The Service Contract Act and the Gig Economy: Are the Ubers and Lyfts of the World Covered?
“There’s an app for that.”
— Anonymous (arguably clever) Apple marketer
Over recent years, the relationship between gig economy businesses such as Uber and Lyft with the people who do their work has come under considerable scrutiny as state and local governments have struggled over whether their wage and hour laws should apply to gig economy workers. The usual debate, in the case of Uber and Lyft, centers around whether their workers are employees or independent contractors. If they’re employees, they’re entitled to minimum wages, overtime, and other things like breaks and maybe even paid sick leave depending on the locality.
No doubt the outcome will vary from state-to-state and the U.S. Department of Labor does not have any current guidance on the issue. But what might happen in the case of gig businesses if they’ve got a federal contract? The debate would not necessarily be exclusively focused on the existence of an employer/employee relationship. Would the workers be entitled to prevailing wages and benefits like those that are mandated under the Service Contract Act (“SCA”), the prevailing wage law ordinarily covering workers on federal government service contracts?
That issue is no longer hypothetical. Recently, the General Services Administration (“GSA”) solicited and awarded contracts for ride sharing services. Let’s start with a company like Uber or Lyft and whether they might have a contract that’s covered by the SCA. Contracts in excess of $2,500 are covered by section 2(a) of the Act and are required to contain a wage determination. 41 U.S.C. § 6703. Contracts of $2,500 or less are subject only to section 2(b) which makes the FLSA minimum wage rate applicable. 41 U.S.C. § 6704. If a contract says if you do X, I’ll pay you Y, that contract will be covered if the price is greater than $2,500 (BTW – the SCA also covers things like concession contracts even though the Government does not itself pay money to the contractor so long as the proceeds of the deal will exceed $2,500.)
However, Blanket Purchase Agreements (“BPAs”) like those awarded by the GSA to Uber and Lyft last year may not be “contracts.” This is because a BPA is a species of “agreement” that technically is not a contract because it does not require any purchases at all. See FAR § 13.301, et seq. The solicitation we saw on the internet did not include the SCA clauses or any wage determination. However, we haven’t seen the terms of the Uber and Lyft BPAs as awarded. But it’s possible that GSA is of the mind that no contract exists until someone requests a ride. Arguably, from Uber’s or Lyft’s vantage point, each ride would be a “micropurchase” type contract well below the SCA’s $2,500 threshold. Problem solved — well maybe or maybe not.
If an agency, nonetheless, enters into its own agreement within the framework of the BPA, then that deal, at least from the Department of Labor’s vantage point, might arguably be seen as morphing into an SCA-covered contract if it requires purchases that will exceed $2,500 in the aggregate. If that happens, then there could be a head-on collision (pun actually not intended) between these gig-economy companies and the duty to pay prevailing wages to drivers, even if they’re considered independent contractors. The SCA also has rules about aggregating orders together rather than treating the orders as separate one-time events. See 29 C.F.R. 4.141(b). So ride sharing possibly, at least from the Department of Labor’s perspective, may look like a service that could be SCA-covered, and it is unclear if there is any other exemption in play.
The SCA covers “service employees.” 41 U.S.C. § 6702 (as defined in § 6701(3)). At first blush, this might seem to limit coverage of the SCA to individuals who are in an employment relationship and not independent contractors. However, the SCA makes it clear that it covers people, not just employees, who work on federal service contracts. 41 U.S.C. § 6701(3)(A-B). DOL regulations further state that “a person's status as an ‘owner-operator’ or an ‘independent contractor’ is immaterial in determining coverage under the Act and all such persons performing the work of service employees must be compensated in accordance with the Act's requirements.” 29 C.F.R. § 4.155.
So, the SCA has been applied to a whole range of people who are not employees and even has been held to apply to volunteers. We know that Uber and Lyft are providing a whole bunch of services to the Government. No doubt there’s a plethora of other gig-type firms performing other services to the Government via an on-demand platform. Do they have SCA-covered contracts? If they do, are they required to pay prevailing wages and benefits? Might the drivers be deemed exempt executive employees managing their own business enterprises and owning more than 20% of their own business such that there is no salary basis test requirement either? And if found to be SCA-covered and nonexempt, how can the gig businesses adapt their systems to fulfill SCA requirements and meet the record-keeping duties? Could the Department of Labor be convinced to issue special ride sharing service wage determinations like they do for a few other industries?
So many questions, so little time. We wish there was an app for this….