One of the first orders of business when the Trump administration came in two years ago was rolling back some Obama-era employment law regulations. This specifically related to tech-based companies use of contractors. There was a further clarification on April 3 of this year from the Department of Labor’s Wage and Hourly Division interpreting the Fair Standards and Labor Act as it relates to workers of online virtual marketplace companies, which includes such popular companies as Lyft and Uber, whose software connects customers with contractor drivers.

Good news for businesses

The DOL’s clarification maintains the viability of these digital marketplaces, which the Obama administration believed were misclassifying employees as contractors. This enables these businesses to:

  • Not pay overtime wage to contractors
  • Not paying for health insurance and other benefits
  • Not paying the federally mandated minimum wage (although companies must still follow local laws)

Good news for workers

In a recent poll by the employment platform Upwork, which focuses on serving tech-based contractors, 31% of workers are earning $75,000 or higher per year. The study also found that 73% of respondents claimed they made more as contractors than they did as fulltime employees.

Determining the right business model

Uber’s business model likely would not work (or at least would not be as successful) if they used fulltime employees and put them in company cars. Nevertheless, many businesses are struggling to attract top-notch talent to fill open contractor positions. Some began providing more perks and benefits to do this, believing that full-time employment will attract risk-averse employees.

Knowledgeable employment law attorneys can work with clients to determine the right business model for the current economic climate while also planning potential changes in the future. They can also help with compliance issues as more clarifications come from the DOL in the future.