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Department of Labor Withdraws Joint Employer Guidance

Monday, June 12, 2017

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U.S. Secretary of Labor Alexander Acosta has announced that the Department of Labor is withdrawing the 2015-16 informal guidance for joint employers and independent contractors.

The Department of Labor stated that, “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 Protection Act, as reflected in the department’s long-standing regulations and case law.”

Obama Administration Interpretation

In the 2015 informal guidance interpretation under former President Barack Obama, the government’s primary focus was subcontractor’s independence and if the subcontractor was, in fact, an independent enterprise. In terms of joint employment, the criteria included if a company was in control of another company, and if the parent company controlled how the secondary treated its employees, creating a broad definition of "joint employment."

This interpretation had multiple implications for how contractors used subcontractors, and companies’ relationships with franchises. The Obama-era administration sought to focus on how independent contractors are used, and to prevent misclassification of employees.

Prior interpretations had focused more on tangible factors, such as if a company set a subcontractor’s hours, made them wear the company uniform and if the subcontractor was provided tools.

Department of Labor, CC-BY-SA 2.0, Flickr

U.S. Secretary of Labor Alexander Acosta (pictured) has announced that the Department of Labor is withdrawing the 2015-16 informal guidance for joint employers and independent contractors.

The National Labor Relations Board (NLRB) enforced the informal interpretation by changing how it ruled joint-employer cases. This complicated matters for employers, given that the new interpretation of “joint employment” was much more vague than previous iterations.

Industry Response

The 2015-16 guidance concerned some industry group, including The Associated General Contractors of America. In a response to the DOL’s recent statement, the AGC said that the Obama administration “took an expansive interpretation of employment and threatened the traditional relationship between contractors and their partners.” This resulted put undue stress on franchises, critics said. During this time, the AGC and its members were concerned that this interpretation would both make compliance more complicated, which would lead to increased cost of operations and additional enforcement efforts that could prove to be unnecessary.

However, the AGC was pleased with the DOL’s recent announcement. The group said that it will continue “to identify opportunities where AGC and the Department of Labor can partner on its mission to keep American workers safe and healthy while stimulating economic growth and creating new high-quality jobs.”

While there is wide industry support for the DOL’s gradual overturn of the prior informal guidance, the construction industry has had consistent issues with the use of independent contractors and misclassifying employees. And while he DOL’s recent announcement is setting things in motion, the courts themselves are not bound by this announcement. Things remain uncertain for employers in this regard.

Company Crackdown

Even with all of the current tumult with the DOL, the agency says it will not hesitate to intervene when it comes to transgressions. According to the DOL’s statement, the department will “continue to enforce all laws within jurisdiction, including Fair Labor Standards Act, and Migrant and Seasonal Agricultural Worker Protection Act.”

In September of 2016, R&R Construction Services (Texas) was charged by the Hawaii Department of Labor and Industrial Relations for allegedly misclassifying up to 65 employees as independent contractors on a $25 million hotel construction project in Waikiki, Hawaii. The agency fined R&R $767,095.

   

Tagged categories: Associated General Contractors (AGC); Commercial contractors; Department of Labor; Laws and litigation; Subcontractors

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