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National Labor Relations Board Says Uber Drivers are Contractors. Is this good news or bad news for Grubhub, Doordash or Postmates?

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The question about whether delivery drivers are independent contractors or employees is settled. Or is it?

The National Labor Relations Board has ruled that Uber drivers are NOT employees. A lot of people seem to think this settles the question across the board with similar apps, food delivery apps, etc.

It does not.

In fact, when you read their Advice Memorandum that explains their decision, there are factors that should be cause for concern for Grubhub in particular. I'll explain why in a bit.

Here are some things you need to know about the NLRB's decision and how it can affect you.

Freelance concept in a word cloud, with Freelance in larger letters and other terms like Self-employed, Business, Entrepreneur, and Independent.
The National Labor Relations Board has ruled that Uber drivers are doing Freelance work, and thus are independent contractors and not employees.

Why Does it Matter?

This is an important question. What difference does it make?

Bottom line is there are a number of protections that a business is required to provide for its employees. They do not have to provide these to contractors.

If you've gone through the income tax process, you know our self employment tax burden well. We have no insurance, no unemployment, no minimum wage, no overtime.

The trade off is that we supposedly get ‘entrepreneurial opportunity.' That means we get freedom to operate our own business.

Businesses skipping out on their responsibility to those that do work for them.

The issue involves, in part, companies trying to use employees but only pay for contractors. It's completely unethical for them to do so.

When they classify you as an independent contractor, they have to give you freedom to operate as one. They cannot interfere with that freedom. They cannot control how you perform your work.

When they still try to maintain control over you but not give you employee protections, they cross a significant moral and legal boundary.

Many of us prefer the independent contractor lifestyle because of the freedoms and the flexibility. We prefer not to be employees. Having said that, it is important that we stand up for our rights as independent contractors.

So what does this mean for us? Is the question settled?

Far from it.

The NLRB decision is NOT the end of the matter

Smart phone on a desk, with the National Labor Relations Board log displaying.

In fact, it's far from it. This decision is only a small piece of the employee vs contractor discussion.

This is not a legal decision.

It is a decision about enforcement. It is not legislation, it is not new law, and it is not a court decision.

The National Labor Relations Board cannot do any of those. They can only determine whether actions cross the line in areas that they can enforce and they have to work within the framework of existing laws and court decisions.

At any time, laws can be passed federally or on the state level that define the independent contractor relationship. At any time, the courts can make decisions that would trump any decisions by an entity such as the NLRB.

This decision is not all encompassing

The biggest area where this ruling has impact is in the ability for drivers to have protected labor unions.

Issues such as minimum wage or overtime are not impacted by this ruling, those are enforced elsewhere.

This also does not exempt Uber from regulations that can vary from state to state. California's supreme court ruling from April of last year is one of the most significant examples.

This decision is not for other companies like Grubhub, Doordash or Postmates.

In 2016, the same board ruled that Postmates drivers were employees. You will notice that Postmates drivers are still considered independent contractors across the board.

When you read through this Uber decision, they cited decisions in similar situations. The cited decisions ruled in favor of a company some times and others they didn't.

They explain their decision in their advice memorandum, and the decision is based more on specific things about Uber, not on the Gig economy. If the factors in their ruling apply to other gig companies, then they would apply if the board rules on that particular company.

In the end though, this is not a general gig economy decision, it is an Uber specific decision.

Does This Mean Grubhub, Postmates and Doordash are in the Clear?

No. In fact, seeing the factors weighed, there are parts of this decision that may be of concern to others.

There are ten factors that are considered in this type of decision.

Those factors include:

  1. The amount of control the company has over how you do your work
  2. Whether or not you operate as a distinct business
  3. The level of supervision required.
  4. The amount of skill required.
  5. If tools or necessary items are provided by the company
  6. The length of time of employment
  7. The way you are paid – by time or by the job
  8. If your work is part of the regular business of the employer
  9. Whether parties believe there is a ‘master and servant' relationship
  10. Whether or not the company you work for is in business

The board pointed out in their decision that in driver related decisions the two most important factors were number one and number seven.

The amount of control a company has over drivers was clearly the most important factor. They used that to determine how important other factors were. In other words, if a violation of one area did not create an atmosphere of control, that violation was a lesser factor.

The board stated that Uber was in violation in some of these factors. However, the overall weight of all factors fell on the side of drivers not being employees.

By Contrast, California's supreme court decision in April 2018 stated there were 3 factors, and that a company must be in compliance on all three in order to legally classify someone a contractor.

Here's a closer look at the factors in the decision. I'll ad my comments based on my experience with Grubhub, Dorodash, Uber Eats and Postmates.

The company cannot control when, where and how you work

Hand holding on to a remote control.

As mentioned, this was by far the most important thing they looked at.

Uber drivers had the freedom to log in and out at will, and the freedom to toggle between apps at will. They could choose where to drive, when to drive. They even had opportunities to make decisions based on heat maps and and boost and surge promotions.

