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

Quick Reference: Tax and PPP help.

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

Why Does it Matter?

The National Labor Relations Board has ruled that Uber drivers are doing Freelance work, and thus are independent contractors and not employees.

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 that are they do not provide for independent contractors. If you have just gone through the income tax process, you are aware of the huge self employment tax burden that we bear. We have no insurance, no unemployment, no minimum wage, no overtime. The trade off is that we are supposed to have ‘entrepreneurial opportunity,' meaning that we are supposed to have the freedom to operate as our own business.

There is a major problem with businesses trying to skip out on their responsibilities to employees by claiming they are not employees. It is completely unethical for companies to do so. When they choose to classify you as an independent contractor, they have to allow you the freedom to operate as your own business and they are not allowed to get in the way of your freedom to operate your own business. 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, and would prefer not to be classified as 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.

This is NOT the End of the Matter

This is not a legal decision.

This 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 Uber drivers were employees. You will notice that Postmates drivers are still considered independent contractors across the board, but they did have to change some policies. When you read through their decision, they cited decisions in similar situations, both decisions that ruled in favor of a company and that 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 fact you see them site rulings for and against other companies in their decision. 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, as you read through the ruling and the factors that they 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, as they used it to determine how important other factors were. In other words, if there is a violation of one area but that violation did not create an atmosphere of control, that violation was a lesser factor.

In this instance, the board stated that Uber was in violation in some of these factors but that the overall weight of all of the 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.

Here's a closer look at the factors in the decision, with some thoughts on how these affect other companies. I can only speak from experience about Grubhub, Doordash and Postmates, but I will make comments on my personal observations about them.

The company cannot control when, where and how you work

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, and even had opportunities to make decisions based on heat maps and promotions such as boost and surge.

One quote in there was interesting, 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.”

That statement is the reason that I say that Grubhub might have the most reason for concern here. There are a number of ways that Grubhub tries to control drivers, particularly in what many observe to be a crack down on cherry picking. Drivers have been paused or deactivated for a number of violations that fall outside areas where they are allowed to control drivers. The bottom line is, there are extensive rules and extensive sanctions in practice. The difference is that they are not detailed. This creates an unfair situation where drivers are sanctioned for rules they didn't know exist, but because Grubhub is careful not to document things it makes it harder to prove this is happening. The block system and guaranteed pay system are all used as a means to control drivers.

I do not see an issue like this with the other apps. Doordash can be annoying with their constant popups on their app asking if you have arrived, is the food ready, and they have tight delivery windows. However, these are all customer service related, and the NLRB board appears to offer leeway in that regard. Postmates and Ubereats appear to me to be the least controlling in this regard.

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 rule came up to protect against a company claiming someone to be an independent contractor – if someone wasn't operating as a business already, logically it's harder to claim that relationship is legitimate.

The board ruled that Uber was actually in violation of this rule, but that this wasn't a major factor. In other words, the board ignored this rule. All of the delivery apps would fall under this rule and would be in violation, however it's apparent this 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 they found was a requirement to maintain minimum customer service ratings, stating these were not things ‘normally indicative of employee status.' That makes sense – if you operate a restaurant but provided crappy service, people aren't going to come back.

This is another area where the board could rule that Grubhub is in violation where Uber wasn't. The very presence of a Driver Specialist (DS) that you answer to creates a problem for Grubhub. There is a definite perception among drivers that the DS is a supervisor, and communications about discipline etc do come from the DS. By contrast, Ubereats and Doordash may have staff in your community but drivers are not assigned to a particular individual.

Based on the NLRB ruling, customer service based metrics such as Doordash's minimum customer rating score are not something that indicates supervision. Requiring acceptance rates, or rules about when you can log out of scheduled blocks, restrictions against delivering for others during a block, are all things that could cross that line, all things which could be an area of concern for Grubhub.

Acceptance rate requirements could be a major problem for Grubhub. Granted, they never publish any requirements but there is enough being done to create an impression. An important part of the ruling is that a company cannot interfere with a contractor's ability to be profitable. Consistent low paying or long distance offers coupled with acceptance rate requirements both create an illegal level of control and an interference in profitabity for the contractor.

Being an independent contractor requires you have a certain skill set

When you operate as a business, typically you have to have a certain skill set to get hired. You might be an accountant, or plumber or painter: you contract for people based on a skill that you have. This was another area where Uber was found to be in violation, but the NLRB determined that it did not create an atmosphere of control nor did it interfere with the ability of contractors to operate in a profitable manner.

Skill is important as a driver, but extraordinary skill is not required to get the gig in the first place. The skills that are important have more to do with being able to evaluate offers, and make profitable business decisions about where and when to drive. Working quickly and efficiently are skills that will help your profit but aren't required to get the gig.

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

The most important factor in the board's ruling was around the fact that drivers use their own cars (or lease them for purposes of doing the work).

I spoke with a national Ubereats employee once who indicated that was the reason that you could no longer get shirts or bags from them (even for purchase) – that they wanted to make it look like drivers were employees.

