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Guilds return as a labor hybrid, aim to deal with Uber, new gig economy

Law Bulletin columnists

Published: July 6, 2016

Uber, the ride-share tech giant, is changing the employment landscape, and government and organized labor are struggling to keep pace. Recent events in New York and California are generating a national conversation on employment in the gig economy, which will have significant consequences for Illinois.

Litigation update

Uber treats its drivers as independent contractors. Disagreement and unhappiness with this classification is fueling innovation in the labor market. In 2013, Uber drivers filed lawsuits in California and Massachusetts challenging their status as independent contractors. O’Connor v. Uber Technologies Inc., C13-3826 (N.D. Calif. 2013); Yucesoy, et al. v. Uber Technologies Inc., CV15-0262 EMC (N.D. Calif. 2014). The drivers alleged that Uber incorrectly classified them as independent contractors and not employees.

The drivers asserted that they are employees because Uber’s rules on communications with customers, vehicle cleanliness and timeliness of pickup and drop off tightly control drivers’ work. Moreover, Uber fires drivers who fail to comply.

After 2½ years of litigation, Uber settled these lawsuits in April 2016 for approximately $100 million, according to a published account. The settlement permits Uber to continue to classify drivers as independent contractors.

On May 1, Uber drivers in Illinois filed a lawsuit in the Northern District of Illinois claiming that drivers are employees and not independent contractors. Further, these Uber drivers sought class certification for all Uber drivers, except those residing in California and Massachusetts. Trosper, et al. v. Uber Technologies Inc., 1:16-CV-04842 (N.D. Ill. 2016).

Push for hybrid employment category

Across the country, motivated by stories of Uber drivers earning subminimum wages, politics and organized labor are pushing to permit independent contractors to unionize. In December 2015, the Seattle City Council voted unanimously to approve an amendment to Section 6.310.735 of its Municipal Code.

The ordinance authorizes “the election of driver representatives” to negotiate with entities [read, Uber] “who have hired, contracted with … or maintained a contractual relationship with … 50 or more for-hire drivers at any one time.”

Councilmember Mike O’Brien, who sponsored the ordinance, said it was designed to establish “collective bargaining for contract workers in the city.”

A similar push is afoot at the federal level. Since 2015, Sen. Mark Warner, D-Va., has been advocating for a new, evolved worker classification. “Right now you are either a W-2 [employee] or 1099 [independent contractor]. … [I]n the future there may need to be a third classification.” Warner believes that the growth of the gig economy requires labor market evolution: “The 20th century model doesn’t work in an age when you can monetize your parking space.”

One hybrid model making inroads into this void are guilds. A “guild is essentially an association of independent contractors.” In New York last month, Uber reportedly entered a five-year agreement with the Independent Drivers Guild, formed in partnership with the International Association of Machinists and Aerospace Workers union, to participate in monthly meetings about working conditions and benefits for contract drivers. The 35,000 Uber drivers in New York City may join the guild.

The guild model is already expanding beyond New York. The Teamsters union is creating a guild for ride-share drivers in California and the Independent Drivers Guild plans to represent Uber drivers nationally. In Chicago, some ride-share drivers have formed Drive4Chicago.

Not surprisingly, Uber strongly opposes legislation requiring collective discussions with representatives of its independent contractor drivers. Uber claims statutes such as Seattle’s violate federal antitrust and labor laws.

The law and guilds

The National Labor Relations Act authorizes employees to “form, join or assist” a union to collectively bargain with the employer. 29 U.S.C. Section 157. Independent contractors do not have this right. 29 U.S.C. Section 152(3).

In FedEx Home Delivery, 361 NLRB No. 55 (Sept. 30, 2014), the National Labor Relations Board “restated and refined” the standard for assessing whether a worker is an employee, covered by the act, or an independent contractor, who is not, to ensure that the act covers as many workers as possible.

The board increased the weight given to employer control over workers’ exercise of entrepreneurial autonomy to find that FedEx drivers were employees entitled to unionize, and not independent contractors.

The U.S. Labor Department’s enforcement of the Fair Labor Standards Act is heading in the same direction. The FLSA requires minimum wages and overtime for covered employees, which excludes independent contractors.

U.S. Labor Administrator’s Interpretation No. 2015-1 informs employers that a worker is an “employee” and not an “independent contract” when “the worker is economically dependent on the employer [and not] in business for him or herself.” With that focus, Labor states, “most workers are employees under the FLSA.”

Presciently, these changes go to the heart of the debate about whether Uber drivers are independent contractors who enjoy freedom and autonomy, or employees exploited by the sophisticated tech savvy giant. Federal law appears poised to provide at least some protection for independent contractors by expanding the definition of “employee” as it evolves.

How guilds will fare remains uncertain, but the debate as played out by Uber and its drivers will impact Illinois employers, many of whom engage at least some workers who are classified as independent contractors.

Rachel E. Lutner, a partner at Chicago-based Robbins, Schwartz, practices in the area of labor and employment law, representing both public and private employers. John R. Eagan, an associate at Robbins, Schwartz, practices in the area of labor and employment law.