U.S. Department of Labor Wage and Hour Division

 Washington, DC 20210 

1

FLSA2019-6

April 29, 2019 

Dear Name*:

This letter responds to your request for an opinion on whether service providers working for a 

virtual marketplace company (VMC) are employees or independent contractors under the Fair 

Labor Standards Act (FLSA). This opinion is based exclusively on the facts you have presented. 

You represent that you do not seek this opinion for any party that the Wage and Hour Division 

(WHD) is currently investigating or for use in any litigation that commenced prior to your 

request. 

BACKGROUND 

You write on behalf of your client,1 a virtual marketplace company that operates in the so-called

“on-demand” or “sharing” economy. Generally, a VMC is an online and/or smartphone-based 

referral service that connects service providers to end-market consumers to provide a wide 

variety of services, such as transportation, delivery, shopping, moving, cleaning, plumbing, 

painting, and household services. VMCs help consumers to obtain these services with greater 

efficiency—days, weeks, or months faster than they would outside the virtual marketplace. 

VMCs accomplish this through a software platform called an analytic hierarchy process—a 

technological structure for organizing data that uses objective criteria to match consumers to 

service providers. 

Regarding your client specifically, before your client allows service providers to use your 

platform, it requires them to provide certain basic information: the service provider’s name, 

contact information, and social security number. Service providers must also self-certify their 

experience and qualifications, complete a background check through an accredited third party, 

and complete an identity check through a different vendor. Your client also requires them to 

acknowledge and accept a terms of use agreement and a service agreement, which states that 

your client provides only a platform for connecting providers with customers and disclaims any 

employment relationship between your client and the service providers. Additionally, these 

agreements state that only the service providers, and not your client, will provide services to 

consumers in the virtual marketplace. The agreements also classify the service providers as 

independent contractors. 

Your client does not interview service providers or require them to undergo training. Once the 

service providers begin to use its virtual platform, it provides them with information on how the 

virtual marketplace works, such as tips on best practices through an online resource center, and 

feedback from existing users (both consumers and service providers) on the level of service that 

1

 WHD draws the following background information from the representations that you make in your 

letter. 

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 1 of 20
2

consumers generally expect. Your client does its entire onboarding process online and does not 

require service providers to review any of these materials. Your client also allows service 

providers to immediately begin providing work to customers once their account is activated and 

does not require them to report to a physical office. 

Your client’s platform consolidates information from a consumer’s service request (such as the 

kind of service needed, location, and date and time) and provides that information to service 

providers through its virtual platform. The platform also allows its service providers to 

communicate with consumers—including through mobile app messaging or masked telephone 

calls—to exchange details about the requested service, including adjustments to the scope, price, 

or time. Your client allows service providers to arrange for repeat business with a consumer, 

including future jobs outside the virtual marketplace. 

Customers using your client’s platform pay service providers on a per job basis. Your client sets

default prices based on the region and scope of the service provider’s work and uses default price 

tiers that correspond to the number and type of services being offered. It also allows its service 

providers to request (presumably from the customer) to charge different prices based on other 

factors, including their work experience outside of the virtual marketplace. Finally, your client 

issues its service providers Form 1099s reflecting their earnings through your client’s platform. 

Your client’s service agreement allows service providers the right to, among other things: accept, 

reject, or ignore any service opportunity on the virtual platform; determine whether to accept any 

service opportunities at all; select service opportunities by time and place; determine the tools, 

equipment, and materials needed to deliver their services; and hire assistants or personnel. Your 

client’s agreement provides that it will not inspect a service provider’s work for quality or rate 

the service provider’s performance. Your client does, however, let consumers rate its service 

providers’ performance. Your client’s service agreement also allows service providers to 

provide their services to consumers through other means, including competing VMC platforms.

Your client does not require a service provider to accept or complete a minimum number of 

service opportunities. Your client designates a service provider as “inactive” if they have not 

taken a job for a certain period of time, but inactive service providers can reactivate their account 

with a telephone call or email. Your client also gives service providers the right to “multiapp”—that is, to simultaneously acquire work on a competitor VMC platform in order to 

determine the most desirable or profitable service opportunity available at any given time. Your 

client’s service providers often make use of this ability to “multi-app.” 

Your client’s service providers design their own schedules and determine exactly when, where, 

and how much to work in the virtual marketplace. Few of them spend full-time hours providing 

services through your client’s platform. Service providers may consider a variety of factors 

when determining whether to accept work—such as, for example, fee amount, expected time, 

dynamic pricing in effect, location, availability of parking, traffic, and access to additional 

consecutive service opportunities—in order to maximize their profit or fit their work into their 

individual schedules. Moreover, service providers may choose between more difficult jobs that 

are more lucrative, and jobs with less revenue potential, according to their personal needs and 

profit motives. However, if a service provider cancels an accepted service opportunity without 

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 2 of 20
3

sufficient notice, your client will charge a cancellation fee on behalf of the consumer. Your 

client collects these fees to maintain the integrity of its platform. 

