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Department of Labor Withdraws Recent Independent Contractor Misclassification Guidance
June 12th, 2017 |

The US Department of Labor issued a news release on June 7, 2017 announcing that it is withdrawing two recent administrative interpretations relating to misclassification of independent contractors and joint employment. These guidelines were widely interpreted as expanding the definition of an employee, thereby increasing the possibility of misclassification cases, and also expanding the concept of joint employment under the Fair Labor Standards Act.

This is a somewhat confusing announcement for employers – adding more uncertainty to an already confusing topic. While the Department emphasized in its announcement that the withdrawal “does not change the legal responsibilities of employers under the Fair Labor Standards Act” it does appear to be an early indicator that the Department of Labor under the Trump administration might be looking to dismantle some of the more controversial policies issued by the DOL during the Obama-era.

The DOL News Release

Here’s the exact copy of the press release:

US Secretary of Labor withdraws joint employment, independent contractor informal guidance

WASHINGTON – U.S. Secretary of Labor Alexander Acosta today announced the withdrawal of the U.S. Department of Labor’s 2015 and 2016 informal guidance on joint employment and independent contractors.  Removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the 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.

Commentary

The withdrawal of these guidelines wasn’t totally unexpected. The Obama administration made it very clear that it intended to expansively interpret the definition of an employee, and this rollback suggests a more moderate view by the Trump administration. While the former DOL Administrator’s guidance was not binding, it clearly spelled out the presumption that under the FLSA “most workers are employees.”

The withdrawal of the guidance narrows the broad interpretation of the Fair Labor Standards Act’s economic realities test, but does not mean the DOL is going to stop actions on misclassification and noncompliance with wage and hour legislation. In fact, the department warned that removal of the interpretation does not change employers’ legal responsibilities under the FLSA. According to the announcement, “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.”

Conclusion

This action by Labor Secretary Acosta will likely be portrayed by many as a significant shift in the enforcement position of the U.S. Department of Labor. It is, however, unlikely to change the legal battles surrounding IC misclassification, which are mostly being fought at the state and local levels.

Companies that misclassify independent contractors will continue to face expensive legal challenges from state agencies, who are likely continue their crackdown on the misclassification of ICs who legally should be treated as employees, and from aggressive plaintiffs’ class action lawyers, who will continue to target companies that fail to properly classify and engage workers under applicable federal and state laws.

Companies that want engage independent contractors, in a safe, easy and cost-effective way, should strongly consider have an expert independent workforce compliance and engagement partner, like TalentWave, on their side.

Image Attribution:
Wikipedia” by United Sates Department of Labor

 

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