In what could be a landmark decision for the future of the gig economy, the Department of Labor (DOL) has classified the workers of an anonymous “virtual marketplace” company as independent contractors, not employees. A complete 180 from the DOL’s previous guidance on gig workers, this opinion came in response to an attorney requesting guidance on behalf of the unnamed company, keen to avoid wage and hour liability under the Fair Labor Standards Act (FLSA). Despite being non-binding and official only for the particular company addressed, the 10-page opinion letter is detailed and expansive, giving the distinct impression that other on-demand employers should be paying attention.
Intentionally or unintentionally, this DOL opinion all but invites gig economy businesses to take notes on how they ought to be handling themselves. In light of this new knowledge, some companies may have to restructure certain facets of their businesses in the coming months — or not.
The prospect of internal structural change is generally considered an onerous task, but on the whole, this opinion is being viewed as a win for businesses. There are numerous ways on-demand companies can actually benefit from the DOL’s new perspective, if they are properly equipped. Here’s what to keep in mind:
To Change or Not to Change?
After years of pushing for independent contractor status, the gig economy appears to have won the dispute. Gig economy workers are independent contractors according to the DOL, and most companies will simply stick with the status quo.
The on-demand economy is still young, however, and federal administrations don’t last forever. This issue could resurface any number of times before a final verdict is reached. It’s important to remember that nothing is set in stone just yet. Everything is liable to change, so be prepared to backtrack if necessary. The principle draw of the gig economy is, after all, flexibility.
There’s no time like the present. Using a reliable solution, companies should start classifying contractors in their organizations now, if they haven’t already, to ensure this segment of the workforce is easy to manage in the coming months.
Flexibility is once again key here. Not all gig workers are treated the same across an organization, and an on-demand business will need a way to systematize workers and manage them separately across locations with differing requirements. On-demand businesses are encouraged to seek configurable, modern classification solutions that can evolve alongside the company’s needs. By identifying and establishing contractors properly in the system, managers can gain more visibility into where contractors are spending their time, allowing for increased efficiency and productivity.
Having workers out in the field — wherever that may be — is a key component of the on-demand industry. Anywhere and everywhere is the goal, whether a company proffers house cleaners, handymen, drivers, or otherwise. As contractors work across states or even continents, they reinforce the importance of another necessity: maintaining compliance.
It should be noted that not all contractors are treated the same throughout the US. States apply their own wage and hour laws when making independent contractor determinations. Depending on where a business’s contractors operate, the relevant laws may differ from the DOL’s opinion. The best option is to invest in a solution that allows a company to manage compliance properly no matter where its independent contractors are located.
Of course, all this debate and discussion doesn’t matter to the customer. They don’t know whether a worker is a contractor or an employee, and frankly, they don’t care. The contractor’s behavior, skills, and professionalism directly affect a company’s relationship with its customers — and by extension, its revenue, reputation, and profit.
Employees or not, these workers contribute to the final deliverable. Businesses should consider tracking their activity to ensure all workers, regardless of classification, are delivering a great product or service to customers. Additionally, a tracked history can simplify a hypothetical situation in which the DOL changes its stance once more and businesses must revert back to their previous practices.
Regardless, employers should empower contractors to manage the own performance and understand their own requirements so that they can add value. That includes the ability to control their own schedules, hire others to help, and maintain their freedom to work in other business or jobs. This way, quality contractors can be identified and appropriately utilized. Otherwise, companies are essentially sending money into the void, with no clarity on whether a contractor’s work is helping or hurting them.
On-demand businesses are in a unique position to take advantage of the DOL’s new outlook on worker classification — provided they first put in the time to understand and implement best practices. The gig economy promises continued innovation and profitability moving forward, and companies can maintain this growth by building on a foundation of adaptability and agility.
Lakshmi Raj is the cofounder and co-CEO of Replicon.