Your client does not impose requirements on how its service providers must perform their work, 

such as what transportation route to take, the order in which to clean an apartment, or the make, 

model, type, brand, source, or amount of their working materials. Your client is not present 

when the service provider works and does not monitor, supervise, or control the particulars of 

that work. Moreover, your client requires service providers to purchase, at their expense, all of 

their own supplies and equipment. Your client does not reimburse them for operating expenses, 

such as transportation costs, vehicles, professional certifications, or licensing. 

Your client will seek to terminate its relationship only if a service provider who commits a 

material breach, such as: inappropriate behavior toward a consumer or the VMC; fraud; repeated 

canceling or rescheduling of service opportunities on short notice; or receiving an aggregate 

consumer rating below a certain minimum threshold. Your client will initiate this termination 

process only in these instances to maintain the integrity of its virtual marketplace. 

GENERAL LEGAL PRINCIPLES 

The FLSA applies to those workers whom the FLSA defines as “employees.” See 29 U.S.C. 

§§ 206, 207. An “employee” is any individual whom an employer suffers, permits, or otherwise 

employs to work. See 29 U.S.C. §§ 203(e)(1), (g). This definition is very broad, but it was 

“obviously not intended to stamp all persons as employees.” Walling v. Portland Terminal Co., 

330 U.S. 148, 152 (1947). For example, independent contractors are not “employees.” See, e.g.,

Rutherford Food Corp. v. McComb, 331 U.S. 722, 729 (1947) (recognizing that workers may be 

independent contractors when their work does not “in its essence ... follow[] the usual path of an 

employee”). 

Over its history, WHD has consistently applied an interpretation of “employee” that adheres to 

the text of the FLSA and judicial precedent interpreting it: 

An employee, as distinguished from a person who is engaged in business for 

himself or herself, is one who, as a matter of economic reality, follows the usual 

path of an employee and is dependent upon the business to which he or she 

renders service. The employer-employee relationship under the FLSA is tested by 

economic reality rather than technical concepts. It is not determined by common 

law standards relating to master and servant. 

WHD Opinion Letter, 2002 WL 32406602, at *2 (quotation marks omitted).2

2 See, e.g., WHD Opinion Letter, 2000 WL 34444342, at *3 (Dec. 7, 2000); WHD Opinion Letter, 2000 

WL 34444352, at *1 (Jul. 5, 2000); WHD Opinion Letter, 1999 WL 1788137, at *1 (Jul. 12, 1999); WHD 

Opinion Letter, 1995 WL 1032489, at *1 (June 5, 1995); WHD Opinion Letter, 1995 WL 1032469, at *1 

(Mar. 2, 1995); WHD Opinion Letter, 1986 WL 740454, at *1 (June 23, 1986); WHD Opinion Letter, 

1986 WL 1171083, at *1 (Jan. 14, 1986); WHD Opinion Letter WH-476, 1978 WL 51437, at *2 (Oct. 19, 

1978); WHD Opinion Letter WH-361, 1975 WL 40984, at *1 (Oct. 1, 1975). 

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 3 of 20
4

As reflected by this longstanding interpretation, the touchstone of employee versus independent 

contractor status has long been “economic dependence.” See, e.g., Parrish v. Premier 

Directional Drilling, L.P., 917 F.3d 369, 379–80 (5th Cir. 2019); Saleem v. Corp. Transp. Grp., 

Ltd., 854 F.3d 131, 138–40 (2d Cir. 2017); Keller v. Miri Microsystems LLC, 781 F.3d 799, 806–

07 (6th Cir. 2015). The Supreme Court has instructed that a worker’s “dependence” should be 

assessed “in light of the purposes of the Act.” Bartels v. Birmingham, 332 U.S. 126, 130 (1947). 

Thus, for example, as “broad” as the definitions of “employ” and “employee” are, “they cannot 

be interpreted so as to make a person whose work serves only his own interest an employee of 

another person who gives him aid and instruction.” Portland Terminal, 330 U.S. at 152; see 

also, e.g., Tony & Susan Alamo Found. v. Sec. of Labor, 471 U.S. 290, 295 (1985) (“While the 

statutory definition is exceedingly broad, ... it does have its limits.” (citation omitted)); 

Scantland v. Jeffry Knight, Inc., 721 F.3d 1308, 1311 (11th Cir. 2013) (“These ‘broad 

definitions’ do not, however, bring ‘independent contractors’ within the FLSA’s ambit.”). 

Whether a worker is economically dependent on a potential employer is a fact-specific inquiry 

that is individualized to each worker. See Barrantine v. Arkansas-Best Freight Sys., Inc., 450 

U.S. 728, 739 (1981). The inability of the worker to work on his or her own terms often suggests 

dependence. See, e.g., Saleem, 854 F.3d at148; Scantland, 721 F.3d at 1312 (citing Usery v. 

Pilgrim Equip. Co., Inc., 527 F.2d 1308, 1311–12 (5th Cir. 1976)); see also Sec’y of Labor, U.S. 

