"Fissured Industry" Homebuilders Feel FLSA Heat

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News that some of the nation's preeminent homebuilders have received information demands from the U.S. Labor Department under the federal Fair Labor Standards Act has drawn a variety of unhappy reactions. But whatever one thinks about the wisdom, appropriateness, timing, or manner of DOL's move, the fact is that the administration has had the construction industry in its FLSA sights for some time now.

As we reported in May 2010, even then DOL had identified construction as being among what it calls "fissured" industries. Officials use this term to refer to business arrangements that in DOL's view cloud the realities of the employment relationship so as to dilute the responsibility for FLSA compliance.

It is therefore likely that one important purpose of DOL's homebuilder initiative is to develop a baseline of industry- and company-specific structural information that is relevant to FLSA compliance. For instance, investigators will no doubt be looking into whether ostensibly-separate corporations, partnerships, sole-proprietorships, and the like serving as different components in or layers of construction projects are truly independent businesses, or whether they are instead so integrated with one another as to be a single, overall enterprise.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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