivers were contractors who do not enjoy the protections of the NLRA.  For this reason, the Division of Advice ordered that the driver’s complaints be dismissed.

The drivers can appeal the dismissal to the NLRB’s General Counsel or withdraw their complaints prior to formal dismissal.  It is expected that the General Counsel would agree with the conclusions of the Advice memo.  While the memo is not technically binding on the NLRB, the General Counsel’s office controls the cases that are brought before the NLRB, so, without a case on which to rule, the NLRB cannot “overrule” it.

Significantly, however, the memo’s proposition that Uber drivers are contractors is also supported by recent Board precedent.  In SuperShuttle DFW, 367 NLRB No. 75 (2019), which was decided before the Uber memo, the Board found that drivers of a shared airport ride service were independent contractors, not employees, and thus were not covered by the Act.  Although this Board decision did not concern workers of rideshare companies, it is still expected to have a wide-ranging impact on gig economy companies reliant on a freelancing and/or sporadic workforce.  In fact, in finding that SuperShuttle drivers were independent contractors, the Board relied on several facts about their work that are also true for Uber drivers (e.g., Uber drivers decide when to work and what hours to work, which trips to accept, and when to turn on the device that alerts them to an available trip).

In sum, this Advice memo and the SuperShuttle decision clarifies Board precedent in this area. This precedent will likely affect not just these particular Uber drivers subject to the complaints before the NLRB, but also the gig economy as a whole (e.g., Lyft or Via drivers).  In addition, although this opinion may be limited to the NLRA, courts and other agencies apply similar factor tests under other laws (Title VII, FLSA, FMLA, etc.).  Therefore, this memo may be cited, or its arguments may be relied upon, by parties in future disputes over employee/contractor status.  The memo represents an important step to provide clarity for businesses operating in the modern gig economy.

Andrew MacDonald is an associate in the firm’s Labor and Employment Department, resident in its Philadelphia office.