New Rule May Clear Up ‘Employee vs Contractor’ Test under FLSA, But Not Quite Yet

DOL joint employment

New regulations may soon be proposed to redefine “employee” under federal wage and hour law. In a recent interview with Bloomberg BNA, Secretary of Labor Alex Acosta hinted that the DOL is working on a new regulation that would more definitively speak to who is an employee and who is an independent contractor.

The Fair Labor Standards Act (FLSA), the federal law governing minimum wage and overtime for employees, does not apply to independent contractors. That’s one of the reasons it matters whether someone is classified as an employee of a contractor. Contractors are not entitled to a minimum wage or overtime under federal law.

The FLSA was passed in the 1930s and does not fit the modern gig economy. Secretary Acosta appears committed to modernizing the regulations, which would bring much needed clarity to the question of who is an employee and who is an independent contractor.

In terms of priorities, the DOL appears likely to address the definition of “joint employment” first.

The National Labor Relations Board (NLRB) has initiated formal rulemaking procedures that would result in a new regulation defining joint employment more narrowly under federal labor law.  The DOL has indicated it has plans to follow suit, using rulemaking procedures to seek a new regulation redefining “joint employment” under the FLSA. We can probably expect to see a new proposed FLSA regulation redefining “joint employment” by early 2019.

Based on Secretary Acosta’s comments to Bloomberg BNA, it seems likely that the DOL will turn it’s attention to the Independent Contractor vs Employee conundrum next.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Five Things You Should Know About Joint Employment

Everyone knows that two’s company but three’s a crowd. Except, of course, for Three’s Company with Jack, Janet, and Chrissy (or Cindy or Terri). But how many of you recall that one is the loneliest number that you’ll ever do? Two can be as bad as one. It’s the loneliest number since the number one. I know this because of Three Dog Night.

For musical tastes, the number four can mean Tops, Seasons, or Non Blondes.

But today’s number is FIVE.  Here are Five Things You Should Know About Joint Employment.  (click here to download the PDF.)

Five things You Should Know About Joint employment - page 1 screenshot

Five things You Should Know About Joint employment - page 1 screenshot

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Dept of Labor May Redefine Joint Employment with New Rule, Hints Labor Sec’y

DOL may issue new rule for joint employment

Rules are important for avoiding chaos, as I am reminded daily by one of my favorite twitter accounts, @CrimeADay. That’s where I learned that it’s a federal crime to operate a manned (or unmanned) submersible in national park waters without a permit, thereby ruining my weekend plans. (18 USC 1865 & 36 CFR 3.19). I also learned it is a federal crime to bring a child to a cockfight before his or her 16th birthday, thereby ruining my winter plans for father-daughter bonding activities. (7 USC §2156(a)(2)(B) & 18 USC §49(c).)

The Department of Labor (DOL) thinks rules are important too. Taking a page from the NLRB, which last week issued a Notice of Proposed Rulemaking to redefine “joint employment” under federal labor law, the DOL may be about to follow suit.

In a speech to members of the American Hotel & Lodging Association and the Asian American Hotel Owners Association, Labor Secretary Alex Acosta disclosed that the DOL is working on a proposal to redefine joint employment, presumably under the Fair Labor Standards Act (FLSA), which requires the payment of overtime and a minimum wage.

Joint employment is a hot button issue in the hospitality business, where outsourcing functions like housekeeping is commonplace, and where joint employment can mean the hotel operator is liable for for wage and hour violations by other entities who are supplying labor.

As we have discussed in previous posts, the tests for joint employment are different depending on which law is being applied. That means that even if the NLRB revises the definition of joint employment, that new test would not apply to the FLSA. The DOL would need to write a separate rule that would define joint employment under the FLSA.

According to Acosta, that new rule may soon be on the way.

Until then, remember that it is illegal to take a fishing boat into the danger zone of the Potomac near the Naval Surface Warfare Center while they’re firing guns, aerial bombing, using directed energy, or other hazardous operations, unless the patrol boats let you in. (33 USC §3 & 33 CFR §334.230(a)(2).)

Thanks, @CrimeADay!

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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When Sharks Talk to Bears: Beware of Cross-Agency Communications When Defending Independent Contractor Misclassification Claims

Shark independent contractor misclassification information sharing agreements

According to National Geographic, A 20-year old Colorado man has been bitten by a shark, a bear, and a snake.

Either the animal kingdom hates this guy, or he simply tastes delicious.

Formal information sharing across species is probably unusual, but within government agencies, it’s a thing. Businesses need to be aware of cross-agency information sharing when defending audits and defending agency enforcement actions related to independent contractor misclassification.

Federal and state agencies are particularly focused on sharing information about independent contractor misclassification. The Wage and Hour Division of the DOL has signed information sharing agreements with 27 states. The IRS and the DOL have a Memorandum of Understanding. Tax agencies share information too.

