On February 19, 2021, the DOL’s Wage and Hour Division withdrew an extremely controversial Trump-era opinion letter issued in April 2019 that had concluded certain “gig economy” service providers could be classified as independent contractors rather than employees under the FLSA. In past weeks, the DOL has revoked a number of other opinion letters on the issue of independent contractor classification. Many of these opinion letters have been withdrawn on the grounds that the agency is currently reviewing regulatory text that is expected to clarify the circumstances in which an individual is legally allowed to be treated as an employee versus an independent contractor. A new regulation on this topic could be finalized as early as this year.
The issue of “gig economy” service provider classification will likely continue to be a hot button topic for a long time to come. The app-based “gig economy,” which includes well known brands like Uber, Lyft, and Door Dash to name just a few, has been on the rise for years and has seen big growth during the pandemic. Companies that participate in the “gig economy” frequently enter into agreements with individuals to provide on-demand services through an app, at times and locations that are convenient for the service provider. Most companies that participate in the “gig economy” treat service providers as independent contractors, who are not subject to payroll withholdings or workers’ compensation laws.