DOL Withdraws Guidance Documents on Joint Employment and Independent Contractor Status

By Fiona W. Ong - Shawe & Rosenthal LLP

June 7, 2017

Employers rejoice! The Trump administration continues to roll back the anti-business positions asserted by various federal agencies under the Obama administration, as most recently evidenced by the Department of Labor’s June 7, 2017 withdrawal of two Administrator Interpretations on joint employment and independent contractor status.

In 2015, the DOL issued an Administrator Interpretation on its test for independent contractor status under the Fair Labor Standards Act. As discussed in our July 2015 E-Update, and a blog post, The DOL Issues Guidance on Independent Contractors, the DOL articulated a broad, six factor “economic realities” test  to determine whether an individual is an employee, who would thereby be covered by the FLSA, or an independent contractor. Notably (and unsurprisingly), the (pro-employee) Obama DOL stated that, under this analysis, most individuals are employees.

The following year, the DOL issued another AI on the topic of joint employment, which we discussed in our January 2016 E-Update. This AI stated that, as with its independent contractor analysis, the DOL uses an “economic realities” test to assess joint employment status. It then set forth two types of joint employment relationships: horizontal and vertical. The AI explained that horizontal joint employment exists where an employee has two (or more) technically separate but related or associated employers, and set forth a non-exhaustive list of nine factors that should be considered in evaluating the relationship. The AI also explained that vertical joint employment exists where an intermediary employer provides workers to another, potential joint employer and the workers are “economically dependent” on both employers. The AI provided a non-exhaustive list of seven factors to be used in this determination.

By withdrawing these two AIs, the DOL is signaling a retreat from the strict standards that these AIs sought to impose on the independent contractor and joint employment determinations, which blatantly favored the finding of employee status. Employers generally may be encouraged that the Trump DOL will take a more realistic and balanced view of these analyses.

Employers in the Fourth Circuit (which covers Maryland, Virginia, West Virginia, and the Carolinas), however, should be (sadly) aware that they are subject to an even broader standard for determining joint employer status under the FLSA than that under the DOL’s AI. As we reported in our January 2015 E-Update, the U.S. Court of Appeals for the Fourth Circuit announced a new and expansive joint employment status test in Salinas v. Commercial Interiors, Inc., under which, in our opinion, nearly all contractor or staffing agency relationships would be found to constitute joint employment.