One quote in there was interesting. They said that in contrast to Elite Limousine, a company that was ruled to have employees, “UberX drivers were not subject to restrictions on their work locations, extensive and detailed rules and regulations enforced through extensive and detailed sanctions, or use of a quality assurance committee to monitor compliance on the road.”

Grubhub might pay attention to this one. My experience is they are the most controlling of drivers. Many observers have noted a trend of cracking down on cherry pickers.

Drivers for Grubhub have been paused or deactivated for a number of violations for things that could be considered excercising control. The bottom line is, there are extensive rules and extensive sanctions in practice.

There's an unfair situation for drivers here. Drivers are sanctioned for rules they didn't know existed. This is because Grubhub is careful not to document the rules. You hear rumors of deactivations or schedule restrictions based on many factors, but there's never anything in writing.

This is why you'll never see it in writing. That kind of control, if proven, can create a negative decision for Grubhub.

I've not noticed the same issues with the other three platforms. Some can be picky about ratings or times, but those have to do with the actual results, not the process.

The company cannot hire you as a business if you weren't already a business.

The idea behind the independent contractor concept is that the company is hiring a business to do work for them rather than an individual. This is to protect against converting an employee to a contractor.

If you want to work for someone but have to become a contractor to do so, that's a sign of misclassification.

The board ruled here that Uber was actually in violation of this rule. However, they didn't see it as a major factor.

In other words, the board ignored this rule.

It's fair to say that all of the delivery apps would fall under this rule. Doordash, Postmates, and Grubhub would be in violation. Apparently, this one is not highly enforced.

The company cannot provide regular supervision

The board stated that Uber drivers generally only interacted with Uber when a problem arose.

The closest thing to supervision the NLRB found was a requirement to maintain minimum customer service ratings. They determined that ratings were not ‘normally indicative of employee status.' That makes sense to me. If you operate a restaurant but provided crappy service, people aren't going to come back.

Grubhub could be at risk here. The very presence of a Driver Specialist (DS) that you answer to creates a problem for Grubhub. Drivers see their specialist as a supervisor. Communication about discipline come from the Driver's Specialist.

Grubhub seems to be more intent on manipulating drivers into higher acceptance rates. Grubhub is smart in never publishing requirements. However, enough drivers report being told that Grubhub will crack down that it creates a supervisory environment.

The board pointed out that management of drivers cannot interfere with profitability. Punitive measures based on attendance, scheduling, and acceptance could be taken as supervisory.

Doordash's customer rating standard appears to be a non issue based on this. Neither would issues related to late deliveries or cancelling deliveries. Those things relate to the end result of our service.

Being an independent contractor requires you have a certain skill set

Needle of a compass pointing to the word skill.

When you hire a business, that business typically needs to offer a certain skill.

People who go into business offer a special service or skill. You could be an accountant, a plumber or painter. You contract based on your skill.

The board ruled that Uber crossed the line here. However, they determined that because it didn't involve an atmosphere of control and because it didn't interfere with profitability, this was not a major issue.

Skill is important as a driver. However, extraordinary skill is not required to get the gig in the first place. Our skills end up being business skills: Being able to evaluate offers. Making profitable decisions about when and where to drive. Working quickly and efficiently.

Those skills help our profitability but they won't get us the gig.

The tools and necessary items for the work have to be provided by the contractor, not the company.

The NLRB leaned heavily on the fact that Uber drivers use their own cars.

I spoke with a national Ubereats employee once who indicated that this was the very reason they no longer provided shirts or delivery bags. They won't even sell those things directly. They did not want to give the impression they were providing the tools.

Delivery bags are the biggest potential violation for Grubhub, Doordash and Postmates. Drivers have received communications stating that use of the hot bag is required.

Seeing how the board weighed other issues, I don't think this would be a major factor against anyone. It does seem to lean towards control, but you could argue it's related to the end result of the service you are providing.

Requiring that the company logo be on a shirt or delivery bag would be a different story.

The company cannot require a specific timeframe of employment

A friend of mine took a 2 year contract position for an IT company. If he wanted to challenge the classification, that term length could be a factor.

The NLRB ruled that drivers had the flexibility to log on and off, take time off for extended periods, and had no commitment to work a certain length of time. I don't see where this would be any different for delivery platforms.

The company cannot use its pay model to control you.

An hourly pay model is often considered a sign of employment.

An independent contractor position usually needs a job by job pay model. It helps when the pay model is transparent.

Postmates and Ubereats are in the best position here. They have clear formulas in how they determine fees.

Doordash's pay model is officially $1 plus tip. However the fuzzy way that they determine their minimum guaranteed pay is a problem. Lack of transparency can also be a problem. Grubhub's new pay model is even less transparent than Doordash's.

I don't expect lack of transparency to be an issue in most cases. Seeing how the NLRB is weighing everything else against control, transparency is only a problem if the pay model exerts control over drivers.

I do think Grubhub's hourly minimum guarantee could be an issue. They present it as a perk. If you accept everything, we'll guarantee you don't fall below a certain earnings level.

