DOL Withdraws Obama-Era Guidance on Joint Employers and Independent Contractors

On June 7, 2017, the U.S. Department of Labor (DOL) announced the withdrawal, effective immediately, of its 2015 and 2016 informal guidance for joint employers and independent contractors. Relied on heavily by the Obama administration to justify enforcement actions taken by the Wage and Hour Administration (WHD), both guidance documents were Administrative Interpretations and thus were not binding law. The rescinded Administrative Interpretations reflect a reigning in of the expansive interpretations of “employment” and “joint employment” under the federal Fair Labor Standards Act (FLSA).

Issued in July 2015, Administrator's Interpretation No. 2015-1, the administrator formally accepted the “economic realities” test as the DOL’s preferred approach to determining whether a worker is an employee or an independent contractor and concluded that “most workers are employees.” Thus, the interpretation expanded the scope of employment and narrowed the definition of independent contractor.

Issued in January 2016, Administrator's Interpretation No. 2016-01 established new standards for determining joint employment status under the FLSA and extended who could be considered a joint employer for liability purposes.

While this is certainly welcome news to businesses, employers are cautioned that the removal of these informal guidance documents “does not change the legal responsibilities of employers under the Fair Labor Standards Act… reflected in the Department’s long-standing regulations and case law," as emphasized by the Department. Litigation regarding joint employment and independent contractor status will naturally continue, especially due to conflicting standards under the laws of various states and in light of the National Labor Relations Board’s controversial Browning-Ferris decision—which significantly expanded the scope of joint employer liability under the National Labor Relations Act (NLRA)—and is currently on appeal in the U.S. Court of Appeals for the District of Columbia Circuit.