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Department of Labor Withdraws Joint Employer and Independent Contractor Classification Guidance

By Katharine K. Sangha

On June 7, 2017, the Department of Labor (“DOL”) announced that legal guidance promulgated during President Obama’s term in office regarding both joint employment and the classification of workers as independent contractors has been withdrawn. 

In July 2015, the DOL’s Wage and Hour Division issued a 15-page Administrator’s Interpretation regarding the determination of workers as independent contractors or employees. Specifically, the Administrative Interpretation considered the Fair Labor Standards Act’s (“FLSA”) definition of “employ,” meaning to “suffer or permit” work, and the impact of the legal test for whether workers are considered employees or independent contractors. At that time, the DOL’s Wage and Hour Division took the position that, under the FLSA, “most workers are employees.”

In January 2016, the Wage and Hour Division released another Administrator’s Interpretation, which indicated that “[t]he concept of joint employment, like employment generally, should be defined expansively under the [Fair Labor Standards Act] and [Migrant and Seasonal Agricultural Worker Protection Act].” In this guidance, the Wage and Hour Division considered the concept of “vertical joint employment”, where an employee has a relationship with an intermediary employer and the entity that engages the intermediary in providing labor. In the Administrator’s Interpretation, the Wage and Hour Division explained that its joint employer regulations would not be considered when analyzing whether vertical joint employment exists. Instead, the Wage and Hour Division adopted an “economic realities test.” 

When rescinding these Administrator’s Interpretations, the DOL stressed that its actions do not “change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.” Accordingly, it is unclear what effect, if any, rescinding these Administrator’s Interpretations may have. By contrast, the National Labor Relations Board continues to press its expansive definition of “joint employer” as two or more entities that possess 1) a common law relationship and 2) those entities share or codetermine matters governing employees’ essential terms and conditions of employment. As such, employers cannot rely exclusively on the DOL’s decision to withdraw the Administrative Interpretation as sounding the all clear. The law with respect to joint employment issues and whether a given worker is an independent contractor is currently in flux. We will be following these and other legal developments closely.