Benefits And CompensationHR Management Compliance

Employers Urged to Put together for More durable Guidelines on Contractors, Joint Employment


The U.S. Division of Labor’s (DOL) announcement of plans to rescind last guidelines associated to unbiased contractors and joint employers ought to put employers on discover {that a} much less employer-friendly day is coming, attorneys who advise employers say.


In asserting the trouble on March 11, the DOL stated the motion is required as a result of the foundations weaken protections for employees below the Honest Labor Requirements Act (FLSA), which ensures a minimal wage and time beyond regulation pay for employees categorized as staff. Employees categorized as unbiased contractors don’t fall below the FLSA’s protections.

The foundations focused are the Trump administration’s unbiased contractor final rule, which was introduced within the final days of the Trump administration however has not but taken impact, and the joint employer relationships below the FLSA final rule, which took impact on March 16, 2020.

Unbiased Contractor Rule

The Biden administration DOL objects to a brand new “financial actuality” check set out within the Trump administration rule to find out whether or not a employee is an worker or an unbiased contractor below the FLSA.

Paul J. Sweeney, an lawyer with Coughlin & Gerhart, LLP, in Binghamton, New York, says the Trump administration’s business-friendly rule makes use of an “financial actuality check centered across the diploma of management over the work carried out and the employee’s alternative for revenue or loss.”

The present DOL proposal doesn’t present steering on what would exchange the Trump administration rule. “Nonetheless, it’s anticipated that, based mostly on previous marketing campaign guarantees, the Biden DOL will quickly suggest reverting to the ABC check that enables for ‘oblique management,’ which may consequence within the reclassification of many unbiased contractors as staff, making them eligible for time beyond regulation and safety below a state’s wage and hour, antidiscrimination, and security legal guidelines,” Sweeney says.

Below the ABC check, a employee is an worker as a substitute of an unbiased contractor until the hiring entity demonstrates that every one the next situations are happy. The employee should:

  1. Be free from the corporate’s management and course in reference to the efficiency of the work;
  2. Carry out work that’s outdoors the standard course of the hiring entity’s enterprise; and
  3. Be usually engaged in an independently established commerce, occupation, or enterprise of the identical nature as that concerned within the work carried out.

Burton J. Fishman, an lawyer with FortneyScott in Washington, D.C., says employers ought to count on a renewed model of the unbiased contractor routine seen throughout the Obama administration. At a minimal, he says, it will likely be more durable to characterize employees as contractors.

Joint Employment Rule

Fishman says employers ought to count on a renewed model of the Obama administration’s routine on joint employment, which is able to make it more durable for employers to keep away from joint employment relationships. Franchisors can be a specific goal, he says.

The Nationwide Labor Relations Board (NLRB) has laws decoding what constitutes joint employment below the Nationwide Labor Relations Act, and the DOL has laws decoding joint employment below the FLSA. Fishman factors out that the DOL can’t rescind or alter NLRB laws, and they’re “sure to battle” with a brand new rule from the Biden administration’s DOL.

Sweeney says a brand new DOL rule is predicted to “borrow closely” from the joint employer check articulated within the Obama-era NLRB determination Browning-Ferris Industries of California, Inc. That call held a enterprise can be thought-about a joint employer when it displays not simply direct management but additionally oblique management or the flexibility to exert management over staff.

“Enlargement of the joint employer definition would have profound impacts on account of labor’s previous efforts to arrange the transportation and ‘gig’ service sectors,” Sweeney says, including that nationwide franchisors can also count on renewed publicity.

Recommendation for Employers

Sweeney says employers ought to stay versatile however assume a “fast and aggressive return to Obama-era DOL guidelines, steering, and enforcement that favors staff and unions.”

“If a enterprise mannequin was based mostly on a Trump-era DOL rule with respect to using unbiased contractors, now’s the time to rethink these assumptions,” Sweeney says. “Potential joint employers ought to anticipate labor’s organizational efforts and be ready to defend and reply.”

Fishman says no new guidelines will go on the books for some time, however employers ought to put together to take care of a DOL opinion letter or some interim advisory reinstituting a lot of the Obama doctrine.

Fishman advises shoring up contracts with unbiased contractors and clarifying traces of authority with franchisors relating to potential joint employer claims. “Fake it’s 2015,” he says.

Tammy Binford writes and edits information alerts and e-newsletter articles on labor and employment regulation matters for BLR internet and print publications.

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