In an age of "industry disruptors" turning established business models on their heads, companies such as Uber and Lyft rely on a unique workforce of individuals outside the traditional employer-employee context. Uber calls them "partners" while other businesses refer to them as "independent contractors," the official classification these individuals use for tax purposes. Recently, the National Labor Relations Board (NLRB) revealed they had warned a business, Postmates, for misclassifying their staff as independent contractors. In the NLRB's determination, these individuals were employees.
Postmates is like ride-sharing businesses in its on-demand nature, employing individuals on a contractual basis to serve as couriers who offer delivery of a wide variety of items. The root of the dispute lies with the employment agreement staff was required to sign during the hiring process. This document included several provisions, with a non-disclosure agreement and a forfeit of the right to class action lawsuits in favor of binding arbitration.
A Postmates courier complained to the NLRB about classification as an independent contractor due to the arbitration clause, triggering the memo about misclassification. The NLRB agreed with the individual. Postmates' response was to provide an opt-out in the contract language.
This is not the first time the Postmates employment agreement has been at the center of legal disagreements. In 2017, the company settled a class action suit brought by former couriers who alleged the company had failed to clearly disclose its intent to perform background checks on potential contractors. As a result, the suit alleged the company violated the FCRA.
The impact of the NLRB memo on these businesses remains to be seen. The initial memo was created in September of 2016, and Postmates amended its employment agreement in February of 2017; since then, there have been no other major publicly-disclosed determinations regarding employee classification by the NLRB. Under the current administration, leadership made the determination employee classification was not a top priority. However, companies such as Uber remain engaged in a variety of court battles over classification. So far, these cases have produced conflicting outcomes as more industries look to independent contractors as an important source of labor.
Amid disagreements about proper classification
For businesses that rely on contractors, developing an understanding of those with whom you do business is critical. To assist, backgroundchecks.com provides the VendorSAFE program, allowing businesses to deploy an FCRA-compliant screening system that seamlessly blends into existing hiring structures. A branded portal for ordering background checks and thorough reporting capabilities create a smooth, consistent experience.
From information about a potential courier's driving record to a prospective hire's professional licensing record, employers can order the appropriate products from backgroundchecks.com as needed. Whether they are hiring "employees" or "independent contractors," a company must know the facts about its workforce. As the gig-based economy continues to grow, backgroundchecks.com provides tools that scale to meet these unique needs.
About Michael Klazema The author
Michael Klazema is Chief Marketing Technologist at EY-VODW.com and has over two decades of experience in digital consulting, online product management, and technology innovation. He is the lead author and editor for Dallas-based backgroundchecks.com with a focus on human resource and employment screening developments.