DOL Withdraws Guidance on Joint Employment & Independent Contractors
US Secretary of Labor Alexander Acosta announced in a 07 June 2017 press release that the US Department of Labor (DOL) has withdrawn two of its recent administrator's interpretations. One of the administrator's interpretations, issued in 2015, focused on the misclassification of employees as independent contractors under the Fair Labor Standards Act (FLSA) and indicated that the DOL would be more closely scrutinizing independent contractor classifications. The other administrator's interpretation, issued in 2016, examined joint employment relationships under the FLSA. Both interpretations were widely considered to be an attempt by the DOL to expand the coverage and enforcement of the FLSA. The withdrawal of the guidance documents likely indicates a shift in enforcement focus of the DOL under the Trump administration.
Background of Administrator's Interpretations
Administrator's Interpretation 2015-1, which was issued on 15 July 2015, provided guidance concerning the DOL's stance on the classification of workers as independent contractors instead of employees. Notably, in its 2015 interpretation, the DOL stated its opinion that "most workers are employees under the FLSA's broad definitions." The document laid out an expansive definition of employee under the FLSA, which focused on the "economic realities" of the worker/employer relationship. Likewise, the guidance signaled that the DOL would increase its enforcement efforts aimed at misclassified independent contractors and indicated that the DOL would closely scrutinize any worker a company classified as an independent contractor.
Administrator's Interpretation 2016-1 was issued on 20 January 2016 and arguably sought to broaden the definition of joint employers under the FLSA. In the guidance document, the DOL noted that a broad joint employment standard would "achieve statutory coverage, financial recovery, and future compliance [with the FLSA]." Further, the DOL indicated that its enforcement efforts would likely target larger employers, stating, "Where joint employment exists, one employer may also be larger and more established, with a greater ability to implement policy or systemic changes to ensure compliance." The guidance also discussed two primary types of joint employment relationships: (1) horizontal joint employment, which arises where two separate but related entities each employ the same employee; and (2) vertical joint employment, where one entity contracts with another to provide services or staff, such as temporary workers.
Takeaways for Employers
Although Secretary Acosta's press release stated that the withdrawal of the administrator's interpretations "does not change employer's legal responsibilities," the removal of the two interpretations could be a signal that the DOL will relax its enforcement efforts of independent contractor misclassification and revert back to its previous approach to joint employer liability. It is not clear at this time if the DOL will implement new guidance, or if it will be simply withdrawing its previous guidance. However, the withdrawal appears to confirm prior statements that the Trump administration would roll back several employment-related changes implemented under the Obama administration. Employers should monitor whether other government agencies will follow suit—such as the NLRB, which adopted its own broad joint employer standard in 2015's decision, Browning-Ferris Industries of California, Inc.
How We Can Help
Our Employment & Compensation attorneys understand the complexities of today's workforces and the underlying business relationships. Our attorneys routinely provide advice to companies regarding their obligations under the FLSA. When disputes arise, our attorneys also help obtain the best possible resolution for our clients.
Our Employment & Compensation lawyers can:
- Audit company workforces to ensure proper classification of employees and independent contractors under the FLSA
- Advise companies on worker staffing relationships and joint employer status
- Represent your company's interests in the event the DOL audits your work site or in the event an employee dispute arises
- Provide practical advice regarding your company's rights and obligations under the Fair Labor Standards Act