Department of Labor Takes Important Step Towards Regulatory Reform | U.S. Chamber of Commerce

Department of Labor Takes Important Step Towards Regulatory Reform

On June 7, the Department of Labor (DOL) withdrew two Obama-era interpretive bulletins covering employee misclassification and the joint employer standard.  These bulletins had been issued by the Wage and Hour Division at DOL as “guidance” documents rather than formal rulemakings.  Their revocation is a welcome step towards reducing the regulatory burden imposed during the eight years of the Obama administration.

Interpretive Bulletin 2015-1 dealt with misclassification of independent contractors, and said that the Wage and Hour Division would view the Fair Labor Standards Act’s (FLSA) “suffer or permit” language in an extremely broad fashion.  The 15-page document could essentially be boiled down to one point:  DOL felt that there were very few instances where someone was actually an independent contractor as opposed to a bona fide employee.

In the bulletin, the Wage and Hour Division expressed the opinion that limiting the circumstances under which someone could be considered an independent contractor would offer greater legal protections to workers.  But of course, there was another angle as well.  Independent contractors are not eligible to unionize, so reducing the ranks of independent contractors means broadening the pool of individuals who could become union recruits.

Interpretive Bulletin 2016-1 dealt with the application of the FLSA’s joint employer doctrine.  In many ways, this was DOL’s attempt to expand upon the National Labor Relations Board’s (NLRB) campaign to extend the reach of the joint employer standard under the National Labor Relations Act, as laid out in the infamous Browning-Ferris decision.  In the bulletin, the Wage and Hour Division argued that the concept of “vertical” joint employment, as spelled out in the regulations implementing the Migrant and Seasonal Agricultural Worker Protection Act, should also be applied to the regulations implementing the FLSA.  One might have thought that the way to update the FLSA regulations was through the formal regulatory process rather than an interpretive bulletin, but that is now a moot point.

The upshot of Interpretive Bulletin 2016-1 was that a broader universe of businesses faced potential liability as joint employers under the FLSA.  This expansion of joint employer liability was also the goal of the Browning-Ferris decision, as well as the NLRB’s litigation claiming that McDonald’s corporation is a joint employer with its franchisees.  Not surprisingly, this all coincided with the Service Employees International Union’s (SEIU) campaign to unionize fast food workers, which depends heavily on proving joint employment status throughout the fast food industry.

Revocation of the two interpretive bulletins is certainly good news.  However, it does not solve the underlying joint employer problem created by the NLRB.  That will have to await Senate confirmation of two new Republican members on the Board, which can then overturn Browning Ferris.  But until then, we’ll count today’s development as a win.