Joint Employment and Independent Contractor Classifications Withdrawn by DOL

On June 7, 2017 DOL announced the withdrawal of its 2015 and 2016 informal guidance on joint employment and independent contractors. Both interpretations represented moves during the Obama Administration to address what it perceived as abuses by employers using contractors or claiming contractor status to avoid certain employer responsibilities and instances where employers could unwittingly become liable under an expansive interpretation of joint employment. 

In January 2016, DOL changed its interpretation of the joint employer standard, which focuses on contract employees shared by more than one employer. At issue was who is liable for the worker’s wages and benefits under Fair Labor Standards Act. Historically, the joint employer standard only applied to horizontal joint employment relationships where a company had direct control over the work and employment conditions.

The intent of the joint employer standard reinterpretation was to expand the number of companies classified as employers, thereby subjecting more companies to wage and hour violations. By withdrawing the reinterpretation, DOL will focus on direct control in applying the joint employer standard and subject fewer companies to wage and hour violations.

In July 2015, DOL issued a new interpretation concerning whether a worker should be classified as an independent contractor or an employee. In its announcement, DOL reiterated its use of the six-part economic realities test in determining whether a worker is an employee or independent contractor, but also stated that most workers should be classified as employees under FLSA. Under the six-part test, the six factors are supposed to be looked at collectively in making a determination regarding independent contractor status.

Under the more aggressive interpretation in 2015, DOL rejected the long-held emphasis by courts on employer control in favor of determining whether the worker was economically dependent on the employer. By rescinding this more aggressive interpretation, DOL is returning to its traditional focus on employer control in determining independent contractor status.