Delivery bags are probably the biggest area of potential violation here by companies like Grubhub, Doordash and Postmates. Based on the language in the board's opinion, this did not seem like it would be a major issue. Requirement of using a delivery bag would likely be seen as a customer service issue and so not a violation, although requiring that drivers use a particular bag or wear a logo or uniform could cross the line of control.

The company cannot require a specific timeframe of employment

A friend of mine took a 2 year contract position for an IT company. The length of the term, if challenged, could potentially put that company in violation. 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 any of the others.

The company cannot use its pay model to control you.

Usually an hourly or straight commission sales model were more likely to be considered a sign of employment. Payment on a job by job basis is more consistent with an independent contractor relationship, especially when the terms of payment are transparent.

Postmates and Ubereats are in the best position here, as they have clearly defined metrics around how delivery fees are determined. Doordash has a clearly stated policy of $1 plus tips which would not be in violation, but the fuzziness of how they determine minimum guaranteed payment is less transparent. In the new pay models being rolled out by Grubhub, they are even less transparent than Doordash. Transparency alone isn't going to be an issue if the pay model is not seen to be a method of control.

There may be an issue with Grubhubs minimum hourly guarantee. On the one hand it is used as a perk for meeting a minimum acceptance rate. However, I see them as using that as an excuse to require certain things. If you go outside a delivery area, log off before your block is over, take orders from other companies, if they use the abuse of that hourly guarantee as an excuse for taking action on those things (regardless of whether you actually receive a guarantee) that crosses the line into using the pay model as a means of control.

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

The idea here is that as a business, when you hire a business to do work for you, it's going to be to do things that are not part of you do as a businss. You have a roofing company, and you hire an IT company or an accounting firm or a lawyer, or a cleaning company… these are all things that are different from what you do. But when your roofing company brings on a roofer to do roofing for your customers, the idea here is you have to hire them as an employee.

The board did rule that Uber violated this rule. However, consistent with their response to other violations, they stated that if they were not creating an atmosphere of control here or interfering with the ability to be profitable, that this violation didn't outweigh areas where Uber was in compliance.

There is a longstanding precedence where Uber is concerned in the ride sharing space. Taxi drivers have been independent contractors for a significant portion of cab companies for decades. That's a very similar space. I would imagine that food delivery companies would get the same treatment.

This is an important area to keep an eye on. This was one of the three rules that the California Supreme Court said in April 2018 that had to be met. All three rules had to be followed to classify someone as a contractor. Grubhub in particular tries to position themselves as a lead generation company and NOT as a delivery company for this very reason. The fact that Uber was found in violation here could be an indication of what the California courts would determine when looking at any of these companies. This will be worth watching.

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 of keeping the distinction clear with drivers, that there was enough of an understanding on both sides that this was not a boss/employee relationship. I find the master and servant wording interesting.

To their credit, Postmates appears to be the most hands off, 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. In fact, this could be their greatest vulnerability. Grubhub has been very smart about not putting requirements in writing. But there is an atmosphere now where its' felt strongly enough that Grubhub is trying to exert control, crack down on cherry picking and low acceptance rates. Drivers have had their accounts paused and enough information is spreading through forums and other social media that people were told it was because of this or that reason. The issue here is that it might be hard to prove them exerting control because nothing is in writing, an atmosphere doesn't have to be proven. If drivers believe that Grubhub is being the master, despite what they have in writing, that can be a major factor.

The one hiring the contractor has to be a business.

I don't think this is a requirement of the business as much as it's a protection for individuals hiring contractors. If you as an individual hire me to do lawn work at your home, you shouldn't have to worry about being brought before the NLRB over employment charges. I didn't see much information on their view on this area, and don't see it being a factor for the other apps either.

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

Based on how they explained their ruling for Uber, and based on my observations related to Ubereats, I don't have an issue with the ruling. I never had the sense that Uber was trying to control me. They don't pay enough, but I don't have to accept what they offer.

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.

As far as Grubhub is concerned, if they came before the board I think they would be much more at risk. In the end it depends on if the board is truly looking into the heart of the matter, or if they have a slant towards ruling in favor of companies for the sake of ruling for companies. I think there are accusations of that happening with this Uber ruling.

As a driver for all four platforms though, I definitely sense a strong effort by Grubhub to control drivers, to use the pay structure as a method of control, and to create a master/servant atmosphere. The hard thing would be to document it all, but when all is said and done, my observation is that Grubhub does cross the line in these areas in ways the others do not. The board puts significant emphasis on the amount of control a company tries to have over its contractors, and this is a far bigger issue within Grubhub than it is with the other apps that I work with. The difference is night and day. I could see the board ruling against Grubhub for a lot of the same reasons they ruled in favor of Uber, especially if someone did an effective job documenting the atmosphere and the feeling of a master/servant relationship.

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, particularly in light of California's supreme court ruling from 2018. States could rule against one or all of these companies.

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 considered to be 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, despite the greater protections, I would move on. 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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