Department of Labor Withdraws Guidance on Joint Employment and Independent Contractor Classification
U.S. Secretary of Labor Alexander Acosta announced on June 7, 2017 that the Department of Labor (DOL) is withdrawing its 2015 and 2016 guidance on joint employment and independent contractors. The withdrawal indicates a possible shift in focus for the DOL, away from the increased scrutiny of business arrangements under the Obama administration.
In 2015, the DOL had issued an Administrator’s Interpretation on the application of the Fair Labor Standards Act’s “suffer or permit” standard in the classification of independent contractors vs. employees. The Interpretation suggested that most workers should be deemed employees under the broad definitions of the Fair Labor Standards Act (FLSA). Similarly, the DOL issued an Administrator’s Interpretation in 2016 on joint employment, seeking to broaden the definition of “joint employment” by utilizing the expansive definitions under the FLSA. The 2016 Interpretation also sought to increase scrutiny of business and employment relationships, potentially holding companies liable for violations committed by contractors or franchisees.
As some analysts had predicted, it appears that the DOL under the Trump administration will be more business-friendly and will reduce the level of scrutiny on employment relationships. And as expected, business owners and industry groups are applauding the DOL’s withdrawal of this guidance, viewing the move as an important step in removing costly constraints on economic opportunity.
However, the DOL has made it clear that the withdrawal of its guidance does not change the legal responsibilities of employers under the FLSA. As such, employers should continue to seek advice on their obligations under the federal laws, and to ensure compliance with regard to employee classification and joint employer status.
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