Independent Contractor Laws: California Sides With Workers While NLRB Backs Big Tech

It has been over a year since California’s highest court sent shock waves through Silicon Valley, declaring what many considered the end of the “gig economy” in California. In Dynamex Operations West v. Lee, the Court dealt a crucial blow to Uber and Lyft and their business model based on classifying workers as “independent contractors.”

But since the Dynamex decision came down, both companies have gone public making wealthy stockholders even wealthier. Uber and Lyft’s stock offerings created thousands of new millionaires in San Francisco, but are ride-share workers any closer to obtaining a proper employee classification, let alone their fair share of the pie?

To recap, the Dynamex decision adopted the “ABC test” to determine whether a worker is an independent contractor or an employee. Under the ABC test, the company has the burden of establishing that the worker:

A) is free from the control of the hiring company while performing their work;

B) performs work outside the hiring company’s usual course of business; and

C) is engaged in an independent trade of the same nature as the worked performed.

Under this common sense test, it is very hard to imagine Uber or Lyft successfully arguing their drivers are independent contractors. Then again, common sense has never stood in the way of a multi-national tech company seeking to reduce labor costs. Now, almost exactly one year after Dynamex, the Trump NLRB General Counsel has issued an advice memo that is a gift to employers who claim that their workers are anything but employees.

The General Counsel makes no mention of the Dynamex ABC test. Rather, the memo applies a test that the California Supreme Court rejected as, “a complex and manipulable multi-factor test which invites employers to structure their relationships with employees in whatever manner best evades liability.” Finally, to eliminate any doubt as to which side the NLRB is on, the memo finds that its test should be viewed through a “prism of entrepreneurial opportunity,” a phrase that sounds like it was lifted from Uber’s mission statement.

The “independent contractor” vs. employee battleground in California is now set: a trucking association case now in federal court challenges the constitutionality of Dynamex. The case argues that the ABC test, as applied to truck drivers, is preempted by federal law and violates the U.S. Constitution. The federal court disagreed and upheld the ABC test as applicable to employers operating within California and that decision is now on appeal and could reach the uber-conservative (and Uber-friendly) U.S. Supreme Court.

For the moment, the General Counsel’s advice memo seems like a rusty anchor dragging in the wake of Dynamex. But, make no mistake: Trump’s NLRB is taking a clear stance in favor of company-friendly tests that make it easy to mis-classify workers.