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RISK INSIGHT: DOL Contractor Guidance Withdrawn

Construction & Real Estate, Education, Financial Institutions, Food & Agribusiness, Government, Healthcare, Manufacturing & Distribution, Property & Casualty, Senior Living & Social Services, Transportation

On June 7, 2017, the federal Department of Labor (DOL) issued a news release informing employers that the DOL Secretary, Alexander Acosta, has officially withdrawn previous informal guidance regarding independent contractors and joint employment.

Previously, the DOL released informal guidance letters in 2015 and 2016 focused on employee/employer relationships and whether employer were misclassifying workers to avoid labor costs.

In the 2015 guidance, the agency focused on the definition of “independent contractor” and the economic dependence of the worker rather than the traditional “control test”.  This guidance created a very narrow interpretation of the definition of independent contractor by focusing on six factors of employment rather than giving more weight to the traditional control factor. This guidance would have likely resulted in more workers being classified as employees under this guidance.

The 2016 DOL guidance focused on joint employment under the Fair Labor Standards Act (FLSA) and the liability for complying with FLSA.  The agency previously interpreted the law to require organizations jointly liable for complying with the FLSA when two or more employers jointly employed the same worker.  The hours worked by these by these employees were aggregated and considered as one employer for purposes of overtime pay.

The withdrawal of this guidance may signify the current administration’s commitment to remove administrative and economic burdens, particularly in the area of employer/employee relationships.

Key Takeaway

Many employers who utilize independent contractors and/or joint employer relationships will welcome the withdrawal of this guidance.  Please keep in mind that the DOL has made it clear that this withdrawal does not change current employer compliance obligations under the law.  Unless further guidance is issued, employers are strongly advised to consider all current guidance in making employment relationship determinations.

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