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DOL pulls Obama-era wage & hour guidance

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in Compensation and Benefits,Employment Law,Human Resources

The U.S. Department of Labor is pulling the plug on two pieces of informal guidance affecting independent contractor misclassification and joint employment that were issued during the Obama administration.

Secretary of Labor Alex Acosta’s decision to withdraw the guidance, announced June 7, was good news for employers. Neither measure carried the force of law, but they guided the enforcement activities of the DOL’s Wage and Hour Division.

The contractor guidance—Administrator’s Interpretation No. 2015-1, issued in 2015—declared that increasing use of independent contractors instead of employees was a “problematic trend.” To limit the practice, the guidance proposed a broad enforcement test that would have found most workers classified as employees if they were at all economically dependent on a particular organization.

The joint-employer guidance—Administrator’s Interpretation No. 2016-1, issued in 2016—made clear that the DOL viewed organizations that engaged workers through staffing services, temp agencies and subcontracting relationships as jointly liable for wage-and-hour violations. The guidance portended an aggressive enforcement stance and led some companies to reconsider their relationships with outside sources of labor.

Business groups argued that both interpretations would generate more lawsuits.

A DOL statement on withdrawal of the administrator interpretations emphasized that employers are still legally bound by the classification and joint employer provisions of the Fair Labor Standards Act. However, it is clear that by pulling back the guidance, the Trump administration is signaling a more tolerant enforcement scheme.

The move may also mark the revival of DOL opinion letters, which all but disappeared during the Obama administration. During confirmation hearings, Acosta vowed to begin issuing them again as a way to offer unofficial guidance on employment law issues.

What’s next: Expect opinion letters to follow soon articulating the administration’s views on independent contractor classification and joint employer relationships.

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