Say It Like You Mean It! NLRB Says Uber Drivers are Independent Contractors

All You can Eat Seats - Independent contractor misclassification

Section 223 looks delicious!

I was in Phoenix last week and saw this sign at a Diamondbacks Game. The seats in Section 223 were probably plastic and hard to chew but otherwise looked pretty tasty. Still, I don’t think I could eat more than a few at a time.

Ok, I know what the sign intended, but my reading is a fair one too. Right? The message wasn’t quite clear.

The NLRB was much more clear in the message it sent last week in an Advice Memorandum from the Office of the General Counsel. The Board opined that UberX and UberBLACK drivers were independent contractors, not employees of the ride-share app.

The opinion letter applies only to federal labor law (the NLRA), not to wage and hour law, employee benefits law, tax law, or the vast potpourri of state laws, but it’s another sign that the current administration is intent on protecting independent contractor relationships — if the relationships are properly structured.

The memo applied the same Right to Control Test for determining Independent Contractor vs. Employee that the Board used in January in its SuperShuttle decision. In SuperShuttle, the Board ruled that a group of airport van drivers were independent contractors, not employees, under the National Labor Relations Act. The ten-factor Right to Control Test used by the Board is explained here.

This NLRB Advice Memorandum arrives less than three weeks after a similar opinion letter from the Department of Labor (DOL). The DOL’s April 29 letter concluded that service providers who use “virtual marketplace” apps to find customers are independent contractors, not employees. While the letter doesn’t identify the app it reviewed, the DOL’s analysis seems to apply to Uber and other ride-share apps and to the service providers (drivers) who use these apps to find customers. The DOL’s letter addressed only the Fair Labor Standards Act (FLSA), which applies a six-factor Economic Realities Test for determining Independent Contractor vs. Employee. Different law, different test. 

Here are four takeaways from the two letters, viewed together:

  1. Different tests apply to different laws, even for similar circumstances. That’s been a consistent theme in this blog, and these two letters — one interpreting the NLRA and the other interpreting the FLSA — reinforce the different approaches. Click here for a chart showing the different tests for Independent Contractor vs. Employee, as of January 2019.
  2. The current administration and its executive agencies are much friendlier toward independent contractor relationships than their Obama-era predecessors. The Obama DOL and NLRB were outright hostile toward independent contractor relationships (see examples here for DOL and here for NLRB), so this is a major change.
  3. These are not court decisions and do not bind the federal courts, even as to NLRA and FLSA cases.
  4. These opinions apply only to the NLRA and the FLSA — two of the many federal laws that apply only to employees, not independent contractors. The opinions do not directly impact federal tax law or employee benefits law, and they do not impact any of the myriad state laws. In other words, the states don’t care.

The area of independent contractor misclassification and the never-ending quest to determine Who Is My Employee? continues to evolve at a pace that should keep readers on the edge of their seats. Just don’t sit too close to the edge, because if you abandon your seat, someone at a D-Backs game might try to eat it.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Going Mobile? DOL Endorses Independent Contractor Model for Virtual Marketplace Apps

Opinion letter mobile app

Long before mobile apps were a thing, Pete Townsend and The Who were already going mobile. In the 1971 song, Townsend sings about the virtues of life on the open road, living in a mobile home. I’m an air-conditioned gypsy.

In an important opinion letter released this week, the DOL went mobile too, lending support to businesses in the “on-demand” or “sharing” economy. The letter is the first significant ruling that supports independent contractor status for service providers who obtain work through virtual marketplace apps.

A virtual marketplace app is a matchmaking service. It connects consumers who need a service (driving, housekeeping, handyman, anything) with service providers who do the work. Virtual marketplace companies (VMCs) are frequently the target of misclassification claims. In these types of claims, service providers — and the plaintiffs’ lawyers who love them — file lawsuits claiming that the service providers are really employees of the VMC. Frequent targets have been Uber, Lyft, Doordash, and Grubhub.

In Monday’s letter, the DOL opined that service providers are indeed independent contractors of the VMC, not its employees, at least under the facts of this particular case. The letter does not identify the specific VMC at issue, but the facts in the letter are going to be generally applicable to lots of VMCs.

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Can You Offer Paid Vacation to Independent Contractors?

Can you offer paid vacation to independent contractorsVacation is all the Go-Go’s and their misplaced apostrophe ever wanted. Vacation, had to get away. Vacation, had to be spent alone.

Employees want vacation too, and so do independent contractors. Should your company’s vacation policy apply to independent contractors too? Can you grant your independent contractors a certain amount of paid vacation?

Not a good idea.

In the various tests for Independent Contractor vs. Employee, one of the recurring themes is that a contractor is in business for himself/herself.  The contractor is supposed to be able to work when he or she wants, so long as deadlines are met.

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Slip Slidin’ Away? Truckers’ Fall Short in Bid to Overturn California’s Dynamex Standard (Plus: Bonus Quiz for Paul Simon Fans)

Truckers Western States dynamex independent contractor misclassificationIt seems a little presumptuous that when Paul Simon released the single, “Slip Slidin’ Away,” he released it as one of two new songs on his 1977 Greatest Hits, Etc. album. How is it a greatest hit before it’s been released? But sure enough, the song rose to #5 on the Billboard charts. Today’s Challenge: Ten bonus points will be awarded to anyone who can name the other new song that debuted on Simon’s 1977 Greatest Hits, Etc. compilation. The answer is at the end of the post.

