The DOL’s withdrawal of two Administrator’s Interpretations likely is a harbinger of further changes to administrative agency enforcement posture under the new administration.
The first few days of June saw movement by the US Department of Labor (DOL) in the direction of the more business-friendly approach anticipated with the arrival of President Donald Trump’s administration: On Friday, June 2, the DOL notified the US Court of Appeals for the Fifth Circuit that it is in the process of rescinding the currently enjoined “persuader regulations” under the Labor Management Reporting and Disclosure Act. Days later, on June 7, the DOL announced the withdrawal of two DOL “Administrator’s Interpretations” (AIs) issued under the administration of former President Barack Obama. Finally, on the same day, DOL Secretary Alexander Acosta defended proposed DOL budget cuts to US Congress.
The rescinded AIs—a 2015 AI addressing the tests for employee/independent contractor classification and a 2016 AI addressing joint employment liability—deliberately pushed the envelope in favor of expanding liability under the Fair Labor Standards Act (FLSA). The DOL’s independent contractor AI, for example, concluded that “most workers are employees” and advocated for a revised “economic realities test” for employee/contractor status that tipped the scales decidedly in favor of employee status. Later in 2016, the DOL similarly articulated a broad view of joint employer coverage—even in situations where little or no traditional indicia of control exists between two entities.
Both AIs were withdrawn, effective immediately upon the DOL’s June 7 announcement. Although the AIs reflected a departure from the standards that courts traditionally have used in many jurisdictions, the AIs did not have the binding effect of a DOL regulation. Accordingly, the long-term impact of the previously issued AIs depends on whether particular courts found their reasoning persuasive.
In the weeks and months to come, we expect to see further policy changes under the current administration across multiple administrative agencies, and employers should continue to monitor developments. Among other developments, we anticipate that we may see the following:
Despite the withdrawal of the AIs, employers must remain vigilant in identifying and evaluating their independent contractor, staffing agency, and other vendor relationships for potential contractor misclassification risk or joint employment liability. Audits of those relationships followed by revisions to contractor and agency agreements, along with changes in the level of on-the-ground control over nonemployee workers, can materially reduce risk for employers.
Even if the DOL is returning to a more business-friendly analysis of these issues and scaling back enforcement, the plaintiffs’ bar remains active in prosecuting class and collective actions premised on contractor misclassification and joint employment theories. We are seeing weekly (if not daily) filings on these issues—particularly in the financial services, energy, and food industries. Our team is available to assist in limiting the risks of these claims.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Ronald E. Manthey
John S. Battenfeld
 See Motion to Hold Case in Abeyance, National Federation of Independent Business et al. v. Acosta, et al., No. 17-10054 (5th Cir. June 2, 2017). See also Morgan Lewis’s June 2016 LawFlash, Federal Court Issues Nationwide Injunction Against DOL Persuader Rules.
 See Morgan Lewis’s prior LawFlashes discussing the AIs: DOL Issues Aggressive Interpretation of Independent Contractor Classification and DOL Issues Interpretation to Expand Joint-Employer Liability.
 See, e.g., Jackson v. Fed. Nat'l Mortg. Ass'n, 181 F. Supp. 3d 1044, 1054 (N.D. Ga. 2016) (citing the DOL’s joint employer AI with approval) and Hanson v. Trop, Inc., 167 F. Supp. 3d 1324, 1328 (N.D. Ga. 2016) (citing AI in misclassification case, quoting language that “most workers are employees under the FLSA”).
 For further discussion of the litigation over the regulation, see our November 2016 LawFlash, Texas Court Enjoins Most of DOL’s New Overtime Regulations.