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Monday 25 September 2017
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Department of Labor Withdraws Guidance on Joint Employment, Misclassification of Employees

On June 7, 2017, the U.S. Department of Labor (DOL) withdrew two Administration Interpretations (AI) that were issued in the past two years.

The first AI, “Joint Employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act,” expanded the “joint employer” doctrine for purposes of the FLSA and Migrant and Seasonal Agricultural Worker Protection Act. In this AI, the DOL provided two analyses to determine whether otherwise separate businesses might be considered joint employers of the same workers.

The second AI, ”The Application of the Fair Labor Standards Act’s ‘Suffer or Permit’ Standard in the Identification of Employees Who Are Misclassified as Independent Contractors,” focused on employer misclassification of employees as independent contractors under the Fair Labor Standards Act (FLSA) and emphasized that the applicable inquiry in determining whether an individual is an “employee” versus an “independent contractor” is whether the individual is “economically dependent” on the employer such that he is an employee.”

While businesses view these withdrawals as a win, the DOL’s announcement did remind employers that while the AI’s were being withdrawn, an employer’s legal responsibilities remain the same. Courts will likely return to the long-standing interpretations of independent contractor and joint-employment principles as determined by courts in each jurisdiction. Absent the AIs, to decide whether entities are joint employers for purposes of the FLSA, the circuit courts will use different tests established through decided cases. Regardless of the differences in these tests, courts have emphasized that the analysis is a flexible one. In the misclassification analysis context, courts apply traditional economic realities test factors to determine whether an individual is an employee under the FLSA. Courts have interpreted the economic realities factors very differently depending on the facts and jurisdiction.