In July, we wrote about “Convoy,” a 1975 song about a fictional trucker rebellion, as a way to introduce a new lawsuit filed by the Western States Trucking Association. The lawsuit seeks to invalidate California’s burdensome ABC Test (the Dynamex test), which is now used to determine who is a contractor and who is an employee under California wage and hour law.  The truckers argued that the law — as applied to truckers — was preempted by federal laws that seek to promote uniformity in the interstate transportation industry.

Based on a recent decision in a California federal court, the truckers’ hopes of invalidating Dynamex may be Slip Slidin’ Away.

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Independent Contractor Misclassification Claim Fails, in Part, Due to Plaintiff’s Goat Farm

Goat independent contractor misclassification

The face that sunk a lawsuit?

In my house, we sometimes have bizarre but short conversations about job functions.  A recent example:

Lindsay: I think I want to do a job that helps people.

Andy: Doesn’t every job help people?

Me: Not executioner.  

This post is about a case involving directional drilling consultants.  And while that sounds like the job title of a scene director in the porn industry, it’s actually a job involving subterranean oil and gas exploration.  Directional drilling consultants (DDs) advise drilling companies how to aim their directional drills when drilling a well that starts down a vertical path, then switches to horizontal.  This allows the company to drill discretely in areas away from home.  Like Josh Duggar.  

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Arbitration Agreements & Staffing Company Workers: Can They Take You Anywhere You Want to Go?

1956 chevy bel air Arbitration agreements staffing agency

1956 Chevy Bel Air. The Ides of March’s Vehicle was a ‘55.

I’m your vehicle baby. I can take you anywhere you want to go.

That may be true for Jim Peterik, vocalist and frontman for The Ides of March, who issued this bold proclamation in the band’s 1970 single, “Vehicle.” (It worked. See more below.)

It’s not true for arbitration agreements, though. They can’t take you anywhere you want to go unless you draft them very carefully. A recent decision by the First Circuit Court of Appeals reminds us of this lesson, although the opinion disappointingly fails to quote the Ides of March.

In Hogan v. SPAR Group Inc., we have an independent contractor named Paradise Hogan (which seems like would have been a cool name for a rock band); a staffing company called SBS; and a retail services provider called SPAR.  SPAR contracted with the staffing company to use the services of its independent contractors, including Hogan.

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Do Pre-Employment Laws Apply When Running Background Checks on Independent Contractors? (Tip: Instead, Just Ask Edward)

Time traveller independent contractor background check requirements

A time traveler named “Edward” claims to have photographic proof that he is visiting from 5,000 years in the future. According to Metro UK, he described his experience as “unbelievable.” Ponder that.

One of the benefits of time travel is that you’d know if your workers are going commit crimes in the future that could jeopardize your company. With people like Edward in short supply, we are instead forced to try to predict future behavior through more widely accepted methods, like reading tarot cards or performing background checks. (Free tip: pick the latter.)

There are federal and state laws that strictly regulate the processes and procedures for running pre-employment background checks. A Ninth Circuit Court of Appeals decision last week highlights the importance of following all technical requirements, including that employers provide a “clear and conspicuous disclosure” that they may run a background check and that the disclosure is “in a document that consists solely of the disclosure.” In that decision, the court ruled that it’s illegal to provide a disclosure that includes state law disclosures on the same page as the federal disclosure. It is common for employers to combine these disclosures on the same form, so check your forms! I blogged about the ruling here, on BakerHostetler’s Employment Class Action blog.

In contrast, the rules for running background checks on independent contractors are not as strict. The federal law requiring a stand alone disclosure applies only to reports being run “for employment purposes.” Same thing for the pre-adverse action notification requirement. It applies only to reports that are run “for employment purposes.”

Interpreting the “for employment purposes” language, at least three federal courts have ruled that a report on a prospective independent contractor is not being run “for employment purposes” and, therefore, these requirements do not apply to reports being run on independent contractors. (The FTC has issued guidance that the “for employment purposes” requirements do apply to independent contractors, but the courts have so far rejected this guidance as being inconsistent with the language of the statute.)

Some of the requirements in the Fair Credit Reporting Act (FCRA) may still apply, depending on the purpose of the report, but the bottom line is that the rules are different for background checks being run on employees and independent contractors. The FCRA is somewhat complicated, and don’t forget the patchwork of state laws.

There’s also the risk of misclassification — that the independent contractor could be deemed an employee — in which case the FCRA and state law requirements for pre-employment background checks would need to be followed, and the failure to follow them can be costly. The FCRA allows for statutory damages of $100 to $1,000 per violation, plus attorneys’ fees.

So if you’re afraid of a misclassification claim should you just follow the “for employment purposes” requirements anyway? Not necessarily. Though it can be prudent to follow some of the technical disclosure and pre-adverse action requirements that apply to pre-employment checks, be careful about using any forms with independent contractors that say the background check is being run “for employment purposes.” In other words, the forms you are using for pre-employment background checks might not be suitable for use with independent contractors.

This earlier blog post discusses more of the issues (and potential risks) related to running background checks on independent contractors.

There are plenty of good reasons to run background checks on some types of contractors, particularly those who will be entering customers’ homes. The goal, of course, is to try to predict the risk of future wrongdoing. Background checks can be useful for that purpose.

But the only surefire way to know what is going to happen in the future is to ask Edward.

For more information on joint employment, gig economy issues, and other labor and employment developments to watch in 2019, join me in Philadelphia on Feb. 26 or Chicago on Mar. 21 for the 2019 BakerHostetler Master Class on Labor Relations and Employment Law: Meeting Today’s Challenges. Advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com. If you list my name in your RSVP, I will have your registration fee waived.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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