It’s one of the most contentious questions in the world of work these days: Whom do Uber drivers and others in the gig economy really work for?
In the eyes of the Trump administration, they work for themselves.
The Labor Department announced Monday it had determined such workers are not employees but independent contractors, and therefore are not protected by labor standards like the minimum wage and overtime pay. The decision was laid out in what’s known as an opinion letter issued by the agency’s wage and hour division to let companies know where the agency stands on a hot-button issue.
By making such a determination, the agency came down on the side of companies like Uber, Lyft and Handy, which have long argued that those who do their work are not actually their workers. Many Silicon Valley startups have predicated their business models on the use of independent contractors, who must bear costs stemming from their jobs ― such as gasoline for vehicles ―while also forgoing basic protections afforded traditional employees.
The Labor Department issued its public letter to lawyers representing an unnamed “virtual marketplace company that operates in the so-called ‘on-demand’ or ‘sharing’ economy.”
Referring to workers as “service providers,” the letter makes the legal case that the Ubers of the world have been making for years: that the workers exercise their own control over their work and schedules, and therefore shouldn’t be considered employees under the law.
″[W]e conclude that your client’s service providers are independent contractors, not employees of your client,” the letter said. “The facts in your letter demonstrate economic independence, rather than economic dependence, in the working relationship between your client and its service providers.”
““Whatever gig company sought the opinion will likely use the letter as a ‘get out of jail free’ card to argue that it acted in good faith in classifying its workers as contractors,””
The letter doesn’t mean workers cannot sue companies like Uber anymore and argue that they’re employees. But it does send a message to corporations that the Labor Department doesn’t intend to crack down on gig companies that use this model.
When the Labor Department was run by Democrats under the Obama administration, it was much more likely to call gig-economy workers employees rather than independent contractors. The agency’s high-ranking officials in the Obama era generally believed the proliferation of contractor arrangements was likely to lead to more exploitation, in part because workers couldn’t sue to recoup back pay they’re owed.
The National Employment Law Project, a left-leaning worker advocacy group, called Monday’s guidance letter a ”cynical interpretation of employment law,” and part of an effort to strip gig-economy workers of labor protections.
“Whatever gig company sought the opinion will likely use the letter as a ‘get out of jail free’ card to argue that it acted in good faith in classifying its workers as contractors,” said Rebecca Smith, director of the group’s work structures program.
Keith Sonderling, the acting administrator of the Labor Department’s wage and hour division, said the agency issued the letter in order to offer advice to “employers who want to do the right thing.”