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Labor Department says virtual platform workers are independent contractors, not employees

April 29, 2019

The US Department of Labor today issued a new opinion letter concluding that workers who provide services to consumers through a company’s virtual platform are independent contractors under the Fair Labor Standards Act, not employees of the company. The letter was written in response to a request on behalf of one specific virtual marketplace company.

An opinion letter is an official, written opinion by the Department’s Wage and Hour Division on how a particular law applies in specific circumstances presented by the individual person or entity that requested the letter.

The letter addresses a virtual marketplace company that operates in the “on-demand” or “sharing” economy. “Generally, a VMC is an online and/or smartphone-based referral service that connects service providers to end-market consumers to provide a wide variety of services, such as transportation, delivery, shopping, moving, cleaning, plumbing, painting and household services,” the letter states.

“Under the facts described in your letter, we conclude that your client’s service providers are independent contractors, not employees of your client,” Keith Sonderling, acting administrator of the Wage and Hour Division wrote in the letter’s conclusion. “The facts in your letter demonstrate economic independence, rather than economic dependence, in the working relationship between your client and its service providers. The FLSA therefore recognizes your client’s status as independent contractors.”

To make this determination, Wage and Hour Division applied six-factor balancing test, derived from Supreme Court precedent:

  • The nature and degree of the potential employer’s control;
  • The permanency of the worker’s relationship with the potential employer;
  • The amount of the worker’s investment in facilities, equipment or helpers;
  • The amount of skill, initiative, judgment or foresight required for the worker’s services;
  • The worker’s opportunities for profit or loss; and
  • The extent of integration of the worker’s services into the potential employer’s business.

“An important role of the US Department of Labor is to ensure that employers who want to do the right thing have clear compliance assistance,” Sonderling said. “Today, the US Department of Labor offers further insight into the nexus of current labor law and innovations in the job market.”

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