NLRB Wades into Employee-Contractor Debate with Postmates Memo

By Michael Klazema on 3/1/2018

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 are concerns about the workers themselves. The National Limousine Association recently produced a PSA about the need for better background checks at companies such as Uber. Even if a large number of checks come back clean, they still offer the valuable opportunity to avoid potential mistakes in hiring, as the University of Illinois discovered when they canceled 35 offers of employment after completing background checks.

For businesses that rely on contractors, developing an understanding of those with whom you do business is critical. To assist, 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 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, provides tools that scale to meet these unique needs. 


Tag Cloud
Recent Posts

Latest News

  • June 20 Repeat background checks are becoming more common, with companies in India leading the charge. What does this trend look like, and how can employers embrace it now to stay ahead of the curve?
  • June 19

    Every federal job involves a background check of some kind. These background checks and how they are evaluated vary based on job, department, and security clearance level.

  • June 18

  • June 14 Ban the box laws aim to improve opportunities for employment. Could they have the opposite effect instead?
  • June 13 Jacobs Petroleum Products is a regional petroleum company that operates throughout Pennsylvania, West Virginia, Ohio, and Maryland. Apart from their employees carrying much responsibility and have frequent contact with customers, the company’s hiring also tends to be segmented since individual store managers are responsible for hiring talent for their own stores. In this employment landscape, Jacobs Petroleum Products needed a reliable and effective way to screen its new hires for criminal infractions and other red flags.
  • June 12

    The University of Wisconsin System may tweak its hiring and reference check processes. The potential changes come after one of UW’s assistant deans was accused of sexual harassment.

  • June 07 Stories of abuse by coaches in youth sports leagues continue to crop up around the country, but rules and guidelines remain patchy and enforcement is often lacking. The struggle to implement an effective system continues nationwide.
  • June 07 Financial background checks, usually referred to as credit history checks, can be an effective way to find out if a candidate is fit to handle accounts, financial data, and other assets at your business.
  • June 06 The Society for Human Resource Management and the Charles Koch Institute recently commissioned a survey to find out how willing employers were to hire people with criminal records. The study indicates that managers, HR professionals, and employees themselves are becoming more comfortable with the idea of hiring and working with ex-offenders.
  • June 04 Are fingerprint background checks the gold standard for employee screening, or are they overhyped? We look at some of the myths and misconceptions surrounding these checks.