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On June 7, 2017, the U.S. Department of Labor (DOL) announced the withdrawal of two Obama-era guidance letters that provided guidance on joint employer and independent contractor classifications. The withdrawal of these two guidance documents marks a step toward more flexibility for employers.
One of the letters, 2016-1, focused on the Fair Labor Standards Act’s (FLSA) joint employer doctrine. Generally, joint employment occurs when an employee does work for two business entities, and both entities have the potential to be exposed to liability for wage and hour violations. The letter, coupled with the National Labor Relations Board’s decision in Browning-Ferris Industries of California, Inc. 362 NLRB No. 186 (Aug. 27, 2015), resulted in an expansion of the joint employer doctrine such that even a business entity with very little control, if any, over an employee could still be considered a joint employer. The joint liability doctrine has also been used to hold franchisors liable as joint employers with their franchisees. For example, under the withdrawn guidance, the franchisor could be held liable for a franchisee’s misclassification of an exempt employee or failure to pay overtime wages.
The other letter withdrawn, 2015-1, provided guidance on the issue of whether a worker is an employee or an independent contractor, and therefore not subject to certain FLSA requirements. This guidance letter had the practical effect of re-classifying many workers as employees, not independent contractors, based on FLSA’s broad definition of the term “employment.”
The DOL has stated that the withdrawal of these interpretative letters does not affect employers’ obligations pursuant to FLSA or the Migrant and Seasonal Agricultural Worker Protection Act. The DOL has further stated that it will “continue to fully and fairly enforce all laws within its jurisdiction.”
The withdrawal of these two letters will certainly be welcomed by most businesses and employers, as the letters have long been criticized as heavy-handed. Others feel that the withdrawal will not have much impact, if any, on the way the FLSA is being applied and enforced.
For more information about how the withdrawal of these two guidance letters might impact your business, please contact any of the attorneys in our Employment & Labor or Franchising & Distribution groups.