DOL Rescinds Obama Administration Guidance on Independent Contractor Classification and Joint Employment

On June 7, 2017, the U.S. Department of Labor (DOL) announced the withdrawal of two Obama-era Administrator’s Interpretations regarding employee/independent contractor classification and joint employment. In 2015, the DOL issued guidance intended to restrict employers’ ability to classify workers as independent contractors under the federal Fair Labor Standards Act (FLSA). Employees, but not independent contractors, are entitled to the FLSA’s protections. Likewise, in 2016, the DOL issued guidance intended to expand the circumstances under which an employee is considered a joint employee of two or more employers (e.g., a contractor and a subcontractor, a franchisor and a franchisee, or a staffing agency and its client). If joint employment exists, each joint employer may be liable for FLSA violations.

In today’s announcement, the DOL noted: “Removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department’s long-standing regulations and case law.” In other words, the withdrawal rescinds the guidance itself but does not alter any regulations or case law dealing with employee/independent contractor classification or joint employment. Accordingly, employers must continue to be careful when entering into independent contractor arrangements or employee sharing/staffing arrangements — but the DOL’s decision signals that it may take a more pro-employer approach to these issues going forward. The Trump administration appears less likely than the Obama administration to take positions that will restrict employers’ use of contracting arrangements, franchise relationships and staffing arrangements.