The first half of the twentieth century saw a profound transformation in United States Labor Law. The seventy-fourth and seventy-fifth United States Congresses, along with President Franklin Roosevelt, passed the National Labor Relations Act of 1935, the Fair Standards Labor Act of 1938, and created the National Labor Relations Board, hoping to better define employee rights and increase employee bargaining power. However, the power and protections these Acts gave to workers was strongly contested in various state, federal, and Supreme Court cases for the rest of the twentieth century. In the twenty-first century, new debates surrounding worker protections are emerging, particularly around platform-mediated services, often colloquially known as the gig economy. This article surveys the contested legal definitions in labor law, which legal definitions major corporations favor, and how these definitions affect workers’ rights. 

 

Introduction 

       The rise of the gig economy has transformed the labor market for millions of Americans, particularly through platform-mediated services. The gig economy describes the prevalence of short-term contracts, as opposed to long-term jobs, in the labor market. Platform-mediated services, which often complement short-term contracts, are jobs arranged and managed through apps or websites, where the company connects workers to customers and controls key aspects of the work [1]. Platform-mediated companies like Uber, Lyft, and Doordash are expanding individuals’ access to this new flexible line of work, while simultaneously raising new legal questions surrounding these workers’ labor protections. Recently, debates have arisen over whether workers in the gig economy should be classified as independent contractors or employees, a distinction that carries important legal implications under U.S. labor law. Under the National Labor Relations Act (NLRA) [2] and the Fair Labor Standards Act (FLSA) [3], only employees are eligible for essential worker protections such as minimum wage, collective bargaining rights, and unemployment benefits. Thus, being granted employee status is a crucial aspect of worker’s rights; likewise, to be deemed an independent contractor presents a problem to workers. However, the distinction between independent contractors and employees remains a strongly contested issue in U.S. labor law. 

 

[1] Abraham et al, Measuring the Gig Economy: Current Knowledge and Open Issues, NATIONAL BUREAU OF ECONOMIC RESEARCH (2018).

[2] National Labor Relations Act of 1935, 29 U.S.C. §§ 151-169. 

[3] Fair Labor Standards Act of 1938, 29 U.S.C. § 201. 

 

Differences Between Employers and Independent Contractors 

       At the crux of the debate over the legal rights of gig economy workers lies the distinction between employees and independent contractors. The NLRA extends rights only to employees, while independent contractors are explicitly excluded [4]. While the NLRA focuses on collective bargaining rights and unionization, the FLSA establishes minimum wage, overtime pay, and other workplace standards [5]. Yet, determining which status applies is contested in the context of platform-mediated work. If gig workers are designated as independent contractors, they remain excluded from these basic protections, highlighting the practical consequences of misclassification beyond unionization rights. To determine whether gig workers qualify as employees, regulators apply multi-factor tests such as the Department of Labor’s Economic Reality Test or the NLRB’s common-law agency test [6]. These tests consider factors like the company’s degree of control over the worker, the worker’s opportunity for profit or loss, the permanence of the working relationship, whether the work is integral to the business, and the skill or independence required. In platform-mediated driving services, drivers are dependent on the platform for income, yet they retain the freedom to set their own hours and use their own vehicles. In this sense, gig work blurs the line between independence and control. For platform-mediated workers such as Uber drivers, the centrality of their work to the company’s core service supports classifying them as employees. The same could be said about Uber, Doordash, Lyft and other platform-mediated companies. Further, the Economic Reality Test mentions that “the fact that a worker does not use specialized skills indicates that the worker is an employee [7].” Therefore, some companies, such as Uber, may be forced to deem their workers as employees given the broad, unspecialized nature of the work drivers do. For example, Uber requires drivers to meet only the following four criteria: one must have at least one year of U.S. driving experience, drive a four-door vehicle with at least four passenger seats, agree to and pass a background check, and meet their state’s minimum driver age requirement [8]. 

 

[4] NLRB v. United Insurance Co. of America, 390 U.S. 254 (1968).

[5] Fair Labor Standards Act of 1938, 29 U.S.C. § 201.

[6] Bartels v. Birmingham, 332 U.S. 126, 130 (1947); United States v. Silk, 331 U.S. 704, 712 (1947).

[7] Bartels v. Birmingham, 332 U.S. 126, 130 (1947).

[8] Uber Technologies Incorporated, Requirements to Sign up as a Driver, UBER, (2025, October 31), https://help.uber.com/en/driving-and-delivering/article/requirements-to-sign-up-as-a-driver?nodeId=d4a40 38b-2553-4917-af9c-132135feece7.

