United States: A Gig Can Be A Gig: US DOL Opinion Letter Breathes New Life Into The Gig Economy Independent Contractor Model

On April 29, 2019, the U.S. Department of Labor ("DOL") issued anopinion letter finding that "on-demand" service providers working for a virtual marketplace company are independent contractors under the Fair Labor Standards Act.

The opinion letter comes almost two years after the DOL withdrew informal guidance on independent contractors issued under the Obama administration, in which the DOL concluded that "most workers are employees under the FLSA." The new opinion letter signals an approach more friendly to "gig economy" virtual marketplace companies (or "VMCs"), online and/or smartphone-based referral services that connect consumers with service providers providing a wide variety of services, such as transportation, delivery, shopping, moving, cleaning, plumbing, painting, and household services.

To determine whether a worker is an independent contractor or employee under the FLSA, courts analyze the "economic dependence" of the worker on the alleged employer. See Bartels v. Birmingham, 332 U.S. 126, 130 (1947). Whether a worker is economically dependent on a potential employer is a fact-specific inquiry that is individualized to each worker. See Barrantine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739 (1981).

In conducting its analysis in the opinion letter, the DOL's Wage and Hour Division ("WHD") analyzed six factors applied by courts:

  1. The nature and degree of the potential employer's control;
  2. The permanency of the worker's relationship with the potential employer;
  3. The amount of the worker's investment in facilities, equipment, or helpers;
  4. The amount of skill, initiative, judgment or foresight required for the worker's services;
  5. The worker's opportunities for profit or loss; and
  6. The extent of integration of the worker's services into the potential employer's business.

Applying these factors, the WHD concluded that the service providers working for the unnamed VMC that requested the DOL's opinion were independent contractors, not employees. The WHD found that the VMC provided "a referral service," and that "as a matter of economic reality," the service providers were working for the consumer, not the VMC providing the referral.

The WHD discussed each of the six factors in explaining why it concluded that the service providers at issue were not economically dependent on the VMC under the FLSA.

  1. The nature and degree of the potential employer's control

The WHD found that the VCM did not appear to exert control over its service providers; rather, they are afforded autonomy to choose the hours of work that are most beneficial to them, can simultaneously work for competitors of the VCM without repercussions, and are subject to minimal, if any, supervision by the VCM.

  1. The permanency of the worker's relationship with the potential employer

The WHD noted that the VCM does not have a permanent working relationship with its service providers that would indicate an employer-employee relationship. Service providers only maintain a relationship with the VCM on a project-by-project basis, and service providers maintain a high degree of freedom to stop using the VCM platform.

  1. The amount of the worker's investment in facilities, equipment, or helpers

The WHD noted that the VCM does not invest in facilities, equipment, or helpers on behalf of its service providers. Rather, the service providers are required to purchase all necessary resources for their work and are not reimbursed by the VCM for them. Though the VCM invests in its own platform, the WHD found that those investments do not, alone, establish an employment relationship with service providers who use the platform because those are not investments in the work the service providers perform.

  1. The amount of skill, initiative, judgment or foresight required for the worker's services

The WHD reasoned that service providers demonstrate independence from the VCM by choosing between different service opportunities and competing virtual platforms and exercising managerial discretion in order to maximize their profits.

  1. The worker's opportunities for profit or loss

While the VCM sets default prices, the WHD noted that the VCM allows service providers to choose different types of jobs with different prices, take as many jobs as they see fit, and negotiate the price of their jobs. Additionally, the VCM charges a fee for cancelled services, and thus the service providers risk losing money if they do not complete a job they accepted. The Department reasoned that these opportunities for profit or loss give the service providers a substantial amount of control over their compensation and thus independence from the VCM.

  1. The extent of integration of the worker's services into the potential employer's business

Finally, the Department found that the service providers are not integrated into the VCM's referral business; rather, the service providers are consumers of the VCM's referral business and can negotiate with the VCM over the terms and conditions of using the referral business. The WHD also noted that the VMC's "primary purpose" was not providing services to end-market consumers, but providing a referral system to connect service providers and consumers.

Takeaways for Businesses

The WHD's opinion letter provides a template that "gig economy" companies and other businesses may wish to consider in structuring their relationships with workers they intend to be independent contractors under the FLSA. State laws may provide other tests for determining whether workers are independent contractors, and companies may wish to consult with employment counsel in evaluating their compliance with applicable laws.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
16 Oct 2019, Speaking Engagement, Dusseldorf, Germany

EQS Group in cooperation with Orrick, Herrington & Sutcliffe LLP invites you to their event on investor relations and compliance. Topics include ESEF reporting and how to meet the challenges of the Europe-wide XBRL format from 2020 onwards.

16 Oct 2019, Webinar, New York, United States

Two years after the start of the #MeToo movement, multinational companies are still navigating the movement's impact on the workplace and corporate reputational risk.

29 Oct 2019, Speaking Engagement, Washington, United States

On Friday, November 1, 2019 from 11:45 AM - 12:45 PM, Lorraine McGowen will speak on the “When the Weak Link Breaks: Supply Chain Insolvencies – Automotive and Elsewhere” panel.

Similar Articles
Relevancy Powered by MondaqAI
McLane Middleton, Professional Association
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
McLane Middleton, Professional Association
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions