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Gig finance company gets guidance on employee versus contractor status



A US Department of Labor statement on when an employee should be regarded as an independent contractor or employee provides clarification to employers who can potentially provide benefits and a minimum wage to workers categorized as entrepreneurs, experts say.

However, observers say that while the title letter will guide employers to avoid potential liability under the 1938 Federal Fair Labor Standards Act, employers still have to contravene laws in more restrictive states like California, Massachusetts, Connecticut and New Jersey. [19659002] The issue of whether employees are employees or independent contractors has been controversial. Last week, Uber Technologies Inc. agreed to pay $ 20 million to settle a trial run by drivers nearly six years ago claiming they should be treated as employees.

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0-page April 29 letter by Worker Department Manager Keith E. Sonderling to an unidentified "virtual marketplace" company described six factors that were said to be derived from a precedent in the Supreme Court that should be used to determine whether an employee should be considered as a independent contractor:

  • Type and degree of potential employer control, as if the company requires a worker to work exclusively for the business.
  • The employee's relationship with the potential employer, including cases where the employee has to refrain from working for competitors after the employment relationship ends.
  • The amount of worker's investment in facilities, equipment or facilities, as in cases where the employee will rely on the business to provide these investments to perform their services.
  • The amount of skills, initiative, assessment or foresight required for employee services, and whether the company gave the workers the skills to do the job.
  • Opportunities for profit or loss. An employee's ability to generate either can indicate the independent contractor's status according to the letter.
  • The scope of the integration of the work service into the potential employer's business.

"Based on the facts you specify in your letter, it seems that the service providers using your customer's virtual marketplace are independent contractors" lettering.

Roger Royse, founder of Royse Law Firm PC in Menlo Park, California, said "The standard is not surprising." With DOL's six-factor balancing test, "We have something we can work around and apply," he said.

The letter probably has an effect beyond the employer addressed in the letter, says Michael J. Puma, a partner of Morgan Lewis & Bockius LLP in Philadelphia.

The letter of the institution states "there are limits to the concept of who is employed, while previous guidance during the Obama administration had much more comprehensive interpretation of what it means for someone to be employed," Puma said.

The Trump administration has not only recalled the Obama administration's guidance in this area, but in the letter "provides a fair flexibility for these types of non-traditional relationships," Puma says.

During the Trump administration, the issue of worker misclassification has become less prioritized, he said. The financial exposure has not changed, but the likelihood of certain employer relationships being challenged is lower, he said.

But the issue of the letter may have a limited effect, says Katherine S. Catlos, a partner with Kaufman, Dolowich & Voluck LLP in San Francisco.

"This particular opinion is not binding on anyone. It is an advisory opinion" probably submitted in response to a question from an anonymous company participating in virtual marketing, she said.

Mr. Puma also said there is a significant amount of private disputes in this area, and the letter does not bind the courts. "It's not even the right of the same ruling as a regulation necessarily, but I think it will be convincing with at least some courts," Puma said.

Kelly T. Kindig, a law firm Cozen O & # 39; Connor PC in Philadelphia, said with the employer department, "It should probably be less responsibility for employers to move on with certain categories of workers."

Employers still need to make sure they implement the sex factor test, says Carrie Hoffman, a partner with Foley & Lardner LLP in Dallas. "It's not a free ride. You still have to follow the six factors," she says.

Employers must also contend with some state laws. With the Trump Administration Department "behind much of the Obama era we probably already see the regulations that fill the gap, "said Mrs. Kindig.

In a decision earlier this month in Dynamex Operations West Inc. v. The Supreme Court of Los Angeles County The US Circuit Court of Appeal in San Francisco held employers hiring independent contractors must retroactively apply a test to assess whether an employee is an employee or a contractor.

Employers must carefully evaluate the laws of the states where they work to be sure "They are not more restrictive than the federal law," says Mrs Hoffman. "This makes the landscape tough for a nationwide employer," she said.

Disputes on it na question "will not go," said Cheryl A. Sabnis, a partner with Kaufman, Dolowich & Voluck in San Francisco. "I believe that what is likely to be seen is legislators who penetrate to bless the concept and provide some protection for individuals, and I think that is probably the best solution for all concerned."


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