Are Ride Share Services Employers?

Recent news reports about class action lawsuits against Uber and Lyft provide an opportunity for revisiting the standards that courts and enforcement agencies use to determine whether an employment relationship exists between the provider of labor and the recipient of the benefits of the labor. Uber is the subject of a lawsuit entitled O'Conner v. Uber Technologies, Inc., currently pending in the United States District Court for the Northern District of California, where it is being heard by Judge Vince Chhabria, under Case No. 13-CV-03826-EMC. The Lyft case is in the same district, where it is being heard by Judge Edward Chen -- Cotter v. Lyft, Inc., under Case No. 13-CV-04065-VC.

In both cases, the judges denied summary judgment motions by the defendants, on the grounds that there were triable issues as to whether the companies were employers of their drivers, The question to be decided at trial in each case is whether the drivers are independent contractors or employees entitled to the protections of the wage and hour laws. The answer turns on the amount of control that each company exercises over the manner and means by which the drivers provide services.

Under the venerable case of S.G. Borello & Sons, Inc. v. Dep’t of Indus., 48 Cal. 3d 341 (1989), California law (which applies in both cases) presumes that anyone who provides services to another is an employee. The burden is on the presumptive employer to show otherwise by analyzing the following factors: (1) the right to control the work, (2) the alleged employee's opportunity for profit or loss depending on his managerial skill, (3) the alleged employee's investment in equipment or materials required for his task, or his employment of helpers, (4) whether the service rendered requires a special skill, (5) the degree of permanence of the working relationship, and (6) whether the service rendered is an integral part of the alleged employer's business. For a practical, question and answer approach to applying the California standard, see the Employment Development Department's Employment Determination Guide.

The federal standard under the Fair Labor Standards Act is similar. For example, in Bonnette v. California Health & Welfare Agency, 704 F.2d 1465, 1470 (9th Cir. 1983), the Ninth Circuit stated that the determination must be based on the economic realities of the situation, including whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.

Cases involving taxi drivers may provide some guidance as to how the Uber and Lyft cases will ultimately turn out. In Yellow Cab Cooperative v. Workers' Compensation Appeals Bd., 226 Cal.App,3d 1288 (1991), the California Court of Appeal ruled that a cab driver was an employee of Yellow Cab for purposes of workers compensation. Although the driver provided services under a written lease with Yellow Cab and was responsible for his own expenses, Yellow Cab exercised substantial control over the manner and means by which the driver provided the services. It marketed the service and had dispatchers who directed the drivers to calls. It instructed drivers on matters of behavior toward the public, personal appearance, and keeping their cabs clean. The company could require drivers to return to the yard. It barred them from working for other companies.

By contrast, in Yellow Taxi Co. v. NLRB, 721 F.2d 366 (D.C. Cir. 1983), a federal court of appeals ruled that taxis drivers were not employees under the National Labor Relations Act. There the company's written lease provided that the driver paid a fixed rental, regardless of his or her earnings on a particular day, and retained all the fares collected without having to account to the company in any way. That created a "strong inference" that the company did not control the manner and means of providing services.

Note that the Fair Labor Standards Act exempts drivers for "an employer engaged in the business of operating taxicabs" from the overtime rules (although not from the minimum wage requirement). See 29 U.S.C. section 213(b)(17).

For news reports on the denial of summary judgment motions in the Uber and Lyft lawsuits, see Juries To Decide Landmark Cases Against Uber and Lyft in Forbes, Judges back drivers in lawsuits against Uber, others in The Boston Globe, Judges Rule Lawsuits Over Lyft, Uber Drivers Should Proceed in The Wall Street Journal, and Uber and Lyft drivers' class-action lawsuits will go to jury trials in The Los Angeles Times.

Are Franchisors Joint Employers With Their Franchisees

The recent announcement by the NLRB's Office of the General Counsel that it has authorized complaints against McDonald's USA for NLRA violations allegedly committed at franchised restaurants raises the general issue of potential franchisor liability for labor and employment violations by their franchisees. Reported decisions on the subject are scarce. In two cases decided over 45 years ago, the NLRB refused to find that a franchisor was a joint employer. Speedee 7-Eleven, 170 N.L.R.B. 1332 (1968) and S.G. Tilden, Inc., 172 N.L.R.B. 752 (1968). If any of the current complaints proceed to adjudication, the NLRB, and then the federal courts, will determine whether the NLRA's definition of employer includes franchisors.

The issue has arisen under other laws. For example, the California Supreme Court has under review a Court of Appeal decision holding that Domino's could be held liable for sexual harassment by one of its franchisee's employees. The case was argued in June 2014. For a discussion of the decision rejecting liability, see this blogpost.

Employees have also sought to hold franchisors liable for wage and hour violations by franchisees. For example, earlier this year, class action lawyers in California, New York and Michigan filed lawsuits claiming that McDonald's was responsible for wage and hour violations by its franchisees.

For a newspaper columnist's view on the issue, see the LA Times Michael Hiltzik's column "The NLRB-McDonald's ruling could be the beginning of a franchise war."

Why Does the NLRB Get Involved in Non-Union Workplaces?

Although the National Labor Relations Board spends much of its time dealing with union vs. management issues, recent publicity about its rulings on social media in the workplace have reminded us that its jurisdiction extends into non-union environments. This post explains the source and contours of that jurisdiction.

The NLRB exercises jurisdiction over all private employers who participate in a minimum level of interstate commerce, except those who employ only agricultural laborers. The Board's Jurisdictional Standards page explains the standards. The National Labor Relations Act excludes all government employees from the Board's jurisdiction.

Section 7 of the NLRA (29 U.S.C. section 157) protects employees' right "to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection."The right extends to those who are not union members and to workplaces with no union presence. To be protected under Section 7, the activity (1) must involve two or more employees acting together or a single employee acting on behalf of others (2) must benefit employees as a group and not just amount to a personal grievance, and (3) must not be malicious, reckless or otherwise unlawful. The NLRB finds the right important enough that it launched a website in June 2012 that is specifically devoted to the protection of concerted activity.

Here are some of the ways in which Section 7 has been held to protect employees from adverse action by their employers:

Social Media. Several decisions have taken employers to task for disciplining or firing employees based on comments posted on Facebook and other social media. The Board's General Counsel issued a report in May 2012 that distilled the state of the law in this area. The most recent Board decision on the subject found that a Chicago car dealer did not violate Section 7 rights when it fired a sales person for posting photos on his Facebook page because the action was not concerted. Karl Knauz Motors, Inc., Case 13–CA–046452 (Sep. 28, 2012).

Wage Discussions. Section 7 gives employees the right to discuss their wages and other terms and conditions of employment. Confidentiality policies that prohibit employees from disclosing such information are not permitted. For an example of a confidentiality policy that drew NLRB enforcement action, see Northeastern Land Services, Ltd., 560 F.3d 36 (1st Cir. (2009).

Civility Policies. A policy that bars employees from treating each other in an uncivil manner may chill Section 7 rights. For example, in KSL Claremont Resort, Inc., 344 N.L.R.B. No. 105 (2005), the Board held that a policy prohibiting "negative conversations" about associates or managers was unlawful, because employees could reasonably construe the policy to bar them from discussing with their coworkers complaints about their managers that affect working conditions, thereby causing employees to refrain from engaging in protected activities.

May Employers Base Employment Decisions on Off-Duty Conduct?

Three teachers have recently been in the news for their extracurricular activities. A Philadelphia high school teacher was suspended for complaining on her blog that her students acted like "rude, disengaged, lazy whiners." A Florida high school football coach was fired for sending racy pictures to his non-student girlfriend. Another Florida teacher was fired for posting to Facebook that gay marriage was a sin and that same-sex unions were a cesspool. See Teachers Under The Morality Microscope by Jonathan Turley in the Los Angeles Times. These and other cases raise questions about the legal limits on an employer's ability to make employment decisions based on off-duty conduct.

