On the heels of withdrawing published interpretations of the concepts of “joint employer” and “independent contractor,” the Secretary of Labor announced yesterday that it will reinstate the issuance of opinion letters. Opinion letters are official, written opinions by the Wage and Hour Division that explain how a law applies to specific sets of facts. In 2010, the Obama administration discontinued the issuance of opinion letters and replaced them with Administrator Interpretations, which provided only informal guidance. The change back to opinion letters will be welcomed by employers who may rely on an opinion letter to establish a good-faith defense in wage and hour claims. Additionally, the agency created a website where the public can search to see if existing opinion letters already answer their questions, or alternatively, request an opinion letter.
The return of opinion letters comes on the heels of the Secretary of Labor’s withdrawal of the Department of Labor’s 2016 and 2015 Administrator Interpretations on joint employment and independent contractors. That withdrawal, announced on Jun 7, 2017, signals that the DOL is stepping back from the expansive interpretations of those concepts announced in the AIs. Before 2016, the Department of Labor interpreted the joint employer doctrine to apply only to cases where a business had “direct control” over another business’s workplace. That control could be over things like hiring and firing, scheduling, and determining compensation. In January 2016, the DOL issued an AI stating that a business may be a joint employer – and therefore liable for the employment law violations of another company – even if it exerted indirect control over another’s workplace. Our blog post from 2016 about this AI is available here. As a result of the 2016 AI, businesses, and in particular franchisors, faced a risk of being liable for workplaces they did not directly oversee or control. The withdrawal of this AI likely means that going forward, the DOL will look for “direct control” over an employee in determining joint employment.
The DOL issued another AI announcing an expansive view of employment back in July 2015 when it took the position that, under the FLSA, most workers should be classified as employees and not independent contractors. (See our blog post about this AI here.) In that 2015 AI, the DOL said that, in determining whether workers are properly classified as independent contractors for purposes of the Fair Labor Standards Act, the DOL would apply the multi-factor “economic realities” test to determine whether the workers are economically dependent on the employer or actually in business for themselves. Since this AI is now also withdrawn, it is possible that the DOL will no longer start its analysis with a presumption that independent contractors are misclassified.
Though the DOL has withdrawn the informal guidance regarding joint employment and independent contractors, it has not yet issued any other guidance. Unless new guidance is issued, employers should note that the conflicting interpretations of joint employment and independent contractor status under state laws still remain. Likewise, the expanded concept of joint employment adopted by the National Labor Relations Board in 2015 remains. In the NLBR’s view, a company that reserves the right to control terms and conditions of employment of workers, even if it does not exercise that control, is a joint employer. Therefore, employers should continue to be cautious about misclassifying independent contractors and/or determining a “joint employer” status. Additionally, employers should know that the DOL has emphasized that withdrawing the informal guidance does not change an employer’s responsibilities under the Fair labor Standards Act.