Department of Labor Withdraws Guidance on Joint Employer and Independent Contractor Liability

The U.S. Department of Labor (DOL) has withdrawn two informal regulatory interpretations, issued in 2015 and 2016, on the subjects of joint employer and independent contractor liability of employers. (See our previous blog posts about the related risks for employers, available here.)

The DOL’s announcement this week appears to signal a major course reversal in the wage and hour arena, particularly from 2016 when its Wage & Hour Division had made joint employment “a major focus.” This is likely true even though the DOL said, in announcing the withdrawal: “Removal of the two administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act . . . as reflected in the Department’s long-standing regulations and case law.”

There can be little doubt about the significant differences in perspective and approach to wage and hour enforcement between the two DOL leaders, David Weil (former) and Alexander Acosta (current). The DOL’s withdrawal of prior interpretive guidance signals, despite its public statements, a likely shift away from earlier enforcement agendas. Wage and hour liability for two separate companies based on a joint employment finding by the DOL under Acosta is less likely now, as is liability based on rejection of independent contracting status.

But as the DOL points out, the actual law interpreted by the withdrawn guidance has not changed, so wage and hour liability risks based on joint employment or misclassification of independent contractors have certainly not been eliminated.

Further, this action by the DOL has no effect on application by the National Labor Relations Board (NLRB) of its new joint employer standard it set forth in 2015. That standard has caused great concern among employers nationwide. Under the NLRB standard, separate companies can be jointly responsible for unfair labor practices and collective bargaining duties based on the mere potential, even if it is never exercised, that one of them could have an impact on the terms and conditions of employment for the other’s employees. The NLRB’s General Counsel believes it will be difficult for the NLRB to undo this new test.

So while the DOL announcement this week is good news, employers are not out of the woods on joint employer or independent contracting issues. The prudent employer will continue to conduct careful analysis and planning and to exercise caution in these areas.