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BREAKING: Secretary of Labor Acosta Withdraws Obama-Era Administrative Interpretations Regarding Independent Contractors and Joint Employment

Alexander Acosta, Secretary of Labor for the U.S. Department of Labor (DOL), announced today the withdrawal of the Wage and Hour Division’s (WHD) administrative interpretations (AI) on independent contractors and joint employment, which were issued in 2015 and 2016, respectively.

These Obama-era sub-regulatory measures had established new standards for the agency to use in determining whether employment relationships (versus independent contractor relationships) and joint employment existed in investigations and enforcement actions. In an effort to brand more workers “employees,” the 2015 AI provided labor-friendly standards to be used in resolving questions regarding the employment status of workers. The WHD’s directive was clear:  “Most” workers, it stated, should be considered “employees” under the FLSA’s broad definition of “employment.”

On the heels of the WHD’s effort to categorize more workers as “employees,” it released the 2016 AI, which explained why liability for violations of employees’ rights should be spread amongst more businesses (calling them “horizontal and vertical joint employers”). In doing so, the 2016 AI provided new standards the WHD believed investigators and courts should consider in resolving joint employment questions. The WHD’s objective was equally clear in this regard:  The “concept of joint employment,” it stated, “should be defined expansively under the FLSA and MSPA.”

While the DOL’s withdrawal of these administrative interpretations may be viewed as a small win for business, employers are encouraged to continue to carefully scrutinize their classification of workers as independent contractors instead of employees, and to remain vigilant about the possibility of inadvertently jointly employing workers believed to be solely employed by some other entity.  Wage and hour claims – including those based on disagreements about the employment status of workers and joint employment – were not born from Obama-era policy, and such claims will continue to consume a large part of courts’ dockets going forward.  Indeed, Secretary of Labor Acosta stated earlier today that the withdrawal of the administrative interpretations “does not change employers’ legal responsibilities” under the FLSA or MSPA, and that the agency remains committed to enforcing the rights of workers and businesses through application of “long-standing regulations and case law.”

Nonetheless, while employers should expect continued investigative and enforcement activity in these areas, they may find some measure of promise and predictability in knowing the administrative agency charged with administering and enforcing the law has committed to do so based on “long-standing regulations and case law,” rather than its predecessor’s expansive “administrative interpretations” thereof.

If you have any questions or concerns regarding how this development impacts your classification of employees or business operations, please contact any member of the KDDK Labor and Employment Law Practice Team.

 

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