Last week, Labor Secretary Alexander Acosta announced that the U.S. Department of Labor has withdrawn two Obama-era informal guidance documents. In 2015, the Department issued guidance regarding the misclassification of employees as independent contractors under the Fair Labor Standards Act. In this document, the Department stated that “most workers are employees” and set forth an “economic realities” test to determine the relationship between employers and workers. In 2016, the Department issued guidance on joint employment in which the Department, like other federal agencies at the time, defined the scope of “joint employment” broadly and addressed both “horizontal” and “vertical” joint employment.
Although the guidance documents were not binding law, they served as the basis for the Department undertaking enforcement actions. In addition, the withdrawal of the documents does not remove any uncertainty regarding “joint employment” in the labor law arena stemming from the National Labor Relations Board’s Browning-Ferris decision. Furthermore, the Department has made clear that the withdrawal of the guidance documents does not absolve employers of their legal responsibilities under the FLSA. Nevertheless, this decision is welcome news for employers, as it reflects the business-friendly attitude of the new administration.