July 18th, 2019
Kathy Speaker MacNett at SkarlatosZonarich
Everything Old is New Again
One of the very first major presentations I delivered as a business-side labor/employment attorney addressed the classification of workers as either Employees or Independent Contractors. During the subsequent decades, this topic continued to surface in a variety of different contexts. I successfully defended classification as an Independent Contractor in an unemployment compensation (UC) case in which a worker for multiple companies, from her own computer, provided services when and where she pleased. The company classified her as an Independent Contractor for UC and other employment purposes. She applied for unemployment, and was initially found to be an employee, eligible for benefits. The Commonwealth Court disagreed, determining that she was ineligible because she was really an Independent Contractor. CEC Credits Online v. UCBR, 946 A 2d 1162 (Pa. Comm. Ct. 2008). The Pennsylvania Supreme Court declined to review the case.
Recently, the topic of Independent Contractors was addressed by the federal National Labor Relations Board (NLRB) in an advice memorandum issued by an Associate General Counsel. Click Here. Much was at stake. If the workers were appropriately classified as Employees, those workers could unionize and strike. However, if those workers were appropriately classified as Independent Contractors, those organizational rights were not available to them.
On April 16, 2019, the Associate General Counsel to the NLRB considered the classification issue within the context of workers of Uber Technologies, Inc. because of five pending unfair labor practice charges against Uber. The drivers for Uber X and Uber BLACK provide their own cars, and entered into contracts in their individual capacities with a subsidiary of Uber. Uber offered each driver a phone and computer app. Uber notified drivers of persons interested in rides in a particular area. The Uber driver had absolute discretion to accept or reject each trip. Uber riders were asked to rate their drivers on a scale of 1-5 after the ride. Uber used the ratings to determine what rides to offer to certain drivers.
The NLRB's Advice applied the ten factor “Common Law Test” placing special emphasis in the shared-ride and taxicab industry on the amount of control that the company exercised over drivers and the relationships between compensation and the amount of fares collected. “[W]here the common-law factors, considered together, demonstrate that the workers in question are afforded significant entrepreneurial opportunity, [the Board] will likely find independent-contractor status.”
The NLRB's Counsel was persuaded by the “virtually unfettered freedom” of Uber drivers to set their own schedules; control of their work locations by choosing the timing to sign into the app: and simultaneously work for competitors. These factors gave Uber drivers significant control over their earnings. Drivers were also required to indemnify and hold Uber harmless for liability based on their own conduct, indicating that the drivers bore the risk of loss. Given the totality of the circumstances, the NLRB's Advice did not place much weight on the workers’ integral involvement with the Employer’s regular business of transporting customers.
The NLRB’s Advice is consistent with a DOL Opinion Letter (FLSA 2019-6) on service providers obtained through the virtual marketplace. Click Here.
BOTTOM LINE: Different agencies will apply different tests to determine if workers are Independent Contractors or Employees. The “Common Law Test” does not fit every circumstance, and application of other tests, such as the “Economic Realities Test” by another administrative agency or court for a different purpose may yield a different result. Some agencies commonly “default” to classification of a worker as an Employee. However, this NLRB's Advice, if followed, is a hugh win for businesses wishing to utilize workers in non-traditional, creative ways in the still emerging “gig economy.”
This blog was written by Kathy Speaker MacNett at SkarlatosZonarich, who authors our Model Policies and Forms for Pennsylvania Employers. You can find additional articles at Insights on their website.