This network of cooperation can spell trouble for businesses undergoing 1099 audits or other agency investigations related to potential independent contractor misclassification.

A small assessment by a state agency may not seem like it’s worth fighting, but beware. Information sharing agreements may cause the assessment to multiply. Adverse findings might also be discoverable in litigation if there’s a civil lawsuit.

In other words, you could be viewed as an easy target, having been found already to be in violation.

A finding of independent contractor misclassification by one state agency may feel like a minor snake bite (I don’t know if there is such a thing as a minor snake bite, but stay with me here).  The snake, however, may share information with the shark, who will tell the bear, and before you know it, you’re that guy in Colorado who’s been bitten by all three.

Ouch!

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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Selling Hot Dogs: Why the DOL Thinks It’s 2008 Again

Dol wage and hour guidance hot dogs

The year 2008 doesn’t seem that long ago. Flo Rida was atop the Billboard charts, No Country for Old Men won the Oscar for Best Picture, and Episode 1 of the 2008 season of Celebrity Apprentice (titled, “Selling Hot Dogs” [yes, really]) featured the judging panel of Donald Trump, Donald Trump Jr., and Ivanka Trump. More on Episode 1 below.

The DOL must be longing for the good old days. Earlier this month, the Wage & Hour Division quietly withdrew its 2014 Fact Sheet advising businesses how to differentiate employees from independent contractors under the FLSA.

Instead, they reposted the 2008 version. In practical terms, there’s probably no real effect. The statute and the regulations that would govern the analysis haven’t changed between 2008 and 2014. But the 2014 version (cached copy here) also included some Obama-DOL commentary, advising that “most workers” are employees under the proper analysis. The old/new 2008 version doesn’t say that.

In any event, what businesses need to know is that courts apply an Economic Realities Test when deciding Who Is My Employee? under the FLSA.

The FLSA is the federal statute requiring non-exempt employees to be paid minimum wage and overtime. It does not apply to independent contractors, which is one reason why misclassification matters. If you thought your worker was properly classified as an independent contractor, then the minimum wage and overtime requirements did not apply. If the worker was misclassified and was really an employee, your business may be held liable for failing to pay minimum wage and overtime.

And for those of you who read all the way to the end of this post hoping to be rewarded with more information about the outcome of Episode 1: Selling Hot Dogs, there’s this from Wikipedia:

Winning team: Hydra, with total sales of $52,286.
Reasons for win: Hydra used their celebrity status to drastically up-sell the hot dogs and Gene Simmons used his contacts to put impressive numbers. Piers Morgan also came up with an idea whereby anyone who paid $100 or more for a hot dog would get to have their picture taken with one of the celebrities, encouraging passers-by to make more substantial donations.

Good job, Piers. You should be proud.

For more information on independent contractor issues and other labor and employment developments to watch in 2018, join me in Cincinnati on March 28 for the 2018 BakerHostetler Master Class on Labor Relations and Employment Law: A Time for Change. Attendance is complimentary, but advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com, and list my name in your RSVP so I can be sure to look for you.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Despite New DOL, Independent Contractor Misclassification and Joint Employment Remain Risky

What effect of withdrawal of DOL memos

In June 2017, the DOL withdrew its Obama-era 2015 and 2016 informal guidance on joint employment and independent contractors. The memos covered federal wage and hour law (FLSA). Eight months later, what effect has that decision made?

Essentially none.

Remember, the 2015 and 2016 memos did not change the law on independent contractor misclassification or joint employment. Rather, the memos were an attempt by the Wage & Hour Administrator, David Weil, to summarize existing law – but with a pro-employee leaning. The memos selectively interpreted court decisions that supported Weil’s view of the world, i.e., that most workers are employees. When Weil left, the DOL said goodbye to his interpretations as well.

But … Continue reading

Free Bird! Dep’t of Labor Rewrites Test for Unpaid Internships

chicks-2965846_1920Lots of things are free in the world of music. There’s Free Bird (Lynyrd Skynyrd), Free Money (Patti Smith), and according to Dire Straits, you can get your money for nothin’ and your chicks for free.

For the most part, though, you’ve got to pay for your interns. Or do you?

On Friday, the DOL announced it was reversing its 2010 guidance on Internship Programs under the Fair Labor Standards Act. Since 2010, the DOL had been taking the position that unpaid interns are employees and must be paid unless each of six factors were present. Here’s the old DOL fact sheet and six-factor test.

The DOL has now changed course, after four U.S. Court of Appeals decisions rejected the DOL’s test as too strict. The DOL now opted for a balancing test. The balancing test asks whether the intern or the business is the “primary beneficiary” of the internship.

The DOL’s new guidance adopts the same balancing test recently favored by the courts.

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