DOL Opinion Letter Upholds Independent Contractor Classification for Gig Workers

On April 29, 2019, the U.S. Department of Labor issued a new opinion letter regarding the independent contractor / employee distinction under the Fair Labor Standards Act (FLSA). In opinion letter FLSA2019-6, the Department’s Wage and Hour Division (WHD) addresses whether workers providing services for a virtual marketplace company (VMC) are independent contractors or employees. A VMC is an online or smartphone-based referral service that connects service providers to end-market consumers to provide a wide variety of services, such as transportation, delivery, shopping, moving, cleaning, plumbing, painting, and household services.

To resolve the legal question of how service providers should be classified, WHD applied its longstanding six-factor balancing test:

• 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 concluding that the business properly classified its workers as independent contractors, rather than employees, WHD noted that the business:

• “gives the service providers significant flexibility, including the ability to pursue external economic opportunities”;
• “does not appear to have a permanent working relationship with its service providers that would be indicative of an employer-employee relationship”;
• “requires its service providers to purchase all necessary resources for their work, and . . . does not reimburse those purchases”;
• permits service providers to “choose between different service opportunities and competing virtual platforms and exercise managerial discretion in order to maximize their profits, thereby showing ‘considerable independence’”;
• does not dictate “[a] predetermined amount” of compensation for service provider’s work, but instead, permits providers to “control[] the major determinants of profit or loss.” WHD Opinion Letter, 2002 WL 32406602, at *2–3.
• does not have service providers “integrated into the referral business” itself.

FLSA2019-6 at p. 7-10.

This opinion letter is doubly significant in that it contradicts DOL Administrator Interpretation 2015-1, issued under the Obama Administration, that these types of workers would be employees.

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