In an opinion letter issued by the U.S. Department of Labor (DOL) on April 29, 2019, DOL finds that workers getting jobs through smart phone apps and websites such as Angie's List are independent contractors and not employees of those platforms. The opinion indicates that such service providers are not working for the virtual marketplace, but working for consumers through the marketplace. Gig companies like Uber and even traditional employers outside of the gig economy can use this opinion letter as a potential defense when they have relationships with independent contractors or others they do not treat as employees.
It should be noted that this opinion letter is not a law or regulation, and only covers how the current administration will interpret the law. This letter makes changes from the Obama-era DOL, which considered most gig workers to be employees.
The opinion letter states that it is based on long-standing Supreme Court precedent, utilizing a six-factor test. Factors include permanency of the worker's relationship to the gig company, the amount of skill or judgment required for the worker's services, control the company exercises over service providers, and how much the service providers' work is tied to the primary purpose of the company. In discussing the control issue, the letter indicates that the company did not set a work quota, a firm schedule, or dictate how to perform the selected services, as service providers had the ability to set their own schedule. They could also take jobs through competitor platforms. The letter also indicated that the work a service provider performs is not integrated into the company's business, because once a client and a service provider are connected, the company's operation is effectively terminated.
The determination of employee versus independent contractor status is critical, as independent contractors do not have employment rights, benefits or tax withholdings. The business models of many companies are based on the independent contractor concept. Nevertheless, plaintiffs may continue to challenge a company's business model dependent on using independent contractors, and many states, like California, have rules more rigid than that of federal laws.
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