Are Gig Workers Considered Contractors After All? What On-Demand Businesses Must Know:

Recruiter | June 19, 2019

By Lakshmi Raj, Co-Founder and Co-CEO, Replicon

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.

Get Classifying

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.

Conquer Compliance

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.

Manage Utilization

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.

Original Source: Recruiter
Author: Lakshmi Raj, Co-Founder and Co-CEO, Replicon

Get started today.
Set up a free trial based on your business needs. Start Free Trial

Global Compliance Desk – Maine, United States

New Earned Employee Leave in Maine Governor Janet Mills signed L.D. 369, An Act Authorizing Earned Employee Leave, in May 2019, which will become effective on January 1, 2021. Currently,…Read More

Weathering a Crisis: 3 Steps to Revitalizing Your Time and Attendance

Regardless of who you ask, most would agree that the pandemic has unilaterally redefined life as we know it. What feels like an eternity of uncertainty and confusion for many…Read More

How COVID-19 Has Changed Digital Transformation Strategies

October 12, 2020 COVID-19 changed how we work and changed what we work with. It's even changed the strategies that have been put in place to move enterprises from traditional…Read More

Exempt vs non-exempt workers: simplify employee classification

In the United States, most jobs are governed by the Fair Labor Standards Act (FLSA), which classifies workers into two broad categories: exempt and non-exempt. Under the FLSA, non-exempt employees are…Read More

The five reasons employees work overtime

Very few people enjoy working overtime, and even fewer companies want their employees stretching their hours. Besides the costs of paying overtime (and a few extra costs), research has shown…Read More

The 7 must-haves for choosing the right professional services management solution

Not too long ago, if you asked any professional services organization to tell you how they managed client projects, resources and utilization rates, the answer was always the same: spreadsheets.…Read More
  • Cloud
  • In The News
  • Corporate
  • Professional Services Management
  • Project and Program Management
  • Shared Services Management
  • Time and Attendance Management
  • Workforce Management
  • Customer Feature
  • Feature Update
  • Time Intelligence
  • Industry News
  • Webinar Recap
  • Global Compliance Updates