Labor Dep’t. Scraps Obama-Era Guidance on “Joint Employment”

The US Department of Labor (DOL) announced today the withdrawal of Obama-era guidance that paved the way for temporary workers or independent contractors to be considered “joint employees” of the contracting employer.

As reported in our post You Could Be Liable for a Contractor’s Overtime, the DOL issued informal administrative interpretations in 2015 and 2016 stating that a company may be a “joint employer” of its independent contractors and temporary workers if they met certain thresholds of management or control over such individuals.

For example, if these thresholds were met between a contracting employer and a staffing company providing temporary workers, both companies would be jointly liable for any overtime premium owed to a worker who exceeded 40 hours in a given work week.

DOL Says Never Mind

But now, effective immediately, these administrative interpretations have been retracted. In announcing this change, the DOL emphasized their view that they were not “chang[ing] the legal responsibilities of employers under the [FLSA], as reflected in the Department’s long-standing regulations and case law.”  The implicit message is that the Obama administration changed the law and that the current DOL is simply bringing things back to where they were.

Withdrawal of the Obama-era guidance on joint employment will make it more difficult for temporary workers or independent contractors to claim that they are “employees” of their client company. Likewise, recent attempts to hold franchisors like McDonalds to be joint employers with their franchisees will also be more challenging.

Bottom Line

After just six months into the new administration, it appears that more Obama-era rules may be subject to the chopping block in the near future.

Bear in mind, however, that this is just a DOL matter.  It is still good practice to be wary of establishing joint employment relationships under the standards imposed by other government bodies such as the IRS and Minnesota’s workers compensation department.  Therefore, Employers utilizing independent contractors should still insure that they have effective written agreements disclaiming an employment relationship, spelling out the contractor’s duty to provide workers compensation coverage and any other applicable obligations, and outlining the areas in which the contractor has control over working conditions and administrative functions.