Dep’t of Labor v. Lauritzen, 835 F.2d 1529, 1542 (7th Cir. 1987) (“The usual argument that 

workers are ‘dependent’ on employers ... is that they are immobile.”) (Easterbrook, J., 

concurring). Accordingly, independent contractors are often characterized by their ability to, for 

example, regularly negotiate working conditions or simultaneously work for another business. 

See Parrish, 917 F.3d at 387 (holding that work “on a ‘project-by-project basis’ ... counsels 

heavily in favor of [independent contractor] status” (citation omitted)); Saleem, 854 F.3d at 141–

43 (holding that the ability to simultaneously “draw income through work for others,” such as by 

working for a competitor, indicates “considerable independence”). When determining economic 

dependence, WHD considers six factors derived from Supreme Court precedent: 

(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; and 

(6) The extent of integration of the worker’s services into the potential employer’s 

business.3

See Rutherford, 331 U.S. at 730; United States v. Silk, 331 U.S. 704, 716 (1947) (Social Security 

Act case). 

3

 Encompassed within these factors is the worker’s degree of independent organization and operation. 

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 4 of 20
5

Other factors may also be relevant, and the appropriate weight to give to each factor depends on 

the facts. See Silk, 331 U.S. at 716. Additionally, “the determination of [employee status] does 

not depend on such isolated factors but rather upon the circumstances of the whole activity.” 

Rutherford, 331 U.S. at 730. Therefore, WHD does not determine employee status by simply 

counting factors, but by weighing these factors in order to answer the ultimate inquiry of whether 

the worker is “engaged in business for himself or herself,” or “is dependent upon the business to 

which he or she renders service.” WHD Opinion Letter, 2002 WL 32406602, at *2. 

Control. The first factor is the nature and degree of the potential employer’s control. A business 

may have control where it, for example, requires a worker to work exclusively for the business; 

disavow working for or interacting with competitors during the working relationship; work 

against the interests of a competitor; work inflexible shifts, achieve large quotas, or work long 

hours, so that it is impracticable to work elsewhere; or otherwise face restrictions on or sanctions 

for external economic conduct, among others. See, e.g., Saleem, 854 F.3d at 141–42 (collecting 

cases finding that a business “relinquishes control” over a worker and thereby makes the worker 

“less economically dependent” when it allows the worker “to work for its competitors” or “draw 

income through work for others”); Pilgrim Equip., 527 F.2d at 1312 (noting control that causes a 

worker to have “no viable economic status that can be traded to other ... companies,” such that 

the worker cannot operate as “a separate economic entity”); WHD Opinion Letter, 2000 WL 

34444342, at *4 (Dec. 7, 2000) (finding “significant control” where the workers were “not 

permitted to work for other businesses while ... in the company’s service”); cf. WHD Opinion 

Letter, 2002 WL 32406602, at *3 (noting that employees generally work for only one employer, 

sometimes using an “exclusive employment agreement”). 

Permanency of relation. The second factor is the permanency of the worker’s relationship with 

the potential employer. Permanence arises where a business, for example, requires a worker to 

agree to a fixed term of work; disavow working for or interacting with competitors after the 

working relationship ends; or otherwise face restrictions on or sanctions for leaving the job in 

order to pursue external economic opportunities, among others. See Saleem, 854 F.3d at 142 

(citing Freund v. Hi-Tech Satellite, Inc., 185 F. App’x 782, 784 (11th Cir. 2006)) (observing that 

permanency of relation restricts external opportunities). Additionally, the existence of a longterm working relationship may indirectly indicate permanence. See, e.g., Scantland, 721 F.3d at 

1319 (finding permanency where the workers “could not work for other companies, were 

required to work long hours, and could not turn down work orders,” such that their relationship 

“was not only of long duration, but ... was also exclusive”); Donovan v. Brandel, 736 F.2d 1114, 

1117 (6th Cir. 1984) (finding no permanency where the length of the working relationship “was 

a product of a mutually satisfactory arrangement”). 

Investment in facilities, equipment, or helpers. The third factor is the amount of the worker’s 

investment in facilities, equipment, or helpers. If a business makes these investments and 

provides them to a worker, that worker may come to rely on the business to supply those 

investments in order to perform his or her services. See Keller, 781 F.3d at 810 (“[T]he capital 

investment factor is most significant if it reveals that the worker performs a specialized service 

that requires a tool or application which he has mastered or that the worker is simply using 

implements of the [company] to accomplish the task.” (alteration in original) (quotation marks 

omitted)). That reliance could make it more difficult for the worker to pursue other economic 

opportunities, thereby increasing the worker’s economic dependence. See Saleem, 854 F.3d at 

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 5 of 20
6

144–46 (noting, conversely, that greater investments enable workers to more easily pursue 

external opportunities, thereby increasing their independence); Scantland, 721 F.3d at 1318 

(noting that worker investments are analogous to the “independence any employee has who has 

gained experience and the ability to market [themselves] to competing employers”). 

