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Uber received a major win earlier this month when the National Labor Relations Board (NLRB) categorized Uber drivers as independent contractors, not employees. Consequently, the NLRB has deemed it will not prosecute the pending National Labor Relations Act (NLRA) charges on behalf of the Uber drivers. Despite the NLRB categorization, the California Supreme Court recently categorized workers using a different test.
The “gig economy” refers to technology-enabled work where the worker is both connected to and paid by the consumer via a technology platform. The widespread access to mobile technology has increased the scale of the gig economy in recent years. In the case of Uber, or its competitor Lyft, a working driver is connected to a passenger via Uber’s or Lyft’s platform.
Other gig economy platforms include Airbnb where homeowners lodge travelers, Etsy where crafters sell homemade goods to consumers, and TaskRabbit where handymen and handywomen and movers fulfill tasks for customers. While debate over whether Uber drivers are independent contractors or employees has been more high-profile than any of the other gig economy platforms, each technology platform that caters to the gig economy has been doing their own homework to ensure their workforce is properly labeled as independent contractors.
In addition to the determination by the NLRB that Uber drivers are independent contractors, an opinion letter issued by the Federal Department of Labor (DOL) in late April 2019 also clarified its stance that gig economy workers are properly classified as independent contractors under the Fair Labor Standards Act (FLSA). While the letter doesn’t specifically state to which companies the determination could apply, the letter covers those that “provide a referral system that connects service providers with consumers,” which likely covers ride-sharing companies such as Uber.
In contrast to the NLRB and DOL’s categorization of gig economy workers, the state of California is categorizing gig economy workers differently. In April 2018, the California Supreme Court adopted a three part test requiring hiring entities to demonstrate the following to classify their workers as independent contractors: “(A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, (B) that the worker performs work that is outside the usual course of the hiring entity’s business, and (C) that the worker is customarily engaged in an independently established trade, occupation, or business.” Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903, 964 (2018), reh’g denied (June 20, 2018). Unless the hiring entity can demonstrate all three elements, the worker is classified as an employee. Thus, while the NLRB and the DOL can classify gig economy workers one way, it does not prevent a state such as California from classifying gig economy employees another way.