Service providers working for a virtual marketplace company may be considered independent contractors when an economic independence is found between the provider and the company, the Labor Department said April 29.

The department said in Opinion Letter FLSA2019-6 that online- or smartphone-based referral businesses use a software platform to connects consumers to such enterprises. Services offered by the referral businesses include transportation, delivery, shopping, moving, cleaning, plumbing, and painting.

The letter, released in response to a private-sector opinion request, said that the client is a virtual marketplace referral service. The business neither employs workers or receives services from the provider, but as a matter of economic reality it is working for the consumer, not the virtual marketplace referral service, the letter said.

Client referral service require service providers to provide basic information, such as name, contact, and Social Security number, before the providers use its virtual marketplace referral service. Service providers also are required to self-certify their experience and qualifications, complete a background check through an accredited third party, complete an identity check, and accept terms of use and service agreements. The agreements classify the service providers as independent contractors; training and interviews are not required and service providers do not have to report to a physical office. Additionally, the virtual marketplace business issues the service providers’ Forms 1099-MISC, which reflect worker payments.

The service providers design their own schedules, determining when, where, and how much they are to work. The referral service does not impose requirements on how the service providers perform their work and and does not supervise, monitor, or control the work. The service providers also buy their own supplies and equipment, for which they are not reimbursed.

The Labor Department said the relationship resembles those of health-care providers that use a registry to obtain clients. The department’s Wage and Hour Division has said that such workers generally are independent contractors.

In determining economic dependence, the letter said the Labor Department considers the nature and degree of the potential employer’s control; the permanency of the working relationship; the worker’s investment in facilities and materials; the amount of skill, initiative, judgment, or foresight required for the worker’s services; the worker’s opportunity for profit or loss; and the extent of integration of the worker’s services into the potential employer’s business.

Given the facts in the opinion request, the letter said the virtual marketplace referral service:

•does not exert control over its service providers;

•lacks a permanent working relationship with service providers; and

•does not invest in facilities, equipment, or helpers for its service providers.

“The exercise of managerial discretion and the lack of training weighs in favor of independent contractor status,” as does the clients’ independence from the referral service as it relates to opportunities for profit and loss, the letter said.