Department of Labor Says Workers at Gig-Economy Company Are Independent Contractors

The U.S. Department of Labor (DOL) published an opinion letter on April 29, 2019 addressing whether workers in the gig economy are independent contractors or employees entitled to protections under the Fair Labor Standards Act. It concluded that individuals providing work for an unnamed “virtual marketplace company” are independent contractors. The letter responded to an inquiry from an unnamed company who provides apartment cleaning services. Rather than characterize the company as an employer, the DOL characterized the company as a “referral service” and the workers as “service providers” who are “working for the consumer” rather than for the company.

This opinion letter concluded that the workers had “economic independence” from the company. It found that the company does not exercise control over the workers because it does not impose schedules or quotas, supervise the work, or limit their ability to work for competitors. It also considered that the workers do not have a permanent relationship with the company, they purchase their own equipment, they are not trained or rated by the company, and they can control their own opportunity for profit or loss by deciding the number of jobs to take.

The letter is a shift from Obama administration guidance which had cautioned against the misclassification of workers as independent contractors and stated that most “workers are employees” protected under the law. Although the opinion letter is not legally binding, it could have significant implications for gig-economy workers. The General Counsel’s office of the National Labor Relations Board under the Trump administration also issued an Advice Memorandum on April 16, 2019, finding that Uber drivers are independent contractors not covered by the National Labor Relations Act. In another pro-employer move, on August 29, 2019, the NLRB ruled that misclassification of a worker as an independent contractor does not alone violate the NLRA.

Still, several states apply more employee-friendly tests to determine independent contractor status under state law. On May 2, 2019, just days after the DOL’s opinion letter, the Ninth Circuit Court of Appeals decided that the three-factor “ABC” test articulated by the California Supreme Court should be applied retroactively. On July 22, 2019, the 9th Circuit withdrew this opinion regarding retroactivity. Regardless of its retroactive effect, California courts apply the “ABC” test, which presumes that workers are employees, unless the employer proves that the workers are free from the control of the hiring entity, they perform work outside the usual course of the hiring entity’s business, and they are engaged in an independently established occupation or business of the same nature as the work performed.

New York City Human Rights Law Seeks to Prevent Those With Criminal Convictions From Losing Out on Employment Opportunities

The Fair Chance Act, effective October 27, 2015, amended the New York City Human Rights Law (NYCHRL), to make it an unlawful discriminatory practice to consider a job applicant’s criminal history as part of the hiring process, in the following ways:

• Referencing arrest or conviction history when advertising for open positions;

• Asking job applicants questions about their criminal records or to authorize a background check;

• Running a background check or attempting to discover whether an applicant has a criminal history.

But that doesn’t mean an employer can never consider an applicant’s criminal history.  An employer can still review a job applicant’s criminal history after it has made the applicant a conditional offer of employment.  At that point in the hiring process, the employer may ask whether the applicant has any criminal conviction history or request that the applicant provide authorization to check the applicant’s criminal record.  If through either of these means the employer becomes aware of a conviction, the employer may withdraw its conditional offer of employment after:

1.  Providing the applicant with a copy of the background check report or other documents used to review the applicant’s criminal record;

2.  Evaluating the applicant under New York Correction Law Article 23-A (Under this law, an employer may only withdraw the conditional offer of employment if there is a direct relationship between the applicant’s criminal record and the prospective job, or if employment of the applicant would create an unreasonable safety risk to individuals or property); and

3.  Holding the job open for at least three business days so that the applicant can respond to the employer’s presentation of the applicant’s criminal record.

The Fair Chance Act reflects a public policy favoring an employer’s review of applicants based upon their qualifications without regard to any criminal history. 

Exemptions.  The law does not apply to the hiring process for positions where a state, federal, or local law requires a background check for employment purposes, or bars employment based on criminal history.  But the law does apply when the position requires a license – such as an Uber driver in New York - even if obtaining the license requires submitting to a criminal background check.  In that case, the employer can only ask whether the applicant has the required license or whether the applicant can obtain one within an acceptable period of time. 

If an applicant believes that a prospective employer has violated the Fair Chance Act, he or she can file an unlawful discriminatory practice complaint with the New York City Commission on Human Rights or in New York State Supreme Court.  Reach out to a Spivak Lipton attorney if you believe that you may be the victim of an unlawful discriminatory practice under the Fair Chance Act.  

Spivak Lipton Partner Hope Pordy quoted in the News

“'New York has taken another step forward in its efforts to remedy the gender pay gap. The salary history ban, along with the recently enacted Women’s Equality Agenda and Achieve Pay Equity Law, will create opportunities for women, and particularly women of color, to earn wages based on their skill level, productivity and market trends rather than past discriminatory pay practices,' says Hope Pordy, a Partner at Spivak Lipton LLP, a New York labor and employment law firm."

Hope Pordy quoted in Marshall-Alan Associates: What New York City's New Ban on Salary History Inquiries Means for Employers