Masters assignment 602

RECENT ADJUDICATION Em p l o y m e n t Law — N a t io n a l La b o r Re l a t io n s Ac t — NLRB C l a s s if ie s Ca n v a sse r s as E m p l o y e e s , N o t I n d e ­ p e n d e n t C o n t r a c t o r s . — Sisters’ Camelot, 363 N.L.R.B. No. 13 (Sept. 25, 2015).

W hat it means to “work” is changing. Many have eschewed the traditional nine-to-five job for more flexible, often one-time “gigs”: de­ livering groceries, fixing a sink, driving a stranger to the airport. Sup­ ported by online intermediaries such as Uber and Task Rabbit, this growing gig economy1 offers greater freedom for workers and busi­ nesses alike. But at the same time, it has raised questions about the existing categories of employment law. Already, disputes have ignited over whether gig workers are employees or merely independent con­ tractors under the law.2 Traditionally, one of the most crucial factors indicating the existence of an employment relationship has been the w orker’s loss of autonomy.3 The challenge in the gig economy — where everyone gets to “be their own boss”4 5 — is to determine who, if anyone, still counts as an employee under this test. Recently, in Sisters’ Camelot,s the National Labor Relations Board did just that, finding that door-to-door canvassers with flexible work schedules were employees within the meaning of the National Labor Relations Act.6 The Board concluded that the canvassers — while free to choose when and how much to work — still faced many of the same constraints as traditional employees and were therefore entitled to the same protec­ tions.7 The B oard’s decision demonstrates how existing legal catego-

1 See Se t h D. H a r r is & Al a n B. Kr u e g e r , T h e H a m il t o n P r o j e c t , A P r o p o s a l f o r Mo d e r n i z in g La b o r Laws f o r T w e n t y -Fir s t -C e n t u r y Wo r k : T h e “In d e ­ p e n d e n t WORKER” 12 (2015) (estimating that at least 600,000 workers participate in the online gig economy); McKlNSEY GLOBAL INSTITUTE, A LABOR MARKET THAT WORKS 33 (2015) (noting that “contingent workers” in “digital marketplaces” are a “rapidly growing” segment of the U.S. working-age population).

2 The distinction is important. Employees are entitled to all the benefits and protections as­ sociated with this status under various laws, including minimum wages, overtime compensation, and the right to collective bargaining. Contractors are not. As such, many gig workers have ini­ tiated misclassification suits against online intermediaries such as Uber and Lvft. See, e.g., O ’Connor v. Uber Techs., Inc., No. C-13-3826, 2015 WL 5138097 (N.D. Cal. Sept. 1, 2015); Cotter v. Lyft, Inc., 60 F. Supp. 3d 1067 (N.D. Cal. 2015).

3 See H a r r is & Kr u e g e r , supra note I, at 8 tbl.i. 4 Uber and the American Worker: Remarks from David Plouffe, U b e r : NEWSROOM (Nov. 3,

2015), https://newsroom .uber.com /1776 [http://perm a.cc/X Z 6F-B L C V ]. Uber has reported that “nearly 90 percent of [its] drivers choose Uber because they want to be their own boss and set their own schedule.” Id.

5 363 N.L.R.B. No. 13 (Sept. 25, 2015). 6 29 U.S.C. §§ 151-169 (2012); id. at 1. 7 See id. at 2-6.

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ries can and do incorporate nontraditional workers. Flexible or not, many relationships in the gig economy are still shaped by the very power asymmetries that define an employment relationship — and should be recognized as such.

