Antitrust Law Daily Labor Secretary withdraws informal guidance on independent contractors and joint employers
Wednesday, June 7, 2017

Labor Secretary withdraws informal guidance on independent contractors and joint employers

By Pamela Wolf, J.D.

On June 7, in a move not entirely unexpected, new Labor Secretary Andrew Acosta announced that the Department of Labor’s 2015 and 2016 informal guidance on joint employment and independent contractors has been withdrawn. The removal of the administrator interpretations (which were not specifically named by formal title but easily identifiable to DOL watchers) does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), as reflected in the department’s long-standing regulations and case law, the DOL cautioned in a news release.

With the many changes wrought by the growing "sharing" or "gig" economy, the Obama Administration’s Department of Labor sought to evolve practices in a manner that would continue to ensure worker protections under laws that did not envision the employment relationships that mark the so-called "fissured" workplace becoming more and more common today. Opponents of these Obama-era efforts, however, viewed these practices as overreaching, going beyond statutory authority, and as potential, if not real, barriers to small businesses and job growth.

Opposition to the policies embodied in the now withdrawn sub-regulatory guidance documents sparked several rounds of congressional committee hearings.

Independent contractor misclassification. Rolling back the Obama-era policies, Acosta has withdrawn Administrator’s Interpretation No. 2015-1, issued by former Wage and Hour Division Administrator Dr. David Weil on July 15, 2015. That guidance came down strongly on the side of finding an employment relationship as opposed to an independent contractor one. The WHD took the position that most workers are employees under the FLSA. The compliance assistance document focused on the economic realities test in light of the FLSA’s definition of "employment" as "to suffer or permit to work," discussed each factor in the economic realities test, and provided case law and examples to flesh out its interpretation.

Joint-employer test. Administrator’s Interpretation No. 2016-1 on joint employment, issued January 20, 2016, is also withdrawn. Under that informal guidance, the test for joint employment under the FLSA and the MSPA also uses the same expansive "suffer or permit" language found in the FLSA’s definition of employment. This test is broader than the common law test, broader than the test under the NLRA and the OSHA test—it "ensures that the scope of employment relationships and joint employment under the FLSA and MSPA is as broad as possible."

The DOL noted that in its announcement of the guidance withdrawals that it "will continue to fully and fairly enforce all laws within its jurisdiction, including the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act."

IFA reaction. The International Franchise Association (IFA) announced its support for the decision, noting that unlimited joint employer liability is one of the most costly and burdensome regulations impacting the franchise business model.

"While uncertainty surrounding the new joint employer standard has made it harder for America’s 733,000 franchise owners to grow and create new jobs, we are pleased the DOL is taking first steps to undo this costly regulation created by the previous administration," said IFA’s Vice President of Public Affairs Matt Haller. "That being said, we urge Congress to now recognize the uncertainty and unreasonable costs the NLRB’s decision has placed on franchise owners and take action to find a true permanent solution."

MainStory: TopStory FranchisingDistribution

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