Sharing Economy

Labor Department: Gig Workers Are Contractors, Not Employees

It's a common sense but crucial indication of how federal regulators classify workers who earn money through online platforms like Uber and TaskRabbit.

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In a letter issued Monday to an unidentified sharing economy platform, the federal Department of Labor clarified that gig economy workers are independent contractors, not full-fledged employees.

That seems like a common sense reading of the relationship between those workers and the platforms—like Uber, TaskRabbit, and dozens of others—that connect them with potential clients. Someone who drives for Uber, for example, gets to set their own hours and is responsible for their own vehicle. That certainly doesn't look like a typical employer-employee relationship, but some activists have been trying to get courts and state governments to identify sharing economy workers as full-fledged employees.

Defining gig economy workers as employees would make the platforms responsible for providing health insurance and other benefits, and would force them to follow federal minimum wage laws. In all, employees can be 20 to 30 percent more expensive than contractors. It's a designation that would potentially jeopardize the business model that has allowed the gig economy to grow and prosper—and one that would likely limit workers' ability to exercise the independence that those jobs offer.

The Labor Department's letter only applies to a single company—an unnamed firm 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"—that had asked the department to determine whether workers using its platform were employees or contractors.

Still, the ruling is an important indication of where it stands on the broader question of how gig economy workers should be classified.

"Today, the U.S. Department of Labor offers further insight into the nexus of current labor law and innovations in the job market," Keith Sonderling, acting administrator of the department's Wage and Hour Division, said in a statement.

The ruling is also an important break with previous Labor Department guidance. Under the Obama administration, the department had issued official guidance advising that Uber and Lyft drivers would likely be classified as employees if the department was asked to make a determination about their status. Shortly after taking office, the Trump administration removed that guidance from the Department of Labor's website, prompting the unnamed company in the letter issued Monday to seek a specific ruling from the department.

In making its determination, the department considered six factors: the degree to which employers have control over workers, the permanency of the workers' relationship with the employer, the employer's level of investment in workers' equipment and facilities, the level of skill required for the work, the workers' potential to earn profit, and the integration of the workers' services into the employer's business.

While the latter four are more technical in nature, the first two categories are probably the most important. Gig economy platforms have very little control over their employees, who typically can log in or log out of the systems as they please.

"A business may have control where it, for example, requires a worker to work exclusively for the business; disavow working for or interacting with competitors during the working relationship," the Department of Labor letter states.

But that is not at all how gig economy platforms operate. Drivers can work for both Lyft and Uber—often switching between the two apps during a single shift—and completing other odd jobs on TaskRabbit does not mean a worker can't also deliver food on DoorDash.

Indeed, research from JP Morgan Chase, an investment bank, shows that most gig economy workers are active only a few months out of the year. Rather than being full-time jobs, the data indicate that workers are likely to use the gig economy to earn extra income when needed or when time allows.

Similarly, there is very little in the way of permanence to the employer-worker relationship within the gig economy. For an Uber driver, for example, ending that relationship is as easy as deleting an app.

Defining that relationship at all is "inherently difficult," the Labor Department letter reads, in part, because "as a matter of economic reality, [workers] are working for the consumer, not [the platform]."

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  1. Awesome I can finally release my prostitution app Hookers R Us.

    1. And your contractors can also work for Rent A Ho.

      1. How about Rent-a-Backho? Asking for several friends.

        1. That’s just dirty.

  2. Six factors? Is the 21 question standard no longer operative?

    1. Ask 50 cent

  3. Good. The usual employer/employee model works fine for lots of jobs, but it’s stupid to try to cram work that doesn’t really fit into that model. There are lots of reasons why both employees and employers might find the contractor arrangement preferable.

    1. “but it’s stupid to try to cram work that doesn’t really fit into that model. ”

      Like ENB, you cannot stop talking about sex work.

  4. This is good news but as a DoL letter, it seems like weak precedent. What can or should be done to lock this in as a defensible standard?

    1. Nothing. A D administration will change it back.

  5. Trump administration turning out to be one of the best ever. It’s unreal.

    1. Heh, don’t get smug. If the Ds take it back next year they’ll change Labor’s mind.

      “Um, the 2019 ruling was due to a gas leak at headquarters. Gig workers are employees now.”