Sisters’ Camelot is a nonprofit organization in Minnesota that dis­ tributes food to low-income individuals.8 It funds its operations al­ most entirely through donations collected by door-to-door canvassers, who operate on a flexible schedule and can choose whether to work on any given day.9 Those who do decide to work must show up at the Camelot facility at a particular time to be transported to their desig­ nated canvassing area.10 Canvassers can solicit donations only within their assigned area, and only for Camelot — they are prohibited from soliciting for other organizations at the same time, and can be disci­ plined for doing so.* 11 They are also required to keep detailed records on each house they visit.12 At the end of their shift, the canvassers de­ liver their collected donations and are transported back to the facili­ ty.13 Each canvasser receives a nonnegotiable commission based on individual donations collected.14

Christopher Allison was one of these canvassers. In 2013, Camelot learned that Allison was involved in efforts to organize a canvassers’ union.15 He was fired.16 His fellow canvassers were warned that, de­ spite their efforts, they could not “force [Camelot] into the role of boss­ es.”17 The canvassers filed a complaint with the Board, alleging viola­ tions of their right to organize under the National Labor Relations Act.18 An essential premise of their argument was that they were em­ ployees within the meaning of the Act and entitled, as such, to protec­ tion from unfair labor practices.19

An administrative law judge dismissed their complaint,20 ruling that the canvassers were independent contractors, not employ-

8 Id. at 1. « Id.

10 Id. 11 Id. at 2, 4. 12 Id. at 1, 2. 13 Id. at 1. 14 Id. at 4. 15 Id. at 6. 16 Id. n Id. 18 The canvassers alleged that Sisters’ Camelot committed unfair labor practices by terminat­

ing Allison, by warning the canvassers that their organizing efforts would be futile, and by grant­ ing them certain benefits in order to dissuade them from further union activities. Id. at i; see also 29 U.S.C. §§ 157-158 (2012).

19 See 29 U.S.C. § 157 (“Employees shall have the right to self-organization . . . .” (emphasis added)).

20 Sisters’ Camelot, No. 18-CA-100514, slip op. at 7 (NLRB Div. of Judges Aug. 7, 2013).

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ees. 21 Crucial to this conclusion were the judge’s findings that the canvassers were in control of their own schedules and lacked direct supervision. 22 The judge emphasized that the canvassers were free to make important choices: whether to show up for their shifts and, dur­ ing their shifts, whether to “work . . . or goof-off. ” 23 Under his analy­ sis, these facts “strongly indicate[d] independent contractor status. ” 24

On review, a three-member panel of the Board25 reversed the judge’s dismissal, finding that the canvassers were employees protect­ ed under the Act. 26 Consistent with its longstanding approach, the Board undertook a holistic consideration of “all of the incidents of the relationship” 27 between Camelot and its canvassers. It applied a mul­ tifactor test and concluded that nine out of the eleven relevant factors indicated the existence of an employment relationship. 28 In stark con­ trast to the judge’s analysis below, the Board determined that — not­ withstanding the canvassers’ “freedom to work or not work as they choose” 29 — Camelot still imposed significant constraints on the can­ vassers’ choices and opportunities. The Board emphasized that the canvassers, once on the clock, worked at set times and locations. 3 0

21 Id. Recognizing, however, that “a reviewing body may conclude otherwise,” id., the judge also addressed the merits of the complaint, finding th at — i f the canvassers were employees — Camelot did indeed violate their rights under the Act, id. at 9.

22 See id. at 7. 23 Id. at 4. 24 Id. The judge applied the B oard’s longstanding multifactor test for determining whether an

individual is an employee or an independent contractor. See id. At the time of his decision, the test consisted of ten factors: (1) the extent of control by the employer; (2) whether the individual is engaged in a distinct occupation or business; (3) the extent of supervision by the employer; (4) the skill required in the occupation; (5) whether the employer supplies the instrumentalities, tools, and place of work; (6) the length of time the individual is employed; (7) the method of payment; (8) whether the work is part of the regular business of the employer; (9) the understanding between the parties; and (10) whether the employer is in the business. See Roadway Package Sys., Inc., 326 N.L.R.B. 842, 849 n.32 (1998). The judge found that all but two factors (the skill required and whether the employer supplied the instrumentalities of work) favored independent contractor status. Sisters’ Camelot, slip op. at 3-7.

25 The panel consisted of Chairman M ark Gaston Pearce, Kent Hirozawa, and Lauren McFerran.

26 See Sisters’ Camelot, 363 N.L.R.B. No. 13, at 1, 5—6. The Board also agreed with the judge that Camelot had violated the Act by terminating Allison and by its statement of futility. Id. at 6.

