Trump-Era DOL Withdraws Two Pro-Employee Guidance Memos

On June 7, 2017, the United States Department of Labor rescinded two critical guidance memos issued during the Obama Administration, one conceived to curb the misclassification of employees as independent contractors and another that broadened liability for joint employment. These moves signal a shift toward less vigorous enforcement by the Department and a return to the more traditional standards governing these two legal concepts.

The two guidance memos, formally referred to as Administrator Interpretation Nos. 2016-1 and 2015-1, were specifically designed to increase liability for employers under the Fair Labor Standards Act (“FLSA”), the federal statute that governs payment of minimum wage and overtime. The guidance on joint employment was particularly controversial, making it possible for the DoL to assess joint and several liability on even loosely related entities that did not necessarily have any control over the worker(s) in question.

The impact of these withdrawals should also be felt outside of the context of DoL enforcement, as plaintiffs in private FLSA litigations had been routinely relying on these pro-employee interpretations to support their claims. Though sub-regulatory in nature, the memos did carry persuasive weight with the courts. Following this withdrawal, we should expect to see stabilization in the traditional multifactor tests that determine outcomes in joint employment and independent contractor analysis.

While this is certainly a positive development for the business community, employers should still take caution with respect to all forms of wage and hour compliance. Notably, the states may step in to fill the void in response to any perceived lapse in federal government enforcement.  Wage and hour litigation and compliance will remain at the forefront of employers’ minds for the foreseeable future.