Once I make up my mind, I’m full of indecision.”

-- Oscar Levant

Just before the arrival of a new Wage & Hour Administrator, on April 29th, 2019, the Acting Administrator of the Wage and Hour Division (“WHD”) of the Department of Labor (“DOL”) issued an opinion letter on the employment status of the service providers participating in a virtual marketplace company. A virtual marketplace company (“VMC”) is a business which connects service providers with consumers through an online marketplace. This could be through a website page or an “app” on your phone. In this opinion letter, the DOL considered a specific set of facts from a specific virtual marketplace company -- as such, the letter is tailored to the set of facts given by the organization that requested the opinion letter.

The letter discussed the status of the service providers with respect to the virtual marketplace company. The company asked if the service providers would be considered as employees or as independent contractors under the facts that the company provided. The DOL issued its opinion stating that the service providers were likely to be independent contractors, not employees. Several factors were considered in the opinion.

First the DOL examined the definition of “employee” under the FLSA, 29 U.S.C. §§ 203(e)(1), (g), as an “individual whom an employer suffers, permits, or otherwise employs to work.” Then, the DOL considered the judicial precedent finding that the relevant test was one that examined whether the worker is dependent on the business it contracts with. The Supreme Court employs six separate factors that determine how much the worker is dependent on the employer: (1) the nature and degree of the potential employer’s control, (2) the permanency of the worker’s relationship with the potential employer, (3) the amount of the worker’s investment in facilities, equipment, or helpers, (4) the amount of skill, imitative, judgement, or foresight required for the worker’s services, (5) the worker’s opportunities for profit or loss, and (6) the extent of integration of the worker’s services into the potential employer’s business. See Rutherford, 331 U.S. at 730; United States v. Silk, 331 U.S. 704, 716 (1947) (Social Security Act case).

The DOL determined that there was a low degree of control because the workers were not rated by the VMC, they did not have shifts, and were allowed a large amount of freedom. Among other factors, some important facts were that the workers were able to perform their services with their own equipment, could work with other VMC’s, did not have a quota, and were not overseen by the VMC beyond a background and reference check. These were not the only relevant facts and for more information please refer to the opinion letter here. https://www.dol.gov/whd/opinion/FLSA/2019/2019_04_29_06_FLSA.pdf.

This opinion letter from the DOL is timely because of the increase in virtual marketplace businesses that use technology to provide a service with an end user; Uber, Lyft, TaskRabbit and Wag (the dog walking service) are just a few. This opinion letter details the analysis that the DOL will go through when independently classifying the workers of VMCs.

The release of the opinion letter comes less than a month after the National Labor Relations Board (“NLRB”) issued its own memorandum to Uber Technologies Inc., employing a common law agency test that looked at some of the factors listed in the DOL’s opinion as well as others. The NLRB concluded that the UberX and UberBLACK drivers are very likely to be independent contractors. That memorandum can be found at http://src.bna.com/Ibt. The current findings by both organizations follow a long period of shifting tides with regard to the standards by which the respective organizations analyze the worker employer relationship.

For more on how the political winds of independent contractor law have fluctuated in wage and hour, see our January, 23, 2018 blog: https://www.awrcounsel.com/blog/2018/1/23/dol-has-withdrawn-its-independent-contractor-guidance.