Bloomberg: DOL Changes Course on Worker Classification, Joint Employers

June 7, 2017

The Labor Department scrapped a pair of Obama-era informal guidance documents, taking the first steps in what could be a new approach to hot-button worker classification and joint employer liability debates.

The withdrawn administrator interpretations (AIs) clarified a broad definition of joint employment and independent contractor misclassification, particularly in the low-wage industries that President Barack Obama’s DOL frequently targeted for wage-and-hour investigations.

The effect of the 2015 and 2016 interpretations on public and private wage-and-hour enforcement is still up for debate. But by withdrawing them, recently confirmed Labor Secretary Alexander Acosta sent a message to GOP lawmakers and the business community that he’s listening to their concerns about the prior president’s labor agenda.

The DOL, in a June 7 statement announcing the withdrawal, cautioned that employers are still expected to comply with the law.

“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 Protections Act,” the department said. A DOL spokeswoman declined to provide further comment on why the letters were withdrawn or whether the documents would be replaced with new Wage and Hour Division guidance.

AIs are intended to apply laws and regulations to hot topics affecting a broad range of workers and employers while also encouraging judges and state labor agencies to follow suit.

The controversial AIs were part of what was considered an important, albeit rarely used, compliance tool at Obama’s WHD under the leadership of Administrator David Weil.

Their withdrawal signals that the DOL is likely to walk back its earlier stance that “most workers” should be treated as employees rather than independent contractors for minimum wage and overtime purposes. Workers who are classified as independent contractors, including many in the burgeoning sharing economy, aren’t covered by the federal minimum wage and overtime laws that the department enforces.

The department under Acosta is also likely to take a more limited approach to joint employer liability issues for businesses in franchise, staffing, and other contract arrangements. Supporters of expanded joint employer liability say the Obama administration’s approach helped ensure that the employers that actually set the terms and conditions on the job are accountable to workers.

Private Bar Can Still Act

But because the interpretations are subregulatory, Acosta could unwind them without taking the administrative steps that revisiting Obama rules would require. The ease with which he could withdraw the AIs made the move a likely outcome the moment Donald Trump was elected president.

Obama’s Solicitor of Labor Patricia Smith earlier this year described the possible withdrawal of the interpretations as primarily symbolic. “If the Department doesn’t take those positions any more, the private bar will,” Smith told Bloomberg News in February.

“If there’s a court case in the 11th Circuit that says, ‘This is how you determine employment,’ unless you get that court case overturned, the Department of Labor’s going to have to define employment that way,” Smith added.

Smith’s point speaks to the prior administration’s position that AIs restated established law, without changing the rules of the game.

GOP, Business Support Turn of Events

Businesses have criticized both interpretation letters as part of what they called the Obama administration’s heavy-handed approach to wage-and-hour enforcement. The employer community urged Acosta to withdraw the guidance shortly after he was confirmed in late April.

Trade groups including the International Franchise Association, National Restaurant Association (NRA) and U.S. Chamber of Commerce all issued statements applauding Acosta for the withdrawal. House Education and the Workforce Committee Chairwoman Virginia Foxx (R-N.C.) chimed in with support as well.

The NRA, echoing a common sentiment among employer associations, was hopeful that Acosta’s move portends further action to restore a pre-Obama interpretation of when a company can be deemed jointly liable with affiliated businesses for wage and safety violations, collective bargaining, or class actions.

“This is a positive step in the right direction. However, we will continue to work with the Department of Labor as well as Congress on the previous administration’s controversial joint employer standard,” Shannon Meade, director of labor and Workforce Policy at the NRA, said in a statement. The National Labor Relations Board has a separate interpretation of joint employment that is under a multipronged attack from the right and the business community.

Some critics, including GOP lawmakers, said the AIs were attempts to sidestep the regulatory process because they were actually rules. However, Obama administration officials argued that the letters merely cleared up misconceptions on established law to improve compliance on subjects affecting a broad range of employers and workers.

These interpretations served as a possible road map for government investigators and they’ve been increasingly cited in private litigation. But they were both published in just the past two years, so their exact influence is unknown. The AIs are given judicial deference, although the level of influence depended on the judge.

Return to Opinion Letters?

Starting early in Obama’s first term, the publication of AIs replaced the previous practice of issuing more narrowly tailored opinion letters in response to questions from individual employers, trade groups, or, in far less frequent cases, unions.

The letters were highly coveted because they could be cited in private litigation as a defense.

The removal of the interpretations may mark the first step to a formal return to WHD opinion letters. This is considered a likely shift as the agency changes priorities to focus more on employer compliance assistance.

The Obama DOL said it considered opinion letters a drain on resources and had switched to issuing AIs in an effort to affect a wider range of workplaces by removing any misconceptions about how they should interpret the FLSA and other laws.

 

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