Skill, initiative, judgment, and foresight required. The fourth factor is the amount of skill, 

initiative, judgment, and foresight required for the worker’s services. In Rutherford, for 

example, while the business profited from the alleged independent contractors’ work, the 

business’s profits were not because of the workers’ “initiative, judgment[,] or foresight,” as 

would be expected from a “typical independent contractor.” Rutherford, 331 U.S. at 730.

Instead, the profits resulted from work that was simply “more like piecework.” Id.; see also 

Saleem, 854 F.3d at 143-44 (concluding that drivers, “[b]y toggling back and forth between 

different car companies and personal clients, and by deciding how best to obtain business from 

... clients,” increased their personal profits “through the[ir] initiative, judgment[,] or foresight,” 

indicating their “considerable independence” (internal quotation marks omitted)). This factor 

may also look to, for example, whether the worker has the “skills necessary to locate and manage 

discrete work projects [that are] characteristic of independent contractors,” as opposed to skills 

“of the task-specific, specialized kind that form a piece of a larger enterprise.” Wilson v. 

Guardian Angel Nursing, Inc., 2008 WL 2944661, at *13 (M.D. Tenn. 2008). How the worker 

acquired his skill is also relevant. Among other things, if “the company provides all workers 

with the skills necessary to perform the job,” that suggests employee status. Keller, 781 F.3d at

809; see Scantland, 721 F.3d at 1318; see also, e.g., Hughes v. Family Life Care Inc., 117 F. 

Supp. 3d 1365, 1372 (N.D. Fla. 2015) (“The relevant inquiry [for the skill factor] is whether [the 

worker] is dependent upon [the company] to equip her with the skills necessary to perform her 

job.”).

Opportunity for profit and loss. The fifth factor is the worker’s opportunities for profit or loss. 

These opportunities typically exist where the worker receives additional compensation based, not 

on greater efficiency, but on the exercise of initiative, judgment, or foresight (e.g., commission); 

has flexibility to renegotiate compensation throughout the working relationship; or has capital 

expenditure at risk in the job. See, e.g., Scantland, 721 F.3d at 1316–17 (examining whether a 

worker’s ability to earn more is due to “being more technically proficient,” which indicates 

employee status, or instead to “managerial skill,” which indicates independent contractor status); 

WHD Opinion Letter, 2002 WL 32406602, at *2–3 (noting, that “courts focus on who, the 

alleged employer or employee, controls the major determinants of profit or loss and who 

exercises the managerial skills on which profit or loss depend”); WHD Opinion Letter, 2000 WL 

34444342, at *5 (discussing how placing capital expenditure at risk indicates independent 

contractor status). Opportunities for profit or loss can indicate independent contractor status 

even if the worker is not “solely in control of [his or her] profits or losses.” Chao v. Mid-Atl. 

Installation Servs., Inc., 16 Fed. App’x 104, 107 (4th Cir. 2001) (emphasis in original). 

Integrality. The sixth factor is the extent of the integration of the worker’s services into the 

potential employer’s business. For example, a worker’s services are integrated into a business if 

they form the “primary purpose” of that business. Werner v. Bell Family Med. Ctr., Inc., 529 F. 

App’x 541, 545 (6th Cir. 2013) (observing that an ultrasound technician was not integrated into a 

medical center’s business because ultrasounds were not “[t]he heart of [its] business”). 

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 6 of 20
7

In short, while the FLSA has a very broad scope of coverage, it is not so broad that all workers 

are caught within its reach—far from it. See Walling, 330 U.S. at 152; cf. Encino Motorcars, 

LLC v. Navarro, 138 S. Ct. 1134, 1142 (2018) (noting “the flawed premise that the FLSA 

pursues its remedial purpose at all costs” (quotation marks omitted)). Recognizing this limitation 

on coverage protects the freedom of workers to operate as independent contractors and remain 

outside the FLSA’s scope. 

OPINION

Based on the facts you provide in your letter, it appears that the service providers who use your 

client’s virtual marketplace are independent contractors.

Your client provides a referral service. As such, it does not receive services from service 

providers, but empowers service providers to provide services to end-market consumers. The 

service providers are not working for your client’s virtual marketplace; they are working for 

consumers through the virtual marketplace. They do not work directly for your client to the 

consumer’s benefit; they work directly for the consumer to your client’s benefit. It is therefore 

inherently difficult to conceptualize the service providers’ “working relationship” with your 

client, because as a matter of economic reality, they are working for the consumer, not your 

client. Indeed, they are similar to certain healthcare providers who use a homecare registry to 

obtain clients—workers whom WHD has previously stated can be classified as independent 

contractors under appropriate circumstances. See WHD Field Assistance Bulletin 2018-4, at *1 

(July 13, 2018) [hereinafter “FAB 2018-4”] (discussing, through the application of numerous 

factors, how “a [homecare] registry that simply facilitates matches between clients and 

caregivers ... is not an employer”). Thus, it appears that your client’s service providers “do not 

fit any ‘traditional employment paradigm covered by the Act.’” WHD Opinion Letter 

FLSA2018-29, 2018 WL 6839426, at *2 (Dec. 21, 2018) (quoting Harker v. State Use Indus., 

990 F.2d 131, 133 (4th Cir. 1993)). 

Upon consideration of “the circumstances of the whole activity,” Rutherford, 331 U.S. at 730, 

WHD does not see any indication that the service providers are economically dependent on your 

client within the meaning of the FLSA. A discussion of the following factors demonstrates why. 

