A Trump administration decision identifying gig economy workers at one company as “independent contractors” rather than “employees” could have massive implications for the tech industry.
The Labor Department in an opinion letter released Monday said an unidentified company – a “smart-phone based” business that connects consumers with service providers – does not have to provide benefits to its workers, including the federal minimum wage or overtime, because they are independent contractors rather than employees.
The opinion is not legally binding and only applies to one company, but it could bolster tech companies’ arguments in court in the future as they push to classify their workers as contractors.
And the decision is likely to come under fire from labor advocates and 2020 Democrats who have raised questions about how businesses deal with the growing number of gig economy workers. According to some estimates, there are between 1 million and 5 million people participating in the online gig economy, which includes companies such as Uber, Lyft, Postmates, Angie’s List and TaskRabbit.
“We reject the use of 21st century breakthroughs as an excuse for 19th century labor practices,” Carolyn Bobb, a spokeswoman for one of the country’s leading unions, AFL-CIO, said in a statement to The Hill. She said it is the union’s stance that many gig economy workers are “misclassified.”
It’s an issue with big stakes for the tech industry. Tech companies that offer services through apps, like ride-sharing apps Uber and Lyft and online home services company Handy, have fought efforts across the country to force them to offer full benefits to their workers.
But gig workers and their advocates, including some top Democrats, have cried foul, accusing the companies of shirking fair labor laws and withholding pay from workers who are functionally employees.
According to the Labor Department’s description, the company in question allows service providers to accept or reject any service opportunities and does not “monitor, supervise, or control the particulars of that work.”
“Under the facts described in your letter, we conclude that your client’s service providers are independent contractors, not employees of your client,” Keith Sonderling, the acting administrator of the department’s Wage and Hour Division, wrote. “The facts in your letter demonstrate economic independence, rather than economic dependence, in the working relationship between your client and its service providers.”
The decision is a win for tech industry executives, who have typically been at odds with the Trump administration on a range of issues, including trade and immigration.
Uber, Lyft and other companies affected by the decision did not respond to The Hill’s requests for comment.
Businesses often turn to “letter opinions” like Monday’s to anticipate where the Department of Labor would come down on certain issues, experts told The Hill.
And the letter, which is
longer and more comprehensive than similar documents, provides further insight into where the Trump Labor Department would come down after it rescinded Obama-era guidelines in 2017 that would have classified many gig economy workers as employees.
“I think [the letter] means that the companies feel much more relaxed about how they’re structuring their business vis-a-vis their workers because they know that the Department of Labor is not going to come after them for misclassifying their workers,” Catherine Ruckelshaus, general counsel with the National Employment Law Project, told The Hill.
Gig companies can expect Democratic presidential candidates to hammer the issue as they seek to court some of the country’s largest unions. The debate is certain to gain steam in a year when Lyft went public at a $24 billion valuation and Uber plans to go public with a $91 billion valuation goal.
Sen. Bernie SandersBernie SandersFilibuster becomes new litmus test for Democrats Gallego says he's been approached about challenging Sinema Democrats call on Biden administration to ease entry to US for at-risk Afghans MORE (I-Vt.) last year introduced legislation to expand the 1935 National Labor Relations Act’s definition of employees to include most gig economy workers, making it easier for them to unionize and organize collectively.
He touted the legislation earlier this month, saying it dictates that “workers have the constitutional right to organize.”
The bill, which went nowhere in the Republican-controlled Senate, was co-sponsored by every senator seeking the 2020 Democratic presidential nomination except Sen. Amy KlobucharAmy KlobucharEffort to overhaul archaic election law wins new momentum Hillicon Valley — Senate panel advances major antitrust bill Senate panel advances bill blocking tech giants from favoring own products MORE (D-Minn.). The bill’s co-sponsors included Sens. Kirsten GillibrandKirsten GillibrandTlaib blasts Biden judicial nominee whose firm sued environmental lawyer The Hill's 12:30 Report - Presented by Connected Commerce Council - Biden faces reporters as his agenda teeters Former aide says she felt 'abandoned' by Democrats who advanced Garcetti nomination as ambassador to India MORE (D-N.Y.), Elizabeth WarrenElizabeth WarrenDemocrats call on Biden administration to ease entry to US for at-risk Afghans Biden stiff arms progressives on the Postal Service Trump by the numbers: 2024 isn't simple MORE (D-Mass.), Cory BookerCory BookerDemocrats call on Biden administration to ease entry to US for at-risk Afghans Bass raises nearly million since launching LA mayor campaign CNN legal analyst knocks GOP senator over remark on Biden nominee MORE (D-N.J.) and Kamala HarrisKamala HarrisTlaib blasts Biden judicial nominee whose firm sued environmental lawyer These Senate seats are up for election in 2022 Trump by the numbers: 2024 isn't simple MORE (D-Calif.).
The companion version of the bill in the House, introduced by Rep. Mark PocanMark William PocanDemocrats livid over GOP's COVID-19 attacks on Biden With Build Back Better, Dems aim to correct messaging missteps Dems brace for score on massive Biden bill MORE (D-Wis.), garnered more than 60 co-sponsors.
Many of the 2020 Democratic contenders, most notably Sanders and Warren, have paid particular attention to labor rights for gig economy workers.
Sanders last month issued a statement in solidarity with Uber and Lyft drivers who went on strike in Los Angeles, tweeting, “One job should be enough to make a decent living in America, especially for those working for multibillion-dollar companies. Drivers must be paid the wages they deserve. #StrikeUberLyft.”
Warren’s office pointed The Hill to a previous statement by the Massachusetts progressive.
“Workers deserve a level playing field and some basic protections, no matter who they work for, where they work, or how the law classifies them. They deserve a strong safety net, dependable benefits, and the chance to bargain over their working conditions — that’s the basic deal,” Warren’s statement said.
Another 2020 contender, former Housing and Urban Development Secretary Julián Castro, over the weekend raised concerns about those who work for companies like Uber full-time but do not receive the benefits of an employee.
Sanders’s office did not respond to The Hill’s question about when the senator plans to reintroduce the bill expanding the Labor Relations Act. But Sen. Richard Blumenthal (D-Conn.), one of bill’s original co-sponsors, told The Hill that it will be reintroduced this Congress.
“I think the Labor Department is abdicating its responsibility to protect these workers,” Blumenthal said.