June 15, 2017Client Alert

DOL Withdraws Key Obama Era Guidance Memoranda on Independent Contractor & Joint Employment Standards

In a move that many in the business community welcomed, on June 7, 2017, U.S. Secretary of Labor Alexander Acosta announced that the U. S. Department of Labor (DOL) was withdrawing its 2015 Administrator’s Interpretation on “independent contractor” status under the Fair Labor Standards Act (FLSA) and its 2016 Administrator’s Interpretation for determining “joint employment” under the FLSA. As a reminder, the FLSA establishes the minimum wage, overtime pay, recordkeeping, and youth employment standards for most employees in the United States.

Many employers and trade associations considered the Obama era contractor memorandum as reflecting a narrow view of who could be treated as an independent contractor (and therefore not covered by the FLSA), as opposed to a covered “employee,” pointing to DOL’s declaration that “most workers are employees under the FLSA’s broad definitions.” In contrast, these stakeholders viewed the joint employment guidance as establishing an expansive view of who could be found to be a “joint employer” with shared responsibility for unpaid wage violations, even when the employer may not have had actual control over the affected employees. Taken together, the memoranda expressed the DOL’s then view that the FLSA should be construed and enforced to cover, protect, and provide relief to as many workers as possible.

Secretary Acosta did not provide a rationale for the withdrawals in his announcement, but reminded employers that they did not “change the legal responsibilities of employers under the FLSA” as “reflected in the Department’s long standing regulations and case law.” Nevertheless, the action clearly signals a significant change in the enforcement position of the DOL with respect to who qualifies as a joint employer or independent contractor under the FLSA. Although the DOL’s enforcement position is not the “last word” on the subject and courts will have the final say, the rescinding of these guidance memoranda should provide some assurance to employers grappling with the issues that there is less risk of a DOL enforcement action. Additionally, it will likely be more difficult for plaintiffs and their attorneys to persuade a court to find covered employment or joint employment status, as they now cannot rely on the existence of these statements from the agency tasked with enforcing the FLSA.

It is unclear whether the DOL will be issuing new standards or clarification of these two important areas, but given the ample amount of litigation in the joint employment and independent contractor contexts under many federal statutes (such as Title VII, the FLSA, and the National Labor Relations Act), any such refined guidance will likely also be significant.

back to top