Gig Workers Are Not Employees: DOL

The Department of Labor's opinion came in a letter to a virtual marketplace company that operates in the "sharing" economy.

The U.S. Department of Labor said this week that service providers working for an unidentified virtual marketplace company were independent contractors rather than employees and should be treated as such under the Fair Labor Standards Act.

The DOL’s opinion came in an April 29 letter in response to a question from counsel for a virtual marketplace company that operates in the so-called “on-demand” or “sharing” economy and serves consumers. The letter applies only to one, unnamed company but is seen as an indicator of how the department will decide how workers in the gig economy should be classified.

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“An important role of the U.S. Department of Labor is to ensure that employers who want to do the right thing have clear compliance assistance,” said Keith Sonderling, acting administrator of the department’s wage and hour division. “Today, the U.S. Department of Labor offers further insight into the nexus of current labor law and innovations in the job market.”

The DOL said it considered the degree of the potential employer’s control over workers in determining their classification, citing the fact that gig economy workers can also work for competitors and have flexible shifts. The DOL also pointed out that the relationship between the virtual marketplace and the workers was not permanent; that the company does not invest in facilities, equipment, or helpers on behalf of the workers; and that the workers do not receive a predetermined amount of compensation for their work, but instead control “the major determinants of profit or loss.”

The agency’s opinion comes as rideshare companies Uber and Lyft and house-cleaning company Handy face lawsuits over their classification of workers as independent contractors. Platforms that classify workers as employees would be responsible for health insurance and would be forced to follow federal minimum wage laws, and workers who are classified as employees are up to 30% more expensive than contractors, according to some studies.

For the virtual marketplace company, the letter is “sort of a get-out-of-jail-free card,” Maya Pinto, a senior researcher at the National Employment Law Project, told CBS News. “It will be used by this one company and could prod other companies to get similar letters. We believe in most cases, if not all cases, the workers are under control of the company and are in fact employees,” she said.

Backing the virtual marketplace’s belief that its workers were independent contractors, the DOL also noted that the contractors in question “are able to work full-time in [the company’s] virtual marketplace, but most of them choose not to do so, which may indicate that they are pursuing other jobs outside your client’s platform.”

An Oxford University study released last August painted a much different portrait of gig economy work. It said the autonomy of a gig worker came at a price — long, irregular and anti-social hours, leading to sleep deprivation and exhaustion, according to Dr. Alex Word, co-author of the Oxford paper.

“The competitive nature of online labor platforms leads to high-intensity work, requiring workers to complete as many gigs as possible as quickly as they can and meet the demands of multiple clients no matter how unreasonable,” the study noted.