 

How Companies Pursue Independent Contracting 

       Despite these factors, gig economy companies argue that the workers cannot be defined as anything more than independent contractors. First, their flexibility to set their own hours, to choose which jobs to accept, and to use their own equipment demonstrates a high level of independence [9]. Additionally, because the work relationship is extremely flexible and entirely dependent on the worker's choice, the majority of workers decide to only engage with the services part-time [10]. For example, the US Bureau of Labor Statistics found that 43% of drivers have a different hourly schedule week-to-week, indicating that the overwhelming majority of Uber drivers are working part-time hours [11]. Recently, courts have tried to clarify these standards in several key cases. In Dynamex Operations West, Inc. v. Superior Court (2018), the California Supreme Court adopted the three-factor ABC test to distinguish between employees and independent contractors [12]. In order to be considered an independent contractor by the State of California, a worker must meet three criteria. Firstly, the worker must be free from the control and direction of the hiring entity in connection with the performance of the work both in practice and in contract [13]. Secondly, the worker must perform work that is outside the usual course of the hiring entity’s business [14]. Thirdly, the worker must be customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed [15]. The California legislature officially put these judicial precedents into effect when they passed California's Assembly Bill 5 into law in 2019 [16].

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[9] M. Keith Chen, Judith A. Chevalier, Peter E. Rossi, and Emily Oehlsen, The Value of Flexible Work: Evidence from Uber Drivers, NBER Working Paper No. 23296 March 2017, Revised June 2017. 

[10] M. Keith Chen, Judith A. Chevalier, Peter E. Rossi, and Emily Oehlsen, The Value of Flexible Work: Evidence from Uber Drivers, NBER Working Paper No. 23296 March 2017, Revised June 2017.

[11] M. Keith Chen, Judith A. Chevalier, Peter E. Rossi, and Emily Oehlsen, The Value of Flexible Work: Evidence from Uber Drivers, NBER Working Paper No. 23296 March 2017, Revised June 2017. 

[12] Dynamex Operations W. v. Superior Court and Charles Lee, Real Party in Interest, 4 Cal.5th 903 (Cal. 2018). 

[13] Fleece on Earth v. Dep’t of Emple. & Training, 181 Vt. 458, 923 A.2d 594, (Vt. 2007).

[14] Great N. Constr., Inc. v. Dept. of Labor, 204 Vt. 1, 161 A.3d 1207, (Vt. 2016).

[15] Garcia v. Border Transportation Group, 28 Cal.App.5th 558, 575, (Cal. 2018).

[16] Proposition 22, 2019 Cal. Stat. A-5.

 

Recent Labor Legislation 

       Despite being passed, California's Assembly Bill 5 remains far from clear. After the bill took effect in 2020, an amendment to Bill 5, Proposition 22, was passed and exempted app-based transportation and delivery companies like Uber, Lyft, and DoorDash from classifying their drivers as employees [17]. It comes as no surprise that these companies led massive lobbying efforts with hundreds of millions of dollars to undermine the bill and favor Proposition 22 [18]. Despite movements to classify workers in the gig economy more as employees than independent contractors, platform-mediated services, lawmakers and courts are grappling to balance worker protections with the flexibility of modern gig work. In January 2024, the United States Department of Labor released a new final rule that revised how workers are classified under the Fair Labor Standards Act. The 2024 rule replaced the 2021 edition, which had focused mainly on two factors, control over the work and the worker’s opportunity for profit or loss, and brought back the broader six-factor Economic Reality Test [19]. The Department argued that this change was meant to better reflect the realities of modern work, particularly for app-based or platform-mediated jobs where control often happens through algorithms instead of direct oversight. Courts using the Economic Reality Test have reached different conclusions, highlighting how the test’s flexible and case-by-case approach doesn’t easily fit the realities of app-based work and algorithmic management. Thus, even with these updates, the classification of gig workers remains unclear, as the new rule continues to rely on a case-by-case approach that leaves room for interpretation. 

 

[17] Proposition 22, 2019 Cal. Stat. A-5

[18] Padlin, L. (2021, September 16), Prop 22 Was a Failure for California’s App-Based Workers. Now, It's Also Unconstitutional, National Employment Law Project Blog, https://www.nelp.org/prop-22-unconstitutional/.

[19] United States Department of Labor, U.S. Department of Labor Announces Final Rule On Classifying Workers As Employees Or Independent Contractors Under The Fair Labor Standards Act, WAGE AND HOUR DIVISION (2024, January 9) https://www.dol.gov/newsroom/releases/whd/whd20240109-1.

 

Conclusion 

       The gig economy has created new industries and types of work, but it has also opened up serious questions about worker protections. The difference between workers’ status as independent contractors and employees remains significant in regards to worker protections given by the NLRA and FLSA. While tests like the Economic Reality Test attempt to provide frameworks of classification, courts and regulators still struggle to apply them to highly flexible and individualized jobs where workers can set their own schedules. Lawmakers are struggling to balance worker protection with the market's demand for flexibility, leaving the landscape messy and often contradictory. Overall, these developments underscore the underlying fact that labor law hasn’t fully caught up with platform-mediated work. How we define gig workers, and what protections they deserve, will continue to be a central question for years to come.