In a major positive development for gig economy businesses, the U.S. Department of Labor issued an opinion letter confirming that certain workers providing work for a virtual marketplace company are, indeed, independent contractors.

While this letter can only be used as an authoritative legal defense by the specific (unnamed) gig economy business that requested the letter, this publication still provides the federal government’s official interpretation on whether a certain business model or practice complies with the law.

The agency applied its longstanding and unchanged six-factor balancing test, derived from Supreme Court precedent, to determine whether the workers are economically independent (leading to a finding of contractor status) or economically dependent (leading to an employee finding) in the working relationship with the entity in question. The six factors are as follows:

1) The nature and degree of the potential employer’s control.
2) The permanency of the worker’s relationship with the potential employer.
3) The amount of the worker’s investment in facilities, equipment, or helpers.
4) The amount of skill, initiative, judgment, or foresight required for the worker’s services.
5) The worker’s opportunities for profit or loss.
6) The extent of integration of the worker’s services into the potential employer’s business.

In the announcement accompanying the publication of the letter, the USDOL confirmed that the opinion letter was an official, written opinion by the Department’s Wage and Hour Division on how the FLSA applies in the specific circumstances presented by the entity that requested the letter.

“An important role of the U.S. Department of Labor is to ensure that employers who want to do the right thing have clear compliance assistance,” said Keith Sonderling, Acting Administrator of the Department’s Wage and Hour Division. “Today, the U.S. Department of Labor offers further insight into the nexus of current labor law and innovations in the job market.”