The “Gig Economy” is booming. With app-based work exploding in recent years, consumers can procure virtually anything through application-based services – from groceries to handypersons to rides.
However, the gig economy has not come without its share of speed bumps – from licensure challenges to job classification concerns, the services many have come to enjoy have been threatened with regulation by government and complaints from the workers who are contracting to provide services. Recently, ride-share app workers in New York pledged to go out on “strike” against the companies who they contract with in protest of the high profits those companies generated as compared to the wages workers receive.
While the nation awaits the results of the strike and its impact on commuting prices, app-based service companies can rejoice at a recent opinion letter from the Department of Labor, which continued its pro-business stance of the current administration. With previous administrations, there was some question as to whether these workers satisfied the requirements of being truly independent contractors.
In the letter, issued on April 29, 2019, the DOL responds to the question of whether the service providers for the virtual marketplace company are employees or independent contractors. In short, the company provided the DOL information that showed how little control they had over the service providers, and gave opportunity to the service providers to create their own opportunities.
In verifying that the service providers were not employees, the DOL focused on the idea of “economic dependence,” and the six factors relied upon in Supreme Court Decisions, which include:
- The nature and degree of the potential employer’s control;
- The permanency of the worker’s relationship with the potential employer;
- The amount of the worker’s investment in facilities, equipment or helpers;
- The amount of skill initiative, judgment or foresight required for the worker’s services;
- The worker’s opportunities for profit or loss; and
- The extent of integration of the worker’s services into the potential employer’s business.
In siding with the company’s belief that the workers were independent contractors, the DOL described the company as a “referral service,” that “does not receive services from service providers, but empowers service providers to provide services to end-market consumers.” In making that determination, the agency focused on a lack of control, permanent relationship, investment, training, predetermined compensation, and integration in the company’s business, which it described as referral platform operation.
While the business requesting the response from the agency was not specified, the business model described in the letter could apply to most if not all of the “gig economy” businesses. With this in mind, as long as similar businesses maintain the same degree of control, they should feel safe in concluding their service providers are independent contractors. However, this is an opinion letter from the DOL based on the description of the relationship by the business itself—there may be more factors at play in a particular case. There can be great differences between the amount of control exerted on paper and the control exerted in real life. Employers need to remain mindful of the fact that circumstances can be interpreted much differently on the service provider side of things, and they need to adhere to the rules established for interacting with contractors.
If you or your company needs assistance in determining the classifications of, or maintaining boundaries with, contracted employee, contact the Wiley Law Office for advice that works.