Private Employers

Under the at will presumption of Labor Code section 2922, a private employer may discharge an employee for any reason, so long as it is not an illegal reason. Thus, in the absence of a statutory bar, an employer may base discharge on off duty conduct. For example, even though tobacco use is lawful, an employer could require its employees to refrain from tobacco use. (For an example of an unsuccessful effort by a smoker to challenge his termination, see Rodrigues v. EG Systems, Inc., 639 F. Supp. 2d 131 (D. Mass. 2009).) In reaction to that possibility, some states (not including California) have enacted protections for tobacco-using employees. (See this compilation by the National Conference of State Legislatures.)

Although the language of California Labor Code section 96(k) appears to protect employees from adverse action based on "lawful conduct occurring during nonworking hours away from the employer's premises," it has been interpreted to apply only to conduct that already has constitutional protection. See Attorney General Opinion No. 00-303 (10/10/2000); Barbee v. Household Automotive Fin. Corp., 113 Cal. App. 4th 525, 6 Cal.Rptr.3d 406 (2003); Grinzi v. San Diego Hospice Corp., 120 Cal. App. 4th 72, 14 Cal. Rptr. 3d 893 (2004).

California Labor Code section 432.7 bars employers from taking adverse action based on any arrest or detention that does not result in a conviction, but allows them to inquire about an arrest for which the employee or applicant is out on bail or on his or her own recognizance pending trial. Thus, the employer may base adverse action on results of its own investigation of the facts surrounding the incident for which the employee was arrested. Cranston v. City of Richmond, 40 Cal.3d 755, 710 P.2d 845, 221 Cal. Rptr. 779 (1985).

California Labor Code sections 1101 and 1102 prohibit employers from acting against their employees based on their political beliefs and activities. Under those provisions, a newspaper editor who was fired after public stating his support for a mayoral candidate had a cause of action for wrongful termination. Ali v. L.A. Focus Publication, 112 Cal.App.4th 1477, 5 Cal.Rptr.3d 791 (2003).

As we explained in a previous blog entry, posting comments online about one’s employment may be protected under the National Labor Relations Act. Basing action on information from an employee's off duty online comments may also violate privacy and wiretapping laws. See, for example, Pietrylo v. Hillstone Restaurant Group, Case No. 06-CV-5754 (D.N.J. Sep. 25, 2009), where a jury awarded $3,400 to two employees fired after management got log in to their private MySpace chat group.

An employee may claim that the employer punishes off duty conduct differently based on a protected characteristic. For example, after Delta fired a female employee who posted suggestive photos of herself in a Delta uniform on her "Queen of the Sky" blog, she claimed that the airline did not treat male employees similarly. Simonetti v. Delta Airlines, Inc., Case No. 05-cv-2321 (N.D. Ga. 2005). Her case was dismissed without prejudice during Delta's bankruptcy proceedings, and never decided on the merits.

Public Employers



As a general rule, public employees are not at will, but may only be discharged for good cause. Their statutory right to continued employment establishes a property right that is protected by due process. Skelly v. State Personnel Bd., 15 Cal.3d 194, 539 P.2d 774 (1975). These principles impose additional restrictions on public employers who seek to discharge employees for off duty conduct.

Generally, a public employer must show that the off duty conduct is rationally related to the employee's particular job, and would result in impairment or disruption of public service. For example, the U.S. Supreme Court upheld the discharge of a police officer who sold video of himself stripping and masturbating online, because his off duty conduct was "detrimental to the mission and functions of the employer."
City of San Diego v. Roe, 543 U.S. 77 (2004). By contrast, a male correctional officer could not be terminated for wearing female clothing away from work, because there was no evidence that his performance of his job was impaired. Yancey v. State Personnel Bd., 167 Cal.App.3d 478, 213 Cal. Rptr. 634 (1985).

Although criminal convictions may constitute good cause for termination of a public employee, the employer may not rely on the conviction if it resulted from a nolo contendere plea. County of Los Angeles v. Civil Service Com., 39 Cal.App.4th 620, 46 Cal.Rptr.2d 256 (1995). Instead, the employer must introduce evidence that independently establishes the wrongdoing.