DOL Withdraws Joint Employer and Independent Contractor Guidance; Takes Steps to Address Persuader, Overtime Rules

June 12, 2017

U.S. Secretary of Labor Alexander Acosta has announced the immediate withdrawal of two Wage and Hour Division Administrator’s Interpretations (“AIs”) on joint employment and independent contractor status issued by the Obama administration. Acosta also indicated that the Department of Labor (DOL) is proposing to rescind the so-called "persuader" rule that would have expanded reporting requirements for employers that use labor-management consultants for certain purposes. Finally, Acosta announced plans to seek public input on the salary thresholds set in the "white collar" overtime rule; specifically, Acosta told a House Appropriations subcommittee that the DOL expects to submit a request for information comment on the controversial updated overtime rule. As Acosta explained in simplified terms on the proposed Labor Department budget, an information request is required under the Administrative Procedure Act before an existing regulation may be withdrawn.

Administrator’s Interpretation No. 2016-01, issued in January 2016, addressed joint employment under the Fair Labor Standards Act (“FLSA”) and Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”) and Administrator’s Interpretation No. 2015-1, issued in July 2015, addressed the definition of independent contractors under the FLSA. The AI regarding joint employment was viewed as an attempt to expand the definition of joint employment and the AI defining independent contractor status as narrowing those classified as independent contractors.

DOL made clear that removal of the two AIs “does not change the legal responsibilities of employers under the Fair Labor Standards Act or Migrant Seasonal Agricultural Worker Protection Act, as reflected in the Department’s long-standing regulations and case law.” But the withdrawal of these two AIs likely signals a policy shift in how DOL will interpret and seek to enforce matters relating to joint employment and independent contractor.

Acosta also signaled during his confirmation hearing that he may re-implement the agency’s practice of issuing opinion letters and, if this practice is reinstated, it is possible DOL may issue opinion letters further addressing joint employment and independent contractor issues.

The Federal Register will publish the DOL's Office of Labor Management Standards' (OLMS) proposal to rescind regulations that would have required employers to file public reports with the DOL when they use consultants (including lawyers) to provide labor relations advice and services that have the purpose of persuading employees regarding union organizing or collective bargaining. The consultants would also have been required to file similar reports containing the details of advice and services provided and the amount of payment received for that advice and service. For decades, these reports have been required only when a consultant providing advice has direct contact with employees. In November 2016, a Texas federal court permanently blocked this "persuader" rule.

In its proposal to rescind the rule, the OLMS explains:

The Department proposes to rescind the Rule to provide the Department with an opportunity to give more consideration to several important effects of the Rule on the regulated parties. Rescission would ensure that any future changes to the Department’s interpretation would reflect additional consideration of possible alternative interpretations of the statute, and could address the concerns that have been raised by reviewing courts. . . . The Department will also consider the potential effects of the Rule on attorneys and employers seeking legal assistance. Rescission would also permit the Department to consider the impact of shifting priorities and resource constraints.

Comments on this proposal are due by August 11, 2017.

Meanwhile, during a June 7 budget hearing, Labor Secretary Acosta indicated that the agency would soon issue a request for information (RFI) on the contentious "white collar" overtime rule that would have re-defined which employees are exempt from the Fair Labor Standards Act's minimum wage and overtime requirements. The rule—which a federal court temporarily enjoined last year—would have more than doubled the minimum salary level for exempt employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). The RFI is considered the first step the Department may take in reworking the rule.

The withdrawal of the sub-regulatory guidance documents and the proposals to take a second look at the persuader and overtime rules shows that the DOL under the current administration is steering the agency in a different direction.