Recently the hot topic in employment law is the widespread misclassification of employees as independent contractors. The courts and the Department of Labor (DOL) have steadily turned up the heat on employers who misclassify independent contractors as employees.  Typically, an independent contractor status is assigned to avoid paying payroll taxes and compliance with federal and state laws that apply to employees such as the minimum wage and overtime pay requirements of the Fair Labor Standards Act (FLSA). The clear trend has been to pursue and punish employers who misclassify their employees, with potentially devastating consequences for those who have been pursued.  

Department of Labor's Initial Interpretation

On July 15, 2015, the DOL, while under the Obama administration, issued an “interpretation” of the law that has been applied to the employee/independent contractor misclassification issue in both judicial and administrative wage and hour cases.  Perhaps not surprisingly, the DOL took a very liberal view (essentially a legal argument) of the subject, analyzing various “tests” used by courts to determine who is and who is not an employee.  It concluded that, overall and as a matter of “economic reality” – that is, if it looks like an employee it probably is an employee – “most workers are employees” under the FLSA.i   

Though not necessarily binding on them, courts will often defer to a government agency’s interpretation of its statutory authority if the statute is silent on the subject and the agency’s interpretation is reasonable.ii  The DOL’s July 15, 2015, interpretation of the FLSA may not be law, but it is helpful or troublesome, depending on which side of the issue you’re on.  

The New Administration's DOL Interpretation

As of June 7, 2017, the landscape changed again.  The new Secretary of Labor appointed by President Trump, Alexander Acosta, has issued a “withdrawal” of the DOL’s July 15, 2015, interpretation of the FLSA, calling it “informal guidance.”iii  The DOL said that “removal of the administrator interpretations does not change the legal responsibilities of employers under the [FLSA],” but, as both a legal and practical matter, you should be aware that its pursuit of employers who misclassify employees as independent contractors has been rolled back.  Add the many new recent appointees to the federal courts to that rollback, and the legal evaluation of “who is an employee” may alter dramatically.      

Whether you are an employer, employee or an independent contractor, you should consult with competent legal counsel to determine your rights or risks in navigating this evolving legal landscape. 

[1] United States Department of Labor Administrator’s Interpretation No. 2015-1 (July 15, 2015), available at http://www.dol.gov/whd/workers/Misclassification/AI-2015_1.html

[2] Oregon Rest. & Lodging Ass’n v. Perez, 816 F.3d 1080, 1089 (9th Cir. 2016)

[3] US  Secretary  of Labor  Withdraws  Joint Employment,  Independent  Contractor Informal Guidance  (June  7,  2017)

https://www.dol.gov/newsroom/releases/opa/opa20170607