As workers across the country prepared for a long Labor Day weekend, the National Labor Relations Board (NLRB) quietly issued another blow to the increasingly powerful movement of ride-hail drivers and gig workers locked in a high-profile struggle with Uber, Lyft and other tech firms that hire millions of people as independent contractors.
In a major win for employers, the NLRB ruled last Thursday that misclassifying workers as independent contractors rather than employees is not by itself illegal. The case involved a medical courier service that unlawfully fired a driver after she contested the company’s assertion that she and fellow drivers were independent contractors and not employees.
The ruling came down as Uber, Lyft and DoorDash launched a multi-million-dollar effort to undermine legislation in California known as Assembly Bill 5 (AB 5) that would require the companies to treat drivers as employees rather than independent contractors.
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Under federal law, employees are guaranteed benefits such as a minimum wage, sick days, health care and have the right to organize a union without threat of retaliation. Employees cannot be fired simply for filing legitimate complaints with bosses. However, an independent contractor does not enjoy the same protections, because they are considered an independent business working under contract, even if that business is just one worker.
In the medical courier case, the NLRB managed to rule in favor of an individual worker but advance a legal theory that benefits employers like Uber and Lyft. The board ruled that the medical service driver was indeed an employee and therefore could not be fired for lodging complaints. However, the board simultaneously reversed an Obama-era legal position and ruled that companies can “miscalculate” and incorrectly tell employees that they are independent contractors without running afoul of federal labor law.
The NLRB is stacked 3-1 (with one vacancy) with Republicans, including two conservatives appointed by President Trump. In a 3-1 ruling, they argued it may be difficult for employers to determine whether workers qualify as employees or contractors under a myriad of standards and laws. The lone Democrat on the board dissented, arguing that misclassification has a chilling effect on workers attempting to assert their rights – especially when workers get fired for speaking up.
Connecting the Dots
Hiring workers as independent contractors is the backbone of the “gig economy” exemplified by companies like Uber and Lyft that have faced worker strikes and protests in California and across the world over their employment practices. The companies essentially argue that workers are given the “flexibility” to work when and how much they want as independent contractors.
The companies save money because they are not required to provide benefits, guarantee a minimum wage or negotiate with a union, and they claim their business model depends on it. Worker-activists and labor organizers say Uber and Lyft drivers are struggling to survive under this model, and many provide the same scale of labor as employees.
“Flexibility is their favorite word, but in reality, you talk to any driver, there is no flexibility, I don’t care what they say,” Rebecca Stack-Martinez, a former Uber and Lyft driver in San Francisco and organizer with Gig Workers Rising, said in an interview with Truthout. “You can log on [to the Uber or Lyft app for drivers] when you want, but if you want to make money, you log in during peak hours. If you want to make a living, you work 60 hours a week.”
The debate has become a flashpoint in places like California and New York City, where demand for ride-hail drivers is high – but so is rent and the general cost of living.
Last week, Stack-Martinez helped organize a caravan of Uber and Lyft drivers who rallied across California in support of AB 5 and the right to form a union. She said the NLRB ruling sends a clear message to Uber and Lyft: “Don’t worry about breaking the law and misclassifying those gig workers, we won’t hold you accountable,” Stack-Martinez said.
It all goes back to a 2018 California Supreme Court ruling known as Dynamex that set a standard for determining whether a worker is an employee or an independent contractor known as the ABC test. According to the statewide ruling, a worker who is “free from the control and direction of the hirer in connection with the performance” and “performs work that is outside the usual course of the hiring entity’s business” can be hired as an independent contractor instead of an employee.
Under this standard, an example of such an independent contractor would be a freelance journalist who writes for several publications but is not on staff at any of them. But what about an Uber driver who works 50 hours a week trying to make ends meet? Are they performing work that is “outside the usual course” of the company’s business?
“According to [the] ABC test, we already are employees so they have been misclassifying us…. AB 5 would make that clear,” Stack-Martinez said.
AB 5 would codify the ruling into law, forcing Uber and Lyft to hire drivers as employees rather than independent contractors – and provide them with all the rights and benefits guaranteed under federal law, including a guaranteed minimum wage. AB 5 is quickly advancing through the California legislature, and Uber and Lyft are pulling out all the stops to wriggle out from under it.
Earlier this month, the labor law firm Littler published that is critical of AB 5 and its potential legal and economic implications. Stack-Martinez called the analysis “one-sided.” She also noticed that William J. Emmanuel, one of the Republican NLRB members behind last week’s worker misclassification ruling, formerly worked for Littler.
Uber and Lyft have faced several lawsuits in California and Massachusetts, which have similar protections for gig workers, for misclassifying ride-hail drivers as independent contractors rather than employees. Appeals courts are looking at whether the Dynamex decision could be applied retroactively in regards to multi-million dollar settlements in these cases, which could put the companies of the hook for years of back pay.
Earlier this year, the NLRB issued a ruling that repealed an Obama-era test for determining whether workers are independent contractors and made it likely that more workers would fall under the definition, according to legal experts. The NLRB issued a memo in April declaring that Uber drivers are independent contractors under that standard.
“There’s all these little interconnections that are starting to come to light,” Stack-Martinez said.
Uber and Lyft Announce $60 Million War Chest
Last week, Uber, Lyft and DoorDash announced they would spend $30 million each to push a statewide ballot initiative that would exempt their companies from AB 5’s requirements, allowing the companies to continue hiring drivers as independent contractors as long as they are provide a minimum pay rate and certain benefits. In petitions sent to drivers and customers, the companies outlined vague concessions offered under the ballot measure: new benefits such as sick leave and paid time off and a guaranteed minimum of $21 per hour “while on trip.”
“While on trip” is crucial. The $21 minimum would only apply to periods of time when a driver is actively driving to pick up a customer or transport them. Uber and Lyft drivers spend an average of about 63 percent of their time “on trip,” according to one estimate, which would make the minimum hourly wage more like $11 to $12 an hour. This would only apply to drivers in California, where minimum wage is already $12 an hour.
“We are working on a solution that provides drivers with strong protections that include an earnings guarantee, a system of worker-directed portable benefits, and first-of-its kind industry-wide sectoral bargaining, without jeopardizing the flexibility drivers tell us they value so much,” a Lyft spokesperson told Truthout in a statement.
Lyft and Uber argue that their business model and ability to pay as many drivers as they do hinges on the independent contractor arrangement. Stack-Martinez, on the other hand, said her stomach churned when she learned that the two companies would spend a combined $60 million to pass a ballot measure that exempts them for AB 5. The massive corporations could be spending that money on drivers who are sleeping in their cars because they can’t pay rent, she said.
“Uber and Lyft are putting themselves on the national stage to be smeared, and this is the wrong election to be anti-worker,” Stack-Martinez said. “If they want a fight, they are going to get it.”