27 Id. at 2 (quoting FedEx Home Delivery, 361 N.L.R.B. No. 35, at 1 (Sept. 30, 2014)); see also NLRB v. United Ins. Co. of Am., 390 U.S. 254, 258 (1968).

28 The Board applied the multifactor test as articulated and refined in FedEx Home Delivery, 361 N.L.R.B. No. ss, a decision issued after the judge’s ruling in Sisters’ Camelot. See Sisters’ Camelot, 363 N.L.R.B. No. 13, at 2. Analyzing the same ten factors as the judge below, the Board found that all but two (length of employment and the parties’ understanding of the rela­ tionship) weighed in favor of employee status. Id. at 5. The Board also considered an eleventh factor set forth in FedEx — whether the individual in question is rendering services as an inde­ pendent business — and found that this, too, indicated an employment relationship. See id.

29 Sisters’ Camelot, 363 N.L.R.B. No. 13, at 2. 30 See id.

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Their compensation was nonnegotiable. 31 Detailed records of their canvassing allowed Camelot to supervise their activities with “close scrutiny. ” 32 And canvassers had no control over “important business decisions” that could affect their profit or loss: where, how, and from whom to solicit. 33 Considered together, these facts all pointed toward an employment relationship.

The Board’s decision offers important lessons for the gig economy. By recognizing the canvassers as employees, the Board signaled its continued commitment34 to accommodating — and protecting — non- traditional forms of work. The flexible relationship between Camelot and its canvassers invites comparisons to the broader gig economy. 35 And while the Board’s specific findings are highly fact bound, its broader reasoning provides useful guidance on how to categorize workers in the gig economy. In Sisters’ Camelot, the Board made clear that, despite shifting boundaries, the existing categories of “employee” and “independent contractor” are still viable — capacious enough to capture new, unconventional work patterns, but narrow enough to confer protection only on those relationships that warrant it.

The Board’s premise — a fundamental one in employment law — is that all workers fall on one side of a distinct dichotomy: employee, or independent contractor. But when it comes to gig workers, this prem­ ise has been challenged. Commentators have been quick to point out that many aspects of the gig economy — the flexible schedules, the lack of in-person supervision, the ability to work for many businesses at the same time — defy simple classification. 36 Some decisionmakers agree, contending that the current legal framework is too rigid to accommo­ date the now-countless variations of work. In a lawsuit against Lyft, a federal judge lamented that the categorization of gig workers is an un-

31 See id. at 4. 32 Id. at 5; see also id. at 3. 33 Id. at 5. 34 Sisters’ Camelot is consistent with a series of NLRB decisions conferring employee status on

part-time or otherwise flexible workers. See, e.g., FedEx Home Delivery, 361 N.L.R.B. No. 55 (Sept. 30, 2014) (FedEx delivery drivers); Lancaster Symphony Orchestra, 357 N.L.R.B. 1761 (2011) (orchestra musicians); Roadway Package Sys., Inc., 326 N.L.R.B. 842 (1998) (delivery drivers).

35 Some commentators have already picked up on the decision’s potential implications for Uber drivers. See, e.g., Brian Mahoney, N LRB Speaks on Indy Contractors, P O L IT I C O (Sept. 28, 2015, 10:00 AM), http://www.politico.com/tipsheets/morning-shift/2015/09/nlrb-v-gig-econom y -u a w -fia t-d e a l-in -je o p a rd y -jo in t-e m p lo y e r-u p d a te -2 10419 [http://perm a.cc/8U S C -S B U M ]; Benjamin Sachs, New N LRB Decision on Independent Contractors, ON L A B O R (Sept. 28, 2015), http://0nlab0r.0rg/2015/09/28/new -nlrb-decisi0n-0n-independent-c0ntract0rs [http://perm a.cc /EH4R-3HLU].

36 See, e.g., H a r r i s & K R U E G E R , supra note I, at 6—10; Greg Ip, As the Gig Economy Chang­ es Work, So Should Rules, W A L L ST. J. (Dec. 9, 2015, 12:49 PM), http://www.wsj.com/articles/as -the-gig-economy-changes-work-so-should-rules-1449683384.