There are a couple of problems. One, the hourly nature of the pay relationship is an issue. Two, the way Grubhub uses the minimum compensation as a means of control is a problem.

If you log off a schedule block early, they call it fraud. How is it fraud? They see it as you gaming the hourly guarantee. If you take orders from another company, they call it fraud. Same reason. Drivers report being deactivated for abusing the Grubhub compensation even when there was no compensation.

When the pay model is used as a way to control behavior the platform is not allowed to control, it becomes a major factor in determining if this is an employee relationship.

The work a contractor does cannot be the same as what an employee for the company would do.

If you run a business, your employees do the work of your business. If you need things done for you that are not part of what you do, you often contract that out to another business. A sales company hires sales reps. However, they hire an IT company to keep their systems running.

If you're a roofing company and you bring on a roofer as a contractor, that becomes an issue.

The NLRB ruled that Uber crossed the line here. However, like other violations, they measured this against the factor of control. They did not use this to interfere with profitability. Thus, it didn't outweigh the factors where Uber was in compliance.

This isn't new for Uber. Taxi companies have used independent contractors for years. It's pretty much the same thing. I would expect that food delivery companies would get the same treatment here.

This is an important area to keep an eye on. California's Dynamex decision in April 18 used an ABC test for employment. A company had to meet all three. This factor is known as the B test.

If the ABC test is implemented anywhere, violation of this factor won't be weighed against other factors. It may in fact be the hardest test for Uber or any of the delivery companies to pass.

There cannot be an environment were parties believe there is a ‘master and servant' relationship

The board determined that Uber did a good enough job here. They felt there was understanding on both sides that this was not a boss employee relationship.

To their credit, Postmates appears to be the most hands off in my experience. I do not get the feel of expectations or requirements with them. Doordash has language in their contract that expressly recognizes a driver's right to reject orders and to work on their own schedule, work for other companies, etc.

Once again, Grubhub is the most at risk here. They could be incredibly vulnerable here.

As I mentioned earlier, they don't put things in writing. As I listen to Grubhub contractors, I get a definite sense that they feel more controlled and directed by Grubhub than I do of contractors for any other platform. You hear about cracking down on this or that.

The way that drivers are paused or deactivated without given specific reasons is a problem. The way it happens speaks to intimidation. It often feels like they do it to send a message.

You can't have ‘cracking down' without a master/servant relationship. You can't have intimidation or sending messages unless you're trying to establish a master/servant relationship.

The one hiring the contractor has to be a business.

This is more of a protection for individuals who hire contractors. If you hire me to do lawn work at your home, you shouldn't have to worry about being brought before the NLRB over employment charges.

This obviously isn't an issue with delivery platforms.

How would the NLRB rule on Grubhub, Doordash, or Postmates?

Based on how they explained their ruling for Uber, and on my observations related to Ubereats, I don't have an issue with the ruling. I never felt that Uber (or Uber Eats) was trying to control me.

They usually don't pay enough. But since I can turn down offers, that's not an issue.

For the most part, I don't see any issues with Postmates or Doordash that could get them in trouble. The only violations that I see for either of them (in my observation and experience) are similar to the ones found with Uber.

Grubhub's a different story. They'd have a harder time passing the test. Grubhub does a lot of things differently.

That said, Grubhub is smart in how they go about controlling drivers. They never put anything in writing. It's harder to prove things.

As a driver for several platforms, I definitely see Grubhub at most risk. They definitely try to control drivers. They use the pay model to control, and they work to create a master/servant atmosphere.

Control is the overriding factor. That's a problem for Grubhub. I could see them ruling against Grubhub for all the same reasons they ruled in Uber's favor.

Final thoughts.

Do not be mistaken: Uber is not in the clear because of this ruling. Violations cited by the NLRB could carry more weight with courts. California's Dynamex decision could be a factor. Various states could rule differently.

Standards differ from one branch of the US government to the other.

I expect to see changes in the next year or two. They could be dramatic. Changes could come in the form of state or national legislation. They could come in court rulings.

I've often wondered if you could ever see a third classification inspired by the gig economy – not quite an employee but something in between that provides further protection for the gig economy worker.

Bottom line is: we need to be ready for change.

What happens if it all comes down that we are classified as employees? What will the companies do? Will they close up shop because the additional expense is too great? Or do they go full employer mode and restrict you from other options, force your schedule.

Personally, if it comes down to being an employee, I will move on. My freedom means more than the protections.

What would you do? Do you have other options? This is an important topic to watch because if the delivery gig industry gets shaken up like it could, what would you do?

Driver safety training offers a rule to live by: always leave yourself an out. If something happens on one side of the road you want to make sure you have yourself in position to avoid the problem. The same needs to be true in the gig economy – if it gets shaken up by a court ruling or legislation, what are your options? It's better to have them ready now than to wait until it happens.

Comment question: What would you do if it were ever ruled that we were employees?

Could this help someone else? Please share it.

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