Employment Alert: "Joint Employer and Independent Contractor Classifications"

On Wednesday, June 7, 2017, the U.S. Department of Labor (“DOL”) withdrew two administrator interpretations published during the Obama Administration that had significantly narrowed the definition of independent contractor and broadened the scope of joint employment. DOL's News Release.

The 2015 and 2016 interpretations that have now been withdrawn deemphasized the long-standing practice of assessing an employer’s control over a worker to determine whether an individual should be classified as an employee.  Instead, the informal guidance promoted an economic realities test that analyzed the worker’s economic dependence on the employer.  In application, under the economic realities test, few workers could properly be classified as independent contractors and a wide spectrum of employers were at risk of being deemed joint employers. 

The 2016 interpretation created an entirely new category of joint employment—“vertical employment”—which exists when a worker is economically dependent on an intermediary employer (such as a staffing agency or subcontractor) and another employer who engages the intermediary to provide workers.  The guidance aligned with the National Labor Relations Board’s (“NLRB”) August 2015 decision in Browning Ferris Industries of California, Inc., which upheld a broad definition of “joint employment.” The Browning Ferris Industries case is pending on appeal before the U.S. Circuit Court of Appeals for the District of Columbia.

The DOL’s decision to withdraw the interpretations has been viewed as a victory for employers.  The decision signals that the current administration intends to loosen the standard such that fewer employers are subject to joint employment liability and more workers can be properly classified as independent contractors.  Nonetheless, for now, the NLRB’s decision in Browning Ferris Industries remains the current law, and employers should stay prudent in their employment practices while these issues remain unsettled.