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U.S. Labor Department Describes Most ‘Gig Economy' Workers as Independent Contractors

    Client Alerts
  • May 10, 2019

With the advent of Uber, Lyft, and other so-called “gig economy” jobs, a niche industry has arisen for plaintiffs’ lawyers who file suit against these companies alleging that their workers are misclassified employees. The outcome of these suits can have an important impact on many companies whose business models are based on not employing the people who provide their services. On April 29, these companies received some relief when the federal Department of Labor issued an opinion letter indicating that many of these workers meet the definition of independent contractors.

The new opinion letter uses DOL’s six-factor balancing test to determine that workers providing services through a company’s web platform are not employees. These factors include the company’s lack of control over the work, the impermanence of the working relationship, the workers’ use of their own equipment and resources, and the workers’ opportunities for profit or loss. On balance, the agreement between the company and its workers falls on the side of the independent contractor classification.

Although the opinion letter only applies to the particular facts discussed, the general principles provided by DOL should apply to a wide range of gig economy companies. Of course, the opinion letter is not binding law, and individual courts may reach different conclusions. In addition, other legal tests are used for distinguishing between employees and contractors under different federal and state laws. However, this letter gives these companies a credible legal basis for their continuing classification of workers as independent contractors.