Control. Your client does not appear to exert control over its service providers. Rather, your 

client gives the service providers significant flexibility, including the ability to pursue external 

economic opportunities. 

First, your client does not impose any duties, such as strict shifts, large quotas, or long hours. 

Instead, your client gives them flexibility to choose if, when, where, how, and for whom they 

will work, and they regularly use this flexibility to their own profit and personal advantage. The 

service providers therefore have complete autonomy to choose the hours of work that are most 

beneficial to them. Indeed, your client does not even require them to perform a minimum 

amount of work. This freedom enables them to pursue any and all external opportunities at their 

leisure. Moreover, they are able to work full-time in your client’s virtual marketplace, but most 

of them choose not to do so, which may indicate that they are pursuing other jobs outside your 

client’s platform. 

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 7 of 20
8

Your client provides its service providers the right to work simultaneously for competitors, and 

they routinely do so in order to maximize their profit. In fact, they will “multi-app”—that is, 

simultaneously run your client’s virtual platform alongside the platform of a competitor to 

compare virtual opportunities in real time and pick the best opportunity on a job-by-job basis. 

See Parrish, 917 F.3d at 387 (holding that work “on a ‘project-by-project basis’ ... counsels 

heavily in favor of [independent contractor] status” (citation omitted)). By providing them the 

right to “multi-app,” your client has relinquished control over their external opportunities. See 

Saleem, 854 F.3d at 141–42. Your client even allows service providers to cancel jobs in order to 

pursue external opportunities on a competitor’s platform. Your client also requires service 

providers to pay a cancellation fee only if they cancel a job without providing the consumer 

adequate notice.4

Moreover, your client does not inspect a service provider’s work for quality or rate a service 

provider’s performance. Indeed, your client does not impose requirements on how its service 

providers must perform their work, is not present when the service provider works, and does not 

monitor, supervise, or control the particulars of that work. Your client’s lack of control weighs 

in favor of the service providers being in business for themselves. The service providers have 

complete autonomy to choose the hours of work that are most beneficial to them, may 

simultaneously work for competitors of your client without repercussions, and are subject to 

minimal, if any, supervision by your client. Accordingly, this factor weighs heavily in favor of 

independent contractor status. 

Permanency of relation. Your client does not appear to have a permanent working relationship 

with its service providers that would be indicative of an employer-employee relationship. In 

fact, the service providers appear to maintain a high degree of freedom to exit the working 

relationship. Most importantly, your client does not restrict them from interacting with 

competitors, either during the relationship itself (since service providers may work on multiple 

platforms simultaneously) or after the relationship ends. 

Your letter does not indicate how long service providers typically remain “active” on your 

client’s virtual marketplace. However, even assuming, in light of your client’s promise that it 

will terminate a relationship with a service provider only for cause, that service providers 

maintain a lengthy working relationship with your client, they do so only “on a ‘project-by4

 Your client does reserve the right to remove a service provider from its virtual marketplace if that person 

frequently cancels jobs without adequate notice. However, this or other neutral requirements that your 

client imposes—such as background and identity checks before gaining access to the platform—are less 

relevant given the general lack of control that your client exercises over when, where, how, and for whom 

the service providers work. See, e.g., Thornton v. Charter Commc’ns, LLC, 2014 WL 4794320, at *11 

(E.D. Mo. 2014) (“Quality control and compliance-monitoring that stem from the nature of the 

business—that is, from the nature of the goods or services being delivered—are qualitatively different 

from control that stems from the nature of the relationship between the employees and the putative 

employer.” (quotation marks omitted)); FAB 2018-4, at *2 (noting that a homecare registry may “confirm 

caregiver credentials, conduct background checks, contact professional references, and engage in other 

quality-control measures,” without establishing an employment relationship). 

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 8 of 20
9

project basis’” Parrish, 917 F.3d at 387. This factor weighs strongly in favor of independent 

contractor status. 

Investment in facilities, equipment, or helpers. Your client does not invest in facilities, 

equipment, or helpers on behalf of its service providers. Instead, your client requires its service 

providers to purchase all necessary resources for their work, and your client does not reimburse 

those purchases.

Your client primarily invests in its virtual referral platform, but those investments do not, alone, 

establish an employment relationship with the service providers who use that platform because 

they are not investments in the work the service providers perform. See FAB 2018-4, at *8 

(stating that a homecare registry’s investments in “office space, payroll software, timekeeping 

systems, and other products to operate its business” do not, without more, establish an 

employment relationship with a caregiver on its registry, but that “investments in the tools 

necessary for the caregiver to perform his or her services may indicate” economic dependence). 

To be sure, the service providers rely on your client’s software to quickly obtain jobs, but that 

reliance only marginally decreases their relative independence, because they can use similar 

software on competitor platforms. Overall, this factor weighs in favor of independent contractor 

status. 

