Gig economy workers are independent contractors, not employees

Recently, the Department of Labor (DOL) produced an opinion letter that supported gig economy companies (sometimes referred to as virtual marketplace companies or VMCs) that typically classify their workers as independent contractors. The letter revealed their analysis on whether individuals that are providing services through the VMC are employees or are independent contractors as it relates to federal wage and hour laws. You can find the actual letter here.

The DOL provides six factors to consider when analyzing whether a worker is a gig worker most of which tie back to flexibility and independence. According to this article from Lexology the six factors are:

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 and loss
6. The extent of integration of the worker’s services into the potential employer’s business

As they reviewed one VMC situation, there was mention of making sure the VMC does not provide any additional compensation; that the VMC reports service provider earnings through IRS Form 1099s, which are used for non-wage compensation, not Form W-2 wage reports. If that is the case, it would seem that mobility benefits that support any gig worker should not be provided or that if provided could jeopardize the ruling of the service provider being an actual employee.  

This will be interesting to watch as this sector of the workforce is growing.