On April 29, 2019 the U.S. Department of Labor issued a new Wage and Hour Opinion Letter, concluding that service providers for a Virtual Marketplace Company were Independent Contractors.
DOL opinion letters address compliance issues related to the Fair Labor Standards Act (FLSA). An opinion letter is an official, written opinion by the Department's Wage and Hour Division (WHD) on how a particular law applies in specific circumstances presented by the individual person or entity that requested the letter.
The new opinion letter FLSA2019-6, addresses whether a service provider for a virtual marketplace company is an employee of the company or an independent contractor under the FLSA. This is a significant distinction because the FLSA applies to those workers whom the FLSA defines as “employees” and independent contractors are not “employees.” This business who requested this opinion letter is an online and smartphone-based referral service that connects service providers to end-market consumers.
This letter responds to a request on behalf of a particular virtual marketplace company. It concludes that the workers who provide services to consumers through this specific company's virtual platform are independent contractors, not employees of the company. To make this determination, WHD applied its longstanding and unchanged six-factor balancing test, derived from Supreme Court precedent:
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, initiative, judgment, 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.
The DOL opinion letter reminded employers that whether a worker is economically dependent on a potential employer is a fact-specific inquiry that is individualized to each worker, and the inability of the worker to work on his or her own terms often suggests dependence. Accordingly, independent contractors are often characterized by their ability to, for example, regularly negotiate working conditions or simultaneously work for another business.
This 10-page single spaced opinion letter, along with the NLRB’s 29-page Board Order in SuperShuttle DFW, Inc. in January 2019 really give employers a lot of guidance, in my opinion.
DOL issues new 2019 Opinion Letter on Independent Contractors