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Department of Labor and the NLRB Consider Whether Gig Workers Are Independent Contractors

Published by on June 24, 2019

The two agencies recently released guidance advising that certain gig workers—workers who perform temporary, flexible jobs (often obtained through a virtual platform)—were not employees, but independent contractors.

DOL Opinion Letter:

On April 29, 2019, the U.S. Department of Labor (DOL) issued an opinion letter in response to a question concerning an online referral service company that connects workers who provide services such as transportation, delivery, shopping, etc. to end market consumers seeking such services. The “service providers” for the company are required to provide contact information, their social security number, experience and qualifications, and complete a background check. Additionally, they must sign a terms of use agreement and service agreement, which disclaims any employment relationship between the service provider and the company and classifies the service providers as independent contractors. The company does not require the providers to be interviewed or complete training. While the company sets default service prices, service providers may request to charge different prices. Service providers are free to accept or reject jobs or work for competitors.

The DOL concluded based on these facts that the service providers were independent contractors and provided services directly for the consumer rather than working directly for the company. In other words, there was no indication that the service providers were economically dependent on the company because: 1) the company did not appear to exercise control over its service providers; 2) there was no permanent working relationship; 3) the company did not invest in equipment or resources for the service providers; 4) service providers could use discretion to choose service opportunities and maximize profits; 5) service providers could control their amount of profit or loss; and 6) service providers used the company’s virtual platform to obtain service opportunities but did not develop, maintain, or otherwise operate that platform.

NLRB Advice Memorandum:

The National Labor Relations Board (NLRB) reached a similar conclusion in an advice memorandum released May 14, 2019. The NLRB analyzed whether Uber drivers were independent contractors for purposes of the National Labor Relations Act, based on Uber’s policies and business model from 2015 to 2016. Riders would open the app, and drivers could choose whether to accept or reject the trip. The rider paid the fare through the app, and Uber retained a percentage of the fares and remitted the remaining fare amount to the driver. Riders also rated Uber drivers, and higher-rated drivers could receive access to more profitable opportunities.

In its memorandum, the NLRB applied the common-law agency test factors as outlined in its SuperShuttle opinion (which we covered here). In determining that the Uber drivers were independent contractors, the NLRB focused on several aspects of the relationship between the drivers and Uber, including the drivers’ almost complete control of their cars, work schedules, and locations, as well as their ability to work for competitors. The NLRB also noted the drivers’ lack of supervision, investment in their work, and their understanding that they were not employees weighed in favor of finding that the drivers were independent contractors.

Welter Insight

Although the guidance issued by the DOL and NLRB is not law and is not binding on courts, it provides useful arguments for companies to utilize the next time they are faced with a claim that gig workers are their employees. Companies, however, should continue to look to the law of their specific jurisdiction, as some states may continue to view gig workers as employees and offer additional protections.

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