Did the new Labor Secretary finally throw employers a bone? We think so, but it’s too early to tell whether it’s delicious bacon-flavored or some generic processed meat flavor.
On June 7, 2017, the Department of Labor (DOL) announced it was withdrawing the 2015 and 2016 informal guidance on joint employment and independent contractor misclassification.
The guidance memos had been written by the previous Wage and Hour Administrator, David Weil. The Independent Contractor memo indicated that the DOL would consider many independent contractor relationships to be misclassified – in other words, that the contractors were really employees under wage and hour law. The Joint Employment memo explained the concepts of vertical and horizontal joint employment and, similarly, concluded that the DOL was looking to find joint employment in all directions.
There has been no new Wage and Hour Administrator appointed to succeed David Weil, but Secretary of Labor Alex Acosta has now taken his first significant step toward signaling increased protections for companies against rampant misclassification and joint employment claims. The withdrawal of these guidance memos, however, creates uncertainty. To borrow an analogy from the legislative healthcare debate, this is just Repeal — not Repeal and Replace.
No new guidance has been issued. We can therefore assume these memos were withdrawn to demonstrate an increased willingness by the DOL to better protect the legitimacy of independent contractor relationships and to try to slow the trend toward finding joint employment everywhere possible; but the Fair Labor Standards Act (FLSA) has not been revised, the regulations have not been revised, and no court decisions have been reversed. As I reported here, a recent Fourth Circuit decision signals that the courts are looking to find joint employment wherever possible, and the withdrawal of these interpretive guidelines certainly does nothing to overturn that decision – or any other court decision.
In essence, this is a step in the right direction, but a small step. Bigger and better steps would include a change in the FLSA regulations, a legislative change to the FLSA itself, or a new set of guidelines.
Companies should also remember that the battle over independent contractor misclassification and joint employment is being fought on many fronts, and the DOL’s view of how the FLSA deals with these issues is a very small piece of the overall picture. The withdrawal of these guidelines (or even the issuance of new guidelines) will not affect misclassification and joint employment allegations brought under state wage and hour laws, federal or state tax laws, unemployment laws, workers’ compensation laws, or employee benefit laws. The withdrawal of these guidelines might not even affect how courts will interpret the FLSA. This is merely interpretive guidance, not a change in the law.
In any event, this is a good sign. Hopefully better days are ahead for companies that use independent contractors and that face joint employment claims. I’m still hoping for real bacon.