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tenable endeavor — like being “handed a square peg and asked to choose between two round holes. ” 37 Professors Seth Harris and Alan Krueger have proposed creating a new legal category, the “independent worker,” for those who occupy the “middle ground between traditional employees and independent contractors. ” 38 Their argument is that the existing legal framework cannot adequately identify who deserves which benefits and protections under the law, creating uncertainty, in­ efficiency, and opportunities for regulatory arbitrage. 39 In their view, working relationships in the gig economy are “not so dependent, deep, extensive, or long lasting” that businesses like Uber should be com­ pelled to “assume responsibility for all aspects of . . . workers’ econom­ ic security” 4 0 — that is, to take on “the role of bosses. ” 41

W hat complicates this view is that, in reality, many workers in the gig economy are deeply dependent on the businesses that hire them. Harris and Krueger characterize the many laws that regulate the em­ ployment relationship as reflecting a “social compact between employ­ ees and employers, ” 42 with employees sacrificing their autonomy in ex­ change for some degree of economic security. 43 Some gig workers find themselves making exactly this kind of sacrifice, but without receiving protection in return . 44

Moreover, Harris and Krueger premise their argument on the idea that gig workers “do not fit easily into the existing legal definitions of ‘employee’ and ‘independent contractor’ status. ” 45 Granted, the par­ ticular details of work might look different in the gig economy, but, as the Board has consistently recognized, careful consideration of the rel­ evant factors46 can still uncover employment relationships where they

37 Cotter v. Lyft, Inc., 60 F. Supp. 3d 1067, 1081 (N.D. Cal. 2015). 38 HARRIS & Kr u e g e r , supra note 1, at s. Their paradigmatic example is the Uber driver

Id. 39 See id. at 6-7. 40 Id. at 8. Harris and Krueger argue that independent workers should be entitled to some,

but not all, of the benefits associated with employee status. See id. at 15-21. 41 Sisters’ Camelot, 363 N.L.R.B. No. 13, at 6. 42 H a r r is & Kr u e g e r , supra note 1, at 6. 43 See id. at 7. 44 Professor Benjamin Sachs has applied this argument to Uber drivers. See, e.g., Benjamin

Sachs, Do We Need an “Independent Worker” Category?, ON LABOR (Dec. 8, 2015), http://0nlab0r.0rg/2015/12/08/d0-we-need-an-independent-w0rker-categ0ry [http://perma CC/VN3U -3RTE],

45 H a r r is & Kr u e g e r , supra note 1, at 2. 46 The test for determining employee status varies across statutes and jurisdictions, but most

courts and agencies emphasize similar factors, such as control. See, e.g., Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323-24 (1992) (articulating a multifactor test for determining em­ ployee status under ERISA, including the “right to control the manner and means” of work, id. at 323 (quoting Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 751 (1989))); Sec’y of Labor V. Lauritzen, 835 F.2d 1529, 1534-35 (7th Cir. 1987) (articulating a six-factor “economic reality” test, id. at 1534, for determining employee status under the Fair Labor Standards Act (FLSA),

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exist. In Sisters’ Camelot, the Board’s analysis of three factors in par­ ticular — control, supervision, and entrepreneurial opportunity — shows how. 47

One of the most important factors indicating an employment rela­ tionship is control. Traditionally, employers have exercised control over their employees by dictating wages, hours, and working condi­ tions. In the gig economy, none of these usual mechanisms are a given. Many gig workers today have broad discretion over when, where, and how much to work. The Board’s analysis in Sisters’ Camelot, howev­ er, suggests that such discretion does not necessarily deprive a worker of employee status. Like many gig workers, Camelot’s canvassers were “free[] to work or not work as they [chose] , ” 4 8 but the Board con­ cluded that “such discretion [was] outweighed by the control” 4 9 that Camelot otherwise exercised over their work lives — for example, by setting their daily start and end times, requiring detailed recordkeep­ ing, restricting their canvassing area, and disciplining them . 50 The key inquiry for the Board was not whether Camelot controlled the can­ vassers’ schedules, but rather how much control it exercised when the canvassers did decide to work. The Board opted for a broad under­ standing of control, recognizing that, especially in nontraditional work arrangements, it can often take atypical forms.

