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DOL Says Gig Economy Workers are Independent Contractors, Not Employees

Wednesday, May 8, 2019

(North American Meat Institute)

Service providers working for a virtual marketplace company (VMC) operating in the "on-demand," "sharing" or "gig" economy are independent contractors, not employees, according to an opinion letter issued last week by the Department of Labor's (DOL) Wage and Hour Division. The distinction is important because under the Fair Labor Standards Act, independent contractors are not entitled to minimum wages and overtime pay.

The letter strengthens the position of online companies that argue they are not traditional employers and therefore not bound by the usual legal obligations between management and employees. The letter does not identify specific companies but the description covers those that "provide a referral system that connects service providers with consumers." The letter indicates how DOL intends to interpret existing rules and regulations. It was made public to clarify the situation for similar businesses, but the specific business' name was redacted, which is standard DOL practice when making letters public.

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