On June 7, 2017, the U.S. Department of Labor (“DOL”) withdrew two guidance memos issued during the Obama administration, a 2015 informal guidance on determining joint employment and a 2016 informal guidance on the classification of independent contractors.
The 2015 informal guidance broadly expanded the concept of employment generally and advised that where two or more employers jointly employee an employee, the employee’s hours worked for all of the joint employers during the workweek are aggregated and considered as one employment, including for the purposes of calculating whether overtime pay is due. The guidance explicitly stated the concept of joint employment was to be defined expansively under the Fair Labor Standards Act (“FLSA”) and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”).
The 2016 informal guidance warned against misclassification of employees as independent contractors. The guidance set forth the test in determining an employee or an independent contractor is whether the worker is economically dependent on the employer or in the business for him or herself. Because the guidance defined “employ” broadly as including “to suffer or permit to work,” “a worker who is economically dependent on an employer is suffered or permitted to work by the employer.”
The Obama era guidance memos were considered to be controversial because, although they were not binding, they clearly expanded the interpretation of what an employee is and designated most workers as employees under the FLSA. The withdrawal is considered a sign of the Trump administration’s shift towards reducing enforcement actions, though continued actions of noncompliance are still expected. Critics argue the move is an attempt to weaken the strength of workers’ cases in court.
In its press release, the DOL cautioned that the removal of the interpretations does not change the legal responsibilities of employers under the FLSA and MSPA.
Notwithstanding the withdrawal of the informal guidance memos, the underlying regulations are still in effect. As such, Coats Group plc will need to ensure continued compliance with relevant labor laws.