Another factor often used to distinguish employees from indepen­ dent contractors is supervision. Assessing this factor can be difficult in the gig economy, where online intermediaries dominate and in-person supervision is rare. Lack of direct supervision does not, however, pre­ clude a worker from employee status. In Sisters’ Camelot, the Board acknowledged that the canvassers were “not generally subject to in- person supervision” — in part because it would have been “highly im­ practical” — but still found a “significant level of oversight” in the re­ lationship, achieved through detailed recordkeeping requirements. 51 Notably, the Board measured supervision in relative terms, based on what was practicable in that context. 52 This approach offers a means

including “the nature and degree of the alleged employer’s control,” id. at 1535); see also S.G. Borello & Sons, Inc. v. D ep’t of Indus. Relations, 769 P.2d 399, 404 (Cal. 1989) (emphasizing “the right to control work details,” among other factors indicating employee status); Rev. Rul. 87-41, 1987-1 C.B. 296 (outlining the Internal Revenue Service’s twenty-factor test for determining “whether sufficient control is present to establish an employer-employee relationship”).

47 For a discussion on how the B oard’s analysis of these factors sheds light on the classification of Uber drivers, see Sachs, supra note 35.

48 Sisters’ Camelot, 363 N.L.R.B. No. 13, at 2. 49 Id. at 2 n.5. 50 Id. at 2. 51 Id. at 3. 52 See id.-, see also Mitchell Bros. Truck Lines, 249 N.L.R.B. 476, 481 (1980) (evaluating su­

pervision in the context of “the nature of the occupation”), overruled in part on other grounds by Container Transit, Inc., 281 N.L.R.B. 1039 (1986).

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of distinguishing between the many online intermediaries in the gig economy. While many of them maintain a strict hands-off model, some of them — such as Uber and Instacart — have detailed feedback mechanisms to enable remote monitoring, 53 suggesting the existence of an employment relationship.

One final factor bearing on a w orker’s status is his entrepreneurial opportunity for profit or gain. For many gig workers, a significant draw is the potential to “make good money” 54 — conditioned, of course, on how much they choose to work. But their opportunities for profit are limited in other ways, too. In Sisters’ Camelot, the Board demonstrated a strong awareness of these constraints, stressing that the relevant test is “actual, not merely theoretical, entrepreneurial op­ portunity. ” 55 Although Camelot’s canvassers were free to work for other organizations, these opportunities for extra profit were out­ weighed, in the Board’s view, by the substantial limits imposed on en­ trepreneurial initiative: commission rates were nonnegotiable, and canvassers were prohibited from soliciting outside their assigned areas or for other organizations during their shifts. 56 There was little that the canvassers could do — besides working harder, in theory — to in­ crease their profits. The Board’s actual-opportunity test offers another means for distinguishing between the different kinds of relationships in the gig economy. On this factor, setting fixed rates, like Uber does, 57 might indicate an employment relationship, whereas using a bidding model or allowing workers to set their own prices — like Agent Any­ thing58 and Sidecar59 do — might not.

The Board’s analysis of these three factors makes clear that many of the distinctive features of the gig economy — the flexible schedules, the lack of in-person supervision, and the promise of entrepreneurial opportunity — do not disqualify its workers from employee status. On the contrary. When applied with nuance, as in Sisters’ Camelot, the Board’s multifactor test reveals that even nontraditional “gigs” can

53 See, e.g., O ’Connor v. Uber Techs., Inc., No. C-13-3826, 2015 WL 5138097, at *19 (N.D. Cal. Sept. 1, 2015) (“Uber maintains a uniform ability to monitor certain aspects of its drivers’ performance, principally through the star rating system and other rider feedback___ ”).

54 Sign Up to Drive with Uber, UBER, https://get.uber.com/drive [http://perma.cc/U32L -SA7H]. Uber entices drivers with the promise of substantial profits: “Got a car? Turn it into a money machine.” Id.

55 Sisters’ Camelot, 363 N.L.R.B. No. 13, at 5 (emphasis added) (citing FedEx Home Delivery, 361 N.L.R.B. No. 55, at 1 (Sept. 30, 2014)).

