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.
The U.S. Department of Labor recently issued three new opinion letters on overtime pay under the Fair Labor Standards Act. Opinion letters cover specific fact situations presented by employers, workers or other parties and are only legally binding on the party who requested the letter. However, employers may be able to claim safe harbor if they rely on an official opinion letter.
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.
The National Labor Relations Board (NLRB) has just overruled a previous case that had expanded the definition of independent contractor for the purposes of the National Labor Relations Act. In its SuperShuttle DFW Inc. decision, the board has brought that definition into greater alignment with the definition used by other agencies such as the Department of Labor and the IRS.
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 2016, the Obama administration's Labor Department proposed a change to the overtime rule in the federal Fair Labor Standards Act. That change would have increased the exempt salary threshold, which is the minimum amount employees must earn in order to be classified as exempt from the FLSA's overtime requirement. However, the change was blocked by an appellate court. Now, the Trump administration's DOL is considering its own changes to the overtime rule, and employer and employee groups testified about their concerns at an Oct. 17 hearing at the DOL.