While local state and city governments have been working to expand the scope of workplace protections, the Federal government has begun “undoing” some of the aggressive advancements of the Obama Administration.

On June 7, the Department of Labor (DOL) announced in a brief statement that it was withdrawing two significant guidance documents – one with respect to JOINT EMPLOYERS and the other dealing with INDEPENDENT CONTRACTORS.

The Joint Employer Guidance sought to expand the circumstances under which one business could be held responsible for the employment, labor and civil rights liabilities of a separate, but related second business.  The DOL Guidance sought to expand worker protections and the ability to collect remedies from parent corporations (when liability was imposed as a result of the acts of a subsidiary) or franchisors (when liability was imposed as a result of the actions of a franchisee).  The now repealed guidance suggested that such liability could be imposed whenever the related-entity exerted “indirect” control over the labor and employment actions of the another entity even if such power was not exercised, a common claim when faced with parent-subsidiary or franchise agreements.  The DOL now returns to the previous standard that such liability can only be imposed on a business which has “direct control” other the business found to be liable.

DOL also withdrew its guidance on Independent Contractors.  Under the now withdrawn guidance, the DOL had taken the position that “most” independent contractors were really “employees” under the common law.  As a result, the DOL had taken the position that such workers were entitled to minimum wage and time-and-a-half for overtime.  The DOL did not address the impact (if any) the withdrawn guidance would have on a much-publicized Federal-State Worker Misclassification Initiative.  Under that initiative, believing that the misclassification of workers had a substantial negative impact on the collection of state and federal payroll and other taxes, 37 states partnered with DOL to share data and take steps to increase collection efforts.  The future of the initiative seems uncertain.

Given the budgetary pressure faced by state and local government, the DOL’s action may have limited immediate impact on collection efforts.  Yet, manufacturers and other employers have a better chance defending these “misclassification cases” now that the DOL appears to have taken a more traditional view.

The Year of Change continues.

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