Independent contractors, on-demand workers and the FLSA

Independent contractors, on-demand workers and the FLSA

| Nov 3, 2020 | Employment Law |

Gig workers, also known as on-demand workers, like those who work for Uber and Postmates, are classified as independent contractors by their respective platforms. This means that these contractors are not afforded the same employment rights as traditional employee, like federal overtime wage laws and the minimum wage. On-demand workers also do not usually qualify for sick leave or workers’ compensation protections. However, as some states have begun to require these on-demand companies to reclassify their gig workers as employees, the Department of Labor has proposed a rule that would make it harder for such workers to qualify for employee status.

The rule

Previously, in 2015, DOL had guidance that indicated that gig workers could qualify as employees, even if these workers were not directly supervised and set their own hours. However, in 2017, this guidance was revoked, and the new rule was announced Sept. 22, 2020. This new, proposed DOL rule reframes the test to qualify into two inquires, (1) the extent to which a company controls how a gig worker performs their gig; and (2) the opportunity that the gig worker has for profit or loss.

Federal court guidance

The federal courts of appeals have focused their analysis on whether the proposed employee is “economically dependent” on their gig “employer,” and whether they are “really in business for him or herself.” And, economic dependence depended on several factors, which are not examined in the new proposed DOL guidance.

The consequences

This new interpretation of the Fair Labor Standards Act could prove problematic for gig workers and be boon for those who utilize gig labor because it makes it harder to reclassify those workers as employees. Often the Palisades Park, New Jersey, and New York City gig “employer” does not have control over either because the worker ultimate decides their hours and how they want to perform their gigs. Of course, if the gig “employer” is able to maintain the independent contractor label, then they will not have to pay overtime, workers’ compensation insurance, Social Security taxes or unemployment insurance.