Department of Labor Withdraws Informal Guidance on Joint Employment and Independent Contractors

On June 7, 2017, the Department of Labor (“DOL”) announced the withdrawal of its 2015 and 2016 Administrator’s Interpretations on joint employment and independent contractors under the Fair Labor Standards Act (“FLSA”).

Administrator’s Interpretation No. 2015-1 (the “Independent Contractor AI”) narrowed the DOL’s interpretation of independent contractors and broadly declared that “most workers are employees under the FLSA’s broad definition.” The Independent Contractor AI advised employers to use a six-factor test to evaluate the “economic realities” of the relationship when classifying workers.

Administrator’s Interpretation No. 2016-1 (the “Joint Employment AI”) garnered a lot of attention because it introduced the concepts of “horizontal” and “vertical” joint employment and thereby expanded the types of business relationships that can give rise to liability under the FLSA. The overlay of these concepts onto the already complex “economic realities” joint employment analysis received a great deal of criticism.

With the withdrawal of the Joint Employment AI and Independent Contractor AI, it remains to be seen whether the DOL will resurrect its prior Opinion Letters on the topics, or issue new guidance. As a practical matter, the withdrawal of the Independent Contractor AI and Joint Employment AI may have implications for employers who relied on the informal guidance when classifying workers and/or determining its relationship with workers.  For employers involved in DOL enforcement actions involving these topics, strategies will likely considerably and rapidly shift.

Massachusetts employers, however, are still subject to the Massachusetts Independent Contractor Law, M.G.L. c. 149, § 148B, which establishes the standard for determining whether an individual performing services for another should be classified as an employee or independent contractor under state law.  The Massachusetts Independent Contractor Law provides that an individual who performs services will be deemed an employee for the purposes of the Commonwealth’s wage statutes – unless the employer can prove by a preponderance of the evidence all of the following:

  1. The individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact;
  2. The service is performed outside the usual course of business of the employer; and
  3. The individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

If you have any questions about what the DOL’s withdrawal of its informal guidance means for your company, please do not hesitate to contact one of the members of Mirick O’Connell’s Labor and Employment Group.

About Amanda Marie Baer

Amanda Marie Baer is a Partner in the firm's Labor, Employment and Employee Benefits Group.  Amanda focuses her practice on representing employers in federal and state courts and before the Massachusetts Commission Against Discrimination and the Connecticut Commission on Human Rights and Opportunities. Amanda defends employers against claims concerning discrimination, harassment, retaliation, wrongful termination, interference, and accommodations.  Amanda also has experience in conducting workplace investigations into allegations of discrimination or harassment, and litigating to enforce (or defend claims regarding) employment, noncompetition/nonsolicitation, and severance agreements. Amanda's litigation experience makes her a valuable resource for employers seeking counsel on a myriad of day-to-day human resources issues and/or employment actions.
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