The Department of Labor (DOL) recently issued an opinion letter to an unnamed company stating that gig workers who connect via apps or online platforms are legally deemed independent contractors rather than employees. This is a big win for companies like Lyft, Uber, Grubhub, DoorDash, Uber Eats, and TaskRabbit because they no longer have to worry about paying minimum wage, overtime, and other employee benefits to their now legally-classified independent contractors.
When evaluating whether the company’s service providers should be an employee or an independent contractor, the DOL used the 6-factor test to assess the company’s platform:
- The nature and degree of the potential employer’s control.
- The company gives service providers flexibility to allow them “to choose if, when, where, how and for whom they will work,” allowing them complete autonomy to work when it’s best for them. Workers are unrestricted to work other jobs for competitors and their work is not monitored or supervised. This all points to an independent contractor, not an employee.
- The permanency of the worker’s relationship with the potential employer.
- Workers have freedom to exit the work relationship at any time and do gigs on a project-by-project basis. This indicates work done by an independent contractor, not an employee.
- The amount of the worker’s investment in facilities, equipment, or helpers.
- Service providers must purchase all necessary tools for their work with no expectation of reimbursement. Although they utilize an app to connect with customers, they could use similar software on other platforms. This factor indicates an independent contractor, not an employee.
- The amount of skill, initiative, judgment, or foresight required for the worker’s services.
- Workers choose between varying opportunities (even among competitors) to maximize their profits, which shows considerable independence. They also rely on their own skillset and have no dependence on company training to know how to do their job. This demonstrates work done by an independent contractor, not an employee.
- The worker’s opportunities for profit or loss.
- Service providers choose from different jobs with different prices, take as many jobs as they’d like, negotiate the price of their jobs, and toggle back and forth between competing virtual platforms to determine which job they’ll do. Workers also risk losing money if a job isn’t completed after they’ve accepted it. This exemplifies managerial skills that are typical of an independent contractor, not an employee.
- The extent of integration of the worker’s services into the potential employer’s business.
- The workers who use the app to connect with gigs don’t actually develop, maintain, or operate the platform; they simply use it to acquire service opportunities. The company itself provides a finished product to the gig workers, making the workers consumers of the company’s app who then negotiate with the company over the terms and conditions of the service they provide. This means the workers are not operationally integrated into the business, which points to an independent contractor rather than an employee.
Before assuming the work relationship you have is that of an independent contractor, be sure to go through the 6-factor test. For help with your specific situation, please contact our experts at HR@stratus.hr.
Do you have an independent contractor or an employee?