For the so-called "gig economy" to be profitable, it relies on one fundamental idea. The workers who perform the gigs are not employees of the company but independent contractors.
Companies like Lyft, Uber and the like have been using a new model for delivering their services to customers. Instead of hiring employees, they rely on contract workers -- even for their core business. This is often called the "gig economy" model.
With the "gig economy" in full swing, state and federal agencies have an incentive to scrutinize whether workers are properly classified as independent contractors or employees. After all, employers are not responsible for paying half of an independent contractor's payroll taxes or the unemployment insurance and workers' comp required by law. And, independent contractors lack many workplace protections that employees are entitled to receive.
In the first ruling under federal law involving Uber, a U.S. District Court Judge in Pennsylvania has just ruled that limousine drivers for UberBLACK are independent contractors under the Fair Labor Standards Act. The FLSA sets the minimum wage and overtime rules for covered employees -- but independent contractors are not covered by the law. Therefore, much FLSA litigation centers around who is legally an employee and who is a contractor.