Labor department withdraws formal guidance on employees and contractors

The United States Department of Labor “announced the withdrawal of the U.S. Department of Labor’s 2015 and 2016 informal guidance on joint employment and independent contractors,” in a press release dated June 7, 2017.

This column will focus on the withdrawal of the independent contractor guidance.

The U.S. Department of Labor, referred to as DOL, is the administrative agency that deals with a variety of laws including the Fair Labor Standards Act, which deals with wages. Their mission is to “to foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.”

The DOL had issued a formal guidance on independent contractors in the form of an “administrator’s interpretation” back in July of 2015. The guidance took a broad view on whether an employee was an independent contractor or an employee, looking primarily at whether “the worker is economically dependent on the employer.”

Whether a worker was an employee or independent contractor has been an important topic for many employers. Failure to correctly classify an employee can have serious consequences for an employer including back wages, overtime, back taxes, retirement, benefits and other potential legal damages.

Even though this formal guidance has been withdrawn, employers should still be cautious in their employee classifications as many other state and federal laws may be at play, and incorrect classification could risk exposure for employers.

The DOL also notes the following: “removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department’s long-standing regulations and case law. The department will continue to fully and fairly enforce all laws within its jurisdiction,” including the laws under these acts.

If you have any questions about this or other employment laws, please contact the attorney of your choice.

This story was originally published June 20, 2017 at 2:53 PM with the headline "Labor department withdraws formal guidance on employees and contractors."