Federal DOL Rescinds Joint Employer and Independent Contractor Guidance

On June 7, 2017, the U.S. Department of Labor (“DOL”), Wage and Hour Division (“WHD”), announced that it was rescinding two significant and heavily-criticized Obama-era Administrator’s Interpretations, the first on joint employer liability under the Fair Labor Standards Act, 29 U.S.C. § 1801 et seq. (“FLSA”) and the Migrant and Seasonal Agricultural Worker Protection Act, 29 U.S.C. § 201 et seq. (“MSPA”) (the “Joint Employer AI”), and the second on independent contractor misclassification under the FLSA (the “Independent Contractor AI”). In its June 7th statement concerning the rescissions, the DOL made its intentions clear:

Removal of the two administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act or Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the Department’s long-standing regulations and case law. The Department 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.

Although neither AI constituted a legal precedent, the January 2016 Joint Employer AI presented the DOL’s analysis of the joint employer principles under caselaw interpreting the FLSA and the MSPA. Gibbons issued an alert about the Joint Employer AI when it was first published. The underlying caselaw is not affected by the DOL’s withdrawal of the Joint Employer AI and the withdrawal does not necessarily signal that the DOL will discontinue its focus on joint employer liability. Significantly, the decision in Browning-Ferris Indus. of Calif., Inc. v. NLRB, D.C. Cir., No. 16-1028 is currently on appeal at the U.S. Court of Appeals for the District of Columbia Circuit and is likely to provide further clarification and authority on the joint employer doctrine under the National Labor Relations Act, from which interpretations of the FLSA tend to emanate. The D.C. Circuit heard oral argument in the case earlier this year.

The July 2015 Independent Contractor AI made the broad pronouncement that “most workers are employees under the FLSA,” a scary proposition for U.S. employers who elect to use independent contractors for a variety of legitimate business reasons. The significance of the Independent Contractor AI rescission should not be overstated. Since 2011, the DOL and the Internal Revenue Service have been parties to a Memorandum of Understanding (“MOU”) aimed at combating worker misclassification. Moreover, 37 states have also entered MOUs with the DOL and agreed to, among other things, information sharing and coordinated enforcement of wage and hour laws.

The real impact of the rescission of the AIs remains to be seen and depends in large part on how far the current administration is willing to go to erase what many viewed as an overly-expansive definition of “employment” promulgated under President Obama. In addition, conflicting or different tests and definitions under other state and federal laws persist.

The attorneys in the Gibbons Employment & Labor Law Department regularly advise employers on joint employer liability and independent contractor misclassification under the morass of federal and state laws that implicate these concepts.