USDOL Opinion Letter Says Virtual Marketplace Company’s Worker Is a Contractor

The U.S. Department of Labor (USDOL) has issued an opinion letter concluding that the workers providing services for a specific but unnamed company operating on a virtual platform in the “on-demand” economy are independent contractors and not employees of the company under the Fair Labor Standards Act (FLSA). WHD based its opinion on its six key factors assessing the worker’s:

  • Control by potential employer
  • Permanency of relationship with potential employer
  • Investment in facilities, equipment or helpers
  • Skill, initiative, judgment and foresight required
  • Opportunity for profit and loss
  • Integration into potential employer’s business

In this case, the USDOL determined that when the six factors were applied to the facts, the results demonstrated the workers’ economic independence rather than dependence on the company. While specific to the requester, the opinion will likely be of interest to online and/or smartphone-based service providers and those who consider themselves part of the gig economy. See FLSA2019-6 for the full text of the opinion letter; see also the USDOL press release.
 
Hawaii employers should note that the USDOL opinion letter is a written opinion by WHD on how a particular law applies in specific circumstances presented by the individual person or entity requesting the letter. The letters are not legally binding, instead providing guidance and agency perspective.  More importantly, the USDOL opinion letter has no impact on the interpretation of State laws and regulations. So, for example, companies operating on a virtual platform in Hawaii may be able to successfully argue that their service providers are “independent contractors” for FLSA purposes, but those same service providers could be deemed “employees” under the “ABC” test used by the Hawaii Department of Labor and Industrial Relations. Companies should check with legal counsel on the classification of workers as employees or independent contractors.