DOL: Not all gig workers are employees

Posted May 1, 2019

In an April 29, 2019 Opinion Letter, the U.S. Department of Labor (DOL) indicated that certain service providers for a particular virtual marketplace are not employees for purposes of the Fair Labor Standards Act (FLSA), but rather, are independent contractors.

This letter specifically responds to a request on behalf of a particular company, so it is not meant to apply to all companies. It can, however, be seen as evidence regarding the DOL’s views.

The company operates in the so-called “on-demand,” “sharing,” or “gig,” economy. The DOL concluded that the workers, who provide services to consumers through this specific company's virtual platform, are independent contractors, not employees of the company. To make this determination, WHD applied its longstanding and unchanged six-factor balancing test, derived from Supreme Court precedent:

• 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.

The company allows these service providers to use its platform, it requires them to provide certain basic information, and to self-certify their experience and qualifications. The company completes a background check and an identify check through third parties. The workers must acknowledge and accept a terms of use agreement and a service agreement, which states that the company provides only a platform for connecting providers with customers and disclaims any employment relationship between. The agreements state that only the service providers, and not the company, provide services to consumers in the virtual marketplace. The agreements also classify the service providers as independent contractors.

The workers were not required to undergo training and no physical workplace was provided.

The DOL does not define “gig” workers and indicates that researchers use many different definitions when they talk about the gig economy. For example:

• A plumber or electrician may be on the payroll of a contracting company on the weekdays and obtain individual jobs through an app on the weekend. Gig worker?
• A substitute teacher in one school district may obtain assignments and pay through traditional means, while the neighboring district assigns and pays workers through an app. Is one a gig worker?

Definitions developed by others than the DOL may overlap with the concept of contingent workers and some of those in alternative employment arrangements. Obviously, the “electronically mediated employment” field continues to evolve.

This article was written by Darlene M. Clabault, SHRM-CP, PHR, CLMS, of J. J. Keller & Associates, Inc.

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