On Wednesday, June 7, 2017, Secretary of Labor Alexander Acosta announced that the U.S. Department of Labor (DOL) would be withdrawing two Administrative Interpretations issued during the previous administration regarding joint employers and independent contractors. While the DOL’s withdrawal signals its departure from the Obama administration’s liberal interpretation of these two issues, employers need to recognize that this action does not change their actual legal responsibilities to employees.
The two prior interpretations provided guidance to employers on how the DOL would evaluate the level of control that employers exercise over employees and independent contractors, and summarized the agency’s tests for determining whether sufficient control existed to demonstrate employer liability under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act. These interpretations advocated for an expansive definition of employment relationships and indicated that the DOL would make presumptive determinations about whether companies are employers under the two Acts.
However, it is important for employers to recognize that the law itself has not changed and that Acosta’s announcement does not relieve employers of their statutory obligations to employees. Federal courts will continue to apply the same employment standards they have previously and state and local laws remain unaffected. Moreover, the National Labor Relations Board, the Federal body responsible for enforcing federal labor law, will continue to apply an expansive definition of joint employment. As before, companies should continue to follow best practices to ensure compliance with federal and state laws, and to ensure you don’t end up on the hook for another company’s violations. Following are some tips to help you stay on the right side of the law.
- When subcontracting out work, be mindful of the control you exercise over a subcontractor’s employees. Control over hiring and firing determinations, disciplinary action, payroll, granting vacation requests, or other terms and conditions of employment may create an employment relationship between you and the subcontractor’s employees. If this is the case, pay special attention that the subcontractor is in compliance with wage and hour laws because if not, you could be held liable as a joint employer.
- Remember that courts may find an employment relationship whether you own an employee’s direct employer as a subsidiary or if you are simply sufficiently associated with a direct employer. Overlapping offices, operations, and customers or clients could lead to a finding that you are a joint employer.
- Before engaging with independent contractors, familiarize yourself with the differences between independent contractors and employees. Just because someone calls themselves an independent contractor, because someone works from home, or because it’s a common industry practice to use contractors does not mean that individuals are not employees.
- An incorrect determination that an employee is an independent contractor or that you are not responsible for another company’s employees can lead to substantial damages and/or penalties.
If you have questions about whether your current employment practices are in compliance with relevant labor and employment laws, you should contact an attorney.
About the author: Sarah Nash is an associate with PilieroMazza in the Labor and Employment Group. She may be reached at [email protected].