Question

What is the Trump Administration's understanding of when a person is an independent contractor or employee?

Answer 1

An independent contractor is an individual or an entity which provides certain goods or services to another person or entity on the basis of a verbal or written agreement between them. Whereas an employee is in full time employment of the contracting entity and works on the instruction of the employer entity. The contractor does not work full time for the contracting entity.

The distinction between a contractor and an employee is important as cost to hire and maintain a contractor is less than those for an employee and also because an employee receives much more legal protection that a contractor. However, the company will have lesser degree of control over independent contractors than employees. But still companies prefer to classify employees as contractors because of cost savings and less legal liability.

The Trump administration, in its Advice memorandum concluded that UberX and UberBlack drivers are independent contractors and not employees. The conclusion was reached by applying the common agency law test and in particular applying two of the agency law test which were the degree of control exercised by the company on the so called employee and how these were paid by the company. To check level of control, the NLRB observed that drivers could fix their work schedule themselves and work as per their convenience and they could decide when they want to work, so Uber had no control on them.

Regarding payment, Uber used to fix the rates for drivers but drivers had the option to work outside UBER as well, hence driver had the option to work for Uber or elsewhere where they got better rates.

Hence, it was concluded that these were independent contractors. Similar analogy could be applied to other industries to determine if someone is employee or independent contractor.