56 Id. at 4-5. 57 E.g., O’Connor, 2015 WL 5138097, at *17 (“[T]he evidence is clear that Uber sets its drivers’

pay without any input or negotiation from the drivers.”). 58 See How It Works, AGENT An y t h i n g , http://www.agentanything.com/how-it-works

[http://perma.cc/WL7H-DMDXl. 59 See Take Control with the New Sidecar, SIDECAR, http://m arketplace.side.cr/driver [http://

perma.cc/9SC8-TYSQ].

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impose significant constraints on a w orker’s autonomy. These con­ straints are precisely what define an employment relationship.

W hat will be difficult for decisionmakers, going forward, is to rec­ ognize those constraints in new and diverse work arrangements. Gig workers can fit into the traditional dichotomy of employees and inde­ pendent contractors, but, as the detailed analysis in Sisters’ Camelot shows, not without close scrutiny of the facts. 6 0 Harris and Krueger have argued that the classification of gig workers will require “long, costly, and uncertain legal battles, ” 61 and that persistent uncertainty about their status exacerbates the risk of misclassification, with busi­ nesses “reorganizing] their work to . . . avoid providing required bene­ fits and protections. ” 62 Reliance on complex, multifactor tests only adds to the uncertainty. 63 The existing categories may still work, but for them to work well, legislatures, courts, and agencies may want to consider stronger decisionmaking rules — such as explicit statutory protections for gig workers64 or, more broadly, a default presumption in favor of employee status. 65

Without a doubt, the gig economy will continue to test our under­ standing of what “work” means. And the classification of its workers will present distinct challenges. But the gig worker is not a “square peg. ” 66 As the Board demonstrated in Sisters’ Camelot, even nontradi- tional working relationships can fit comfortably within the existing framework of employment.

60 Not all of the facts found in Sisters’ Camelot are applicable to all gig workers. For example, the canvassers were unable to choose their “daily start and end times,” Sisters’ Camelot, 363 N.L.R.B. No. 13, at 2, and did not provide their own tools, “only their own pens,” id. at 3. For workers who have more flexible schedules, or who provide their own tools — using, for example, their own cars — questions about their legal status might still remain.

61 H a r r is & Kr u e g e r , supra note 1 , at 6. 62 Id. at 7. 63 This concern is not new. Judge Easterbrook raised it in Secretary o f Labor v. Lauritzen, 835

F.2d 1529 (7th Cir. 1987), where the Seventh Circuit determined that migrant pickle pickers were employees under the FLSA. See id. at 1534-38. In his concurrence, Judge Easterbrook lamented that the court’s multifactor test “offer[ed] little guidance for future cases,” making it difficult for businesses to structure their behavior. Id. at 1539 (Easterbrook, J., concurring). “Why keep cu­ cumber farmers in the dark about the legal consequences of their deeds?” he asked. Id.

64 Recently, the Seattle City Council unanimously passed a bill allowing drivers for Uber, Lyft, and other ride-hailing apps to unionize. See Nick Wingfield & Mike Isaac, Seattle Will Allow Uber and Lyft Drivers to Form Unions, N.Y. TIMES (Dec. 14, 2015), http://www.nytimes.com /2015/12/15/technology/seattle-clears-the-way-for-uber-drivers-to-form-a-union.html.

65 Some countries, including Mexico, the Netherlands, and Portugal, have adopted statutes establishing a rebuttable presumption in favor of employee status. See HARRIS & KRUEGER, supra note 1, at 6. Recently, the U.S. Department of Labor issued a new interpretation of the FLSA that represented a small step in this direction, emphasizing that the Act was “specifically designed to ensure as broad of a scope of statutory coverage as possible” and should be interpret­ ed to include “most workers” as protected employees. See U.S. Dep’t of Labor, Wage & Hour Div., A dministrator’s Interpretation No. 2015-1 (July 15, 2015).

66 Contra Cotter v. Lyft, Inc., 60 F. Supp. 3d 1067, 1081 (N.D. Cal. 2015).

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