  6. I am glad we have stopped calling these “sharing”. They always ask for money.

    1. Yeah, that always confused me.

  7. Yet another area where the official position of government will change every time the letter following the President’s name changes. I certainly agree with this designation, but wouldn’t it be preferable to get Congress to, I don’t know, actually pass laws that define these things clearly?

    1. Or just repeal the entirely dysfunctional Labor Department. How the U.S. had its greatest employee success and earning before the Department existed should be a common-sense sign to most people.

  8. Has anyone used Task Rabbit? I tried and it’s shit. Either they say they can’t do the job or if they want to the price is too damned high. Fuck’em.

    1. Sounds like we need Tarea Conejo.

  9. Gig workers are not employees?
    Does that mean gig workers don’t get paid?

    1. If they agree to do it for FREE… Yep, then No Pay JUST AS EXPECTED!

  10. It’s ridiculous that the govt even had a say in this process. Employers and employees should define their relationship together. If Uber wants permanently employees (perhaps some people really love driving for them and it is advantageous to Uber), they can freely do so.

    1. If the government stopped defining the relationship, then all employers would immediately declare all their employees to be contractors, so that they could avoid the regulations on the treatment of employees and stop paying tax withholding and Social Security/Medicare contributions. There would be no “defin(ing) their relationship together.”

      1. So basically it’s about tax collection.

        1. Mostly, yes, but it’s also about buying votes with mandated employee benefits.

        2. Contractors are responsible for paying their own Social Security/Medicare from their received earnings. The way EVERY person should be held responsible for paying their taxes. Then instead of swooping up earnings under the rug like the employer does – the employees could REALLY feel the pain of “LOOSING” all that money and not be so utterly stupid as to support anything that takes MORE of their earnings.

      2. Even if this doomsday scenario were true, so what? The employees leave and some enterprising young men start forming companies where they recognize their employees as employees and poach all the talent.

      3. Not the case at all, because when you stop classifying people as employees you lose a lot of control that you have over when they work and for how long. I do this sort of thing in the writing/editing sphere, and there’s simply no way that I’m a regular employee under any stretch of the word.

  11. For income tax purposes, it doesn’t matter. All they need to do is learn the law, and file educated returns, either as employees or contractors, and receive full refunds of all withheld taxes, or avoid paying 1099 “non employment compensation” taxes as well. Learn the law, the Constitution, and stand up for freedom. The Dep of Labor is irrelevant as far as taxation goes . http://www.losthorizons.com

    1. You continue to provide amusement and stupidity all in one post.
      Your sentiments are in the right place; your head is up your ass. Fuck off with that nonsense.

  12. It seems obvious to me but the way governments define employment is often much too expansive, and creates a one-size fits all approach to labor regs. Strangely enough the statists want to put everyone in a power structure for employment. We’d do better to scrap the Fair Labor Standards Act all together.

  13. […] U.S. Department of Labor said this week that service providers working for an unidentified virtual marketplace company were i… rather than employees and should be treated as such under the Fair Labor Standards […]

  14. Everyone single one of these “activists” (read: Taxi-cab and Union assholes) needs a swift kick to the nuts every hour of the day. I work full time in the gig economy and I’ll be goddamned if I’m gonna be limited by “minimum wage”. I don’t HAVE to put in 40+ hours every week to make my bills and if these jackasses get their way, I’ll be joining every other former gig economy worker in the poor house. Fuck these motherfuckers with a rusty goddamn spoon!

    1. Amen a million times over. I’m so stoked with my gig job right now and know that government just can’t wait to swoop in and fuck it up so I turn into just another rat in the race.

  15. […] U.S. Department of Labor said this week that service providers working for an unidentified virtual marketplace company were i… quite than staff and must be handled as such underneath the Fair Labor Standards […]

  16. […] U.S. Department of Labor said this week that service providers working for an unidentified virtual marketplace company were i… rather than employees and should be treated as such under the Fair Labor Standards […]

  17. […] memo concurs with a letter the Labor Department released last month that classified gig economy workers […]

  18. […] memo concurs with a letter the Labor Department released last month that classified gig economy workers […]

  19. […] memo concurs with a letter the Labor Department released last month that classified gig economy workers […]

  20. […] memo concurs with a letter the Labor Department released last month that classified gig economy workers […]

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