Skill, initiative, judgment, or foresight required. Your letter does not specifically identify what 

types of services are offered on your client’s virtual marketplace. However, regardless of the 

specific services they perform, your client’s service providers, like the drivers in Saleem, choose 

between different service opportunities and competing virtual platforms and exercise managerial 

discretion in order to maximize their profits, thereby showing “considerable independence” from 

your client. See Saleem, 854 F.3d at 143–44. Additionally, your client’s service providers do 

not undergo mandatory training. The fact that they do not appear to rely on your client to 

provide them with training also increases their economic independence. See Scantland, 721 F.3d 

at 1318 (skills obtained through an employer’s training are less indicative of independent 

contractor status). The exercise of managerial discretion and the lack of training weighs in favor 

of independent contractor status. 

Opportunity for profit and loss. Your client’s service providers do not “receive [a] 

predetermined amount” of compensation for their work, but instead “control[] the major 

determinants of profit or loss.” WHD Opinion Letter, 2002 WL 32406602, at *2–3. Your client 

sets default prices, but it allows service providers to choose different types of jobs with different 

prices, take as many jobs as they see fit, and negotiate the price of their jobs. They can further 

control their profit or loss by “toggling back and forth between different” competing VMC 

platforms. See Saleem, 854 F.3d at 144. Additionally, because your client charges a fee for 

cancelled services, the service providers risk losing money if they do not complete a job they 

have accepted. These opportunities for profit or loss give them a substantial amount of control 

over their level of compensation, and therefore independence from your client. Moreover, 

service providers’ flexibility to work for different platforms, choose how to perform the job, 

choose different jobs with different prices, negotiate the prices of their jobs, and choose whether 

or not cancelling a job is worthwhile indicates that their opportunity for profit or loss is driven by 

their own managerial skill, not simply their productivity. This factor therefore weighs in favor of 

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 9 of 20
10

independent contractor status, even though your client—by setting default prices—retains some 

control over their profits and losses. Mid-Atl. Installation Servs., 16 F. App’x at 107.

Integrality. Your client’s service providers are not integrated into your client’s referral business. 

First, the service providers who use your client’s virtual platform do not develop, maintain, or 

otherwise operate that platform; rather, they use that platform to acquire service opportunities. 

Your client offers a finished product to its service providers; its business operations effectively 

terminate at the point of connecting service providers to consumers and do not extend to the 

service provider’s actual provision of services. In other words, the service providers are not an 

integral part of your client’s referral service; they are consumers of that service from your client 

and negotiate with your client over the terms and conditions of using that service. Accordingly, 

they are not operationally integrated into your client’s business. 

Relatedly, the business’s “primary purpose” is not to provide services to end-market consumers, 

but to provide a referral system that connects service providers with consumers. Werner, 

529 F. App’x at 545. This lack of integration weighs in favor of independent contractor status. 

See Saleem, 854 F.3d at 142.

CONCLUSION

Under the facts described in your letter, we conclude that your client’s service providers are 

independent contractors, not employees of your client. The facts in your letter demonstrate 

economic independence, rather than economic dependence, in the working relationship between 

your client and its service providers. The FLSA therefore recognizes your client’s status as 

independent contractors.

We trust that this letter is responsive to your inquiry.

Sincerely,

Keith E. Sonderling

Acting Administrator

*Note: The actual name(s) was removed to protect privacy in accordance with 5 U.S.C. 

§ 552(b)(7).

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 10 of 20
Notice of Proposed Rule: Employee or Independent Contractor Classification Under the Fair Labor Standards Act, RIN 1235-AA43 | U.S. Department of Labor

file:///C/...der%20the%20Fair%20Labor%20Standards%20Act,%20RIN%201235-AA43%20_%20U.S.%20Department%20of%20Labor.html[6/19/2023 10:27:40 AM]

WHD Wages and the Fair Labor Standards Act Misclassifcation of Employees as Independent Contractors

Notice of Proposed Rule: Employee or Independent Contractor Classifcation Under the Fair Labor Standards Act, RIN 1235-AA43

Notice of Proposed Rule: Employee or

Independent Contractor Classifcation

Under the Fair Labor Standards Act, RIN

1235-AA43

On October 13, 2022, the U.S. Department of Labor published a Notice of Proposed

Rulemaking (NPRM) to revise the Department’s guidance on how to determine who is an

employee or independent contractor under the Fair Labor Standards Act (FLSA). The

NPRM proposed to rescind a prior rule, Independent Contractor Status Under the Fair

Labor Standards Act (2021 IC Rule), that was published on January 7, 2021 and replace

it with an analysis for determining employee or independent contractor satus that is more

consisent with the FLSA as interpreted by longsanding judicial precedent. The

Department believes that its proposed rule would reduce the risk that employees are

misclassifed as independent contractors, while providing added certainty for businesses

that engage (or wish to engage) with individuals who are in business for themselves.

The comment period closed on December 13, 2022. The Department is currently

reviewing all timely submitted comments. The full text of the NPRM can be found

at Federalregiser.gov.

