The National Labor Relations Board (NLRB) released an advice memorandum on May 14, 2019, in which it advised that Uber drivers are not “employees” of the company, but rather independent contractors.
The move is the first major policy decision under the Trump Administration dealing with the “gig” or “sharing” economy. A gig economy is one in which temporary, flexible jobs are commonplace and identified through the hiring of independent contractors and freelancers, as opposed to full-time employees. The NLRB’s memorandum strikes a major blow for drivers of Uber and its main competitor, Lyft, who were attempting to engage in concerted activity to demand higher pay and better working conditions. Essentially, this memorandum means that Uber drivers are without federal protection for organizing activities, depriving them of a forum to unionize or file unfair labor practice charges. This decision also comports with a recent Department of Labor conclusion that “gig workers” are also properly classified as independent contractors. Notably, these decisions reversed the approach of the Obama Administration, which had suggested that gig workers, like Uber drivers, were likely employees.
While the memorandum does not establish law, it carries great weight with how the NLRB will interpret and enforce federal labor law. The immediate effect of this memorandum will likely be the dismissal of separate charges against Uber, either voluntarily by the drivers who originally filed them or by the regional NLRB offices themselves. Moreover, this decision may help Uber’s falling stock prices, following its initial public offering last week, as increased labor costs were proving to be a point of concern among investors, with some suggesting that Uber may have faced a 20-30% increase in costs if drivers successfully organized.
Interestingly, while citing a number of factors used in determining whether a worker is properly classified as an employee or a contractor, the memorandum focused on the “entrepreneurial opportunity” of the drivers. The memorandum cited Uber’s business model: Even though Uber retained portions of the fares under a “commission-based system,” the company gave significant control to the drivers, including “virtually complete control” of their cars, schedules, and log-in locations. Uber also did not restrict its drivers from working for Lyft, as many a rider has seen when ordering a ride and having the driver arrive with both Uber and Lyft stickers identifying the vehicle.
Some labor-side critics of the memorandum have already pointed out that the memorandum gives little consideration to factors indicating employment, such as performing functions that are core to the business or the fact that the “entrepreneurial opportunities” are almost eliminated by the fact that drivers are unable to set prices for their services.
While this memorandum certainly deals a significant blow against Uber drivers’ organizational efforts, the fight is far from over. But for the immediate future, the drivers are in for an uphill battle.