On June 7, 2017, United States Secretary of Labor Alexander Acosta announced the withdrawal of the 2015 and 2016 Department of Labor's Wage and Hour Division Administrator Interpretations (AIs) on independent contractors and joint employment.
What is a Joint Employer Relationship?
Commonly found in companies that use temporary employees, a joint employer relationship is when an individual performs work for two entities that share control over how that individual performs his/her work. While it is easy to identify joint employees in certain industries that use staffing agencies or independent contractors, many franchisor-franchisee and contractor-subcontractor relationships can be classified as joint employment. The Department of Labor and the judicial system at-large consider factors such as the supervision of day-to-day activities, control of assignments and hours of work, hiring and firing authority, and the provision of benefits and administrative services, such as payroll and withholding when classifying employee relationships.
What are Administrator Interpretations?
When a statute or law is ambiguous, federal or state regulators revert to regulations, opinion letters, or administrator interpretations to inform the regulated community. For the last seven years, DOL's Wage and Hour Division has used AIs in replace of opinion letters, which had been issued for decades in response to specific requests made by the regulated community. Opinion letters can potentially be a complete defense to liability or liquidated damages under the Fair Labor Standards Act (FLSA). Although AIs are not binding law, they serve as the basis for the Department undertaking enforcement actions
2015 Administrator Interpretation
In 2015, the DOL 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.
2016 Administrator Interpretation
In 2016, the DOL issued an AI regarding joint employment, specifically of migrant and seasonal agricultural workers. The 2016 AI broadened the definition of “joint employment” and noted that the ““[t]he concept of joint employment, like employment generally, should be defined expansively under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.”
Again, WHD applied the economic realities test and explained the scope of joint employment as being “as broad as possible.” This created concern among prime contractors, franchisors, staffing agencies, and others fearing that they could be tagged with joint employer exposure in relationships where there had previously been little risk. The 2015 and 2016 AIs were intended to provide notice that the Department of Labor would define the term “employee” broadly, which more than likely would increase the number of joint employment relationships it would find.
There have been no replacement guidance documents issued by the DOL in which the agency takes a different position. Therefore, the withdrawal of the 2015 and 2016 DOL guidance does not change the legal responsibilities of employers with regard to joint employer relationships. For example, employers should remain aware of EEOC and NLRB guidance in this area, as well as California state laws, where willful violations of independent contractor standards are subject to statutory penalties of $5,000 to $15,000. Employers are advised to review independent contractor relationships and evaluate agreements with third parties, and contact an employment lawyer with questions. To discuss these laws, or a potential claim on your behalf, feel free to call us toll-free at (888) 500-8469 or click here to contact us via email.