Additional Information

Proposed Rule: Employee or Independent Contractor Classifcation under the Fair

Labor Standards Act

Extension of Comment Period: Employee or Independent Contractor Classifcation

U.S. DEPARTMENT OF LABOR

An ofcial website of the United States government.

Here’s how you know

Wage and Hour Division

MENU

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 11 of 20
Notice of Proposed Rule: Employee or Independent Contractor Classification Under the Fair Labor Standards Act, RIN 1235-AA43 | U.S. Department of Labor

file:///C/...der%20the%20Fair%20Labor%20Standards%20Act,%20RIN%201235-AA43%20_%20U.S.%20Department%20of%20Labor.html[6/19/2023 10:27:40 AM]

Topics

Worker Rights

For Employers

Resources

Interpretive Guidance

State Laws

News

Wage and Hour Division

An agency within the U.S.

Department of Labor

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 12 of 20
Notice of Proposed Rule: Employee or Independent Contractor Classification Under the Fair Labor Standards Act, RIN 1235-AA43 | U.S. Department of Labor

file:///C/...der%20the%20Fair%20Labor%20Standards%20Act,%20RIN%201235-AA43%20_%20U.S.%20Department%20of%20Labor.html[6/19/2023 10:27:40 AM]

200 Consitution Ave NW

Washington, DC 20210

1-866-4-US-WAGE

1-866-487-9243

www.dol.gov

FEDERAL GOVERNMENTPLUS-SQUARE

White House

Benefts.gov

Coronavirus Resources

Disaser Recovery Assisance

DisaserAssisance.gov

USA.gov

Notifcation of EEO Violations

No Fear Act Data

U.S. Ofce of Special Counsel

LABOR DEPARTMENTPLUS-SQUARE

About DOL

Guidance Search

Español

Ofce of Inspector General

Subscribe to the DOL Newsletter

Read the DOL Newsletter

Emergency Accountability Status Link

A to Z Index

WHD PORTALSPLUS-SQUARE

YouthRules!

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 13 of 20
Notice of Proposed Rule: Employee or Independent Contractor Classification Under the Fair Labor Standards Act, RIN 1235-AA43 | U.S. Department of Labor

file:///C/...der%20the%20Fair%20Labor%20Standards%20Act,%20RIN%201235-AA43%20_%20U.S.%20Department%20of%20Labor.html[6/19/2023 10:27:40 AM]

Site Map Important Website Notices Privacy & Security Statement

Wage Determinations

Connect With DOL

facebookftwitter insagramyoutubelinkedin

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 14 of 20
Fact Sheet 13: Employment Relationship Under the Fair Labor Standards Act (FLSA) | U.S. Department of Labor

file:///C/...nship%20Under%20the%20Fair%20Labor%20Standards%20Act%20(FLSA)%20_%20U.S.%20Department%20of%20Labor.html[6/19/2023 10:25:33 AM]

WHD WHD Fact Sheets Fact Sheet 13: Employment Relationship Under the Fair Labor Standards Act (FLSA)

WAGE AND HOUR DIVISION

UNITED STATES DEPARTMENT OF LABOR

Fact Sheet 13: Employment

Relationship Under the Fair Labor

Standards Act (FLSA)

Revised March 2022

On March 14, 2022 a disrict court in the Easern Disrict of Texas

vacated the Department’s Delay Rule, Independent Contractor Status

Under the Fair Labor Standards Act (FLSA): Delay of Efective Date,

86 FR 12535 (Mar. 4, 2021), and the Withdrawal Rule, Independent

Contractor Status Under the Fair Labor Standards Act (FLSA):

Withdrawal, 86 FR 24303 (May 6, 2021). The disrict court further

sated that the Independent Contractor Rule, Independent Contractor

Status Under the Fair Labor Standards Act, 86 FR 1168 (Jan. 7,

2021), became efective as of March 8, 2021, the rule’s original

efective date, and remains in efect.

This fact sheet provides general information concerning the meaning of

Print Fact Sheet

U.S. DEPARTMENT OF LABOR

An ofcial website of the United States government.

Here’s how you know

Wage and Hour Division

MENU

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 15 of 20
Fact Sheet 13: Employment Relationship Under the Fair Labor Standards Act (FLSA) | U.S. Department of Labor

file:///C/...nship%20Under%20the%20Fair%20Labor%20Standards%20Act%20(FLSA)%20_%20U.S.%20Department%20of%20Labor.html[6/19/2023 10:25:33 AM]

apply to any person engaged in work which may otherwise be subject to the Act.

In the application of the FLSA an employee, as disinguished from a person who

is engaged in a business of his or her own, is one who, as a matter of economic

reality, follows the usual path of an employee and is dependent on the business

which he or she serves. The employer-employee relationship under the FLSA is

tesed by "economic reality" rather than "technical concepts." It is not determined

by the common law sandards relating to maser and servant.

The U.S. Supreme Court has on a number of occasions indicated that there is no

single rule or tes for determining whether an individual is an independent

contractor or an employee for purposes of the FLSA. The Court has held that it is

the total activity or situation which controls. Among the factors which the Court

has considered signifcant are:

1. The extent to which the services rendered are an integral part of the principal's

business.

2. The permanency of the relationship.

3. The amount of the alleged contractor's invesment in facilities and equipment.

4. The nature and degree of control by the principal.

5. The alleged contractor's opportunities for proft and loss.

6. The amount of initiative, judgment, or foresight in open market competition

with others required for the success of the claimed independent contractor.

7. The degree of independent business organization and operation.

There are certain factors which are immaterial in determining whether there is an

employment relationship. Such facts as the place where work is performed, the

absence of a formal employment agreement, or whether an alleged independent

contractor is licensed by State/local government are not considered to have a

bearing on determinations as to whether there is an employment relationship.

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 16 of 20
Fact Sheet 13: Employment Relationship Under the Fair Labor Standards Act (FLSA) | U.S. Department of Labor

file:///C/...nship%20Under%20the%20Fair%20Labor%20Standards%20Act%20(FLSA)%20_%20U.S.%20Department%20of%20Labor.html[6/19/2023 10:25:33 AM]

required that the employee be paid at leas the Federal minimum wage of $5.85

per hour efective July 24, 2007; $6.55 per hour efective July 24, 2008; and

$7.25 per hour efective July 24, 2009, and in mos cases overtime at time and

one-half his/her regular rate of pay for all hours worked in excess of 40 per

week. The Act also has youth employment provisions which regulate the

employment of minors under the age of eighteen, as well as recordkeeping

requirements.

Typical Problems

(1) One of the mos common problems is in the consruction indusry where

contractors hire so-called independent contractors, who in reality should be

considered employees because they do not meet the tess for independence, as

sated above. (2) Franchise arrangements can pose problems in this area as

well. Depending on the level of control the franchisor has over the franchisee,

employees of the latter may be considered to be employed by the franchisor. (3)

A situation involving a person volunteering his or her services for another may

also result in an employment relationship. For example, a person who is an

employee cannot "volunteer" his/her services to the employer to perform the

same type service performed as an employee. Of course, individuals may

volunteer or donate their services to religious, public service, and non-proft

organizations, without contemplation of pay, and not be considered employees

of such organization. (4) Trainees or sudents may also be employees,

depending on the circumsances of their activities for the employer. (5) People

who perform work at their own home are often improperly considered as

independent contractors. The Act covers such homeworkers as employees and

they are entitled to all benefts of the law.

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 17 of 20
Fact Sheet 13: Employment Relationship Under the Fair Labor Standards Act (FLSA) | U.S. Department of Labor

file:///C/...nship%20Under%20the%20Fair%20Labor%20Standards%20Act%20(FLSA)%20_%20U.S.%20Department%20of%20Labor.html[6/19/2023 10:25:33 AM]

Topics

Worker Rights

For Employers

Resources

Interpretive Guidance

The contents of this document do not have the force and efect of law and are not meant to

bind the public in any way. This document is intended only to provide clarity to the public

regarding exising requirements under the law or agency policies.

1-866-4USWAGE (1-866-487-9243).

This publication is for general information and is not to be considered in

the same light as ofcial satements of position contained in the

regulations.

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 18 of 20
Fact Sheet 13: Employment Relationship Under the Fair Labor Standards Act (FLSA) | U.S. Department of Labor

file:///C/...nship%20Under%20the%20Fair%20Labor%20Standards%20Act%20(FLSA)%20_%20U.S.%20Department%20of%20Labor.html[6/19/2023 10:25:33 AM]

State Laws

News

Wage and Hour Division

An agency within the U.S.

Department of Labor

200 Consitution Ave NW

Washington, DC 20210

1-866-4-US-WAGE

1-866-487-9243

www.dol.gov

FEDERAL GOVERNMENTPLUS-SQUARE

White House

Benefts.gov

Coronavirus Resources

Disaser Recovery Assisance

DisaserAssisance.gov

USA.gov

Notifcation of EEO Violations

No Fear Act Data

U.S. Ofce of Special Counsel

LABOR DEPARTMENTPLUS-SQUARE

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 19 of 20
Fact Sheet 13: Employment Relationship Under the Fair Labor Standards Act (FLSA) | U.S. Department of Labor

file:///C/...nship%20Under%20the%20Fair%20Labor%20Standards%20Act%20(FLSA)%20_%20U.S.%20Department%20of%20Labor.html[6/19/2023 10:25:33 AM]

Site Map Important Website Notices Privacy & Security Statement

About DOL

Guidance Search

Español

Ofce of Inspector General

Subscribe to the DOL Newsletter

Read the DOL Newsletter

Emergency Accountability Status Link

A to Z Index

WHD PORTALSPLUS-SQUARE

YouthRules!

Wage Determinations

Connect With DOL

facebookftwitter insagramyoutubelinkedin

Case 1:22-cv-22671-CMA Document 83-1 Entered on FLSD Docket 06/26/2023 Page 20 of 20