The 2016 federal budget: targeting independent contractor misclassification as part of the “fissured workplace”

From Lexology and the Independent Contractor Compliance and Misclassification Legal Blog, Richard J. Reibstein, Lisa B. Petkun, and Andrew J. Rudolph discuss the budget justification issued by the Department of Labor’s Wage and Hour Division.  The first key initiative is addressing the “fissured” workplace, referring to models that “function to obscure, or eliminate entirely, the link between the worker and the business.”  The authors write:

“Page 26 of the budget justification states: “By focusing on priority industries, WHD also increases the likelihood of detecting instances of misclassification. WHD continues to increase its presence in those industries that have evolved business practices to avoid classifying and treating workers as employees, including those in which employees are misclassified as independent contractors. WHD’s priority industries are those industries where the relationship between the workers and the beneficiaries of the labor are more and more attenuated and fissured. Rather than add workers to their permanent payrolls and assume the obligations associated with employment relationships, companies are relying on various contingent workforce solutions to produce goods and services. WHD’s emphasis on conducting investigations [in] priority industries is consistent with the goal of detecting instances of misclassification.”

What else does the Wage and Hour Division have in mind to deter misclassification in the “fissured workplace” in the upcoming fiscal year? The budget justification (at 16) notes that the WHD “aims to prioritize increasing civil monetary penalties for minimum wage and overtime violations under the FLSA [and] FLSA recordkeeping provisions.” The next paragraph notes that such increased penalties will be applied to businesses found to have misclassified employees as independent contractors.

What does this mean for companies that use independent contractors including on-demand workers? If they are in a “priority” industry, they should expect a greater likelihood of a WHD investigation. What are those industries? The Labor Department has not issued a formal list, but public statements, press releases, and congressional testimony by government officials include the following targeted industries:

  • janitorial services,
  • construction,
  • home health care,
  • nursing,
  • staffing,
  • internet services,
  • child care,
  • transportation and trucking,
  • cable companies,
  • security,
  • restaurants,
  • catering services,
  • hotel/motel,
  • ship repair,
  • oil and gas,
  • landscaping and nurseries,
  • car service and limousines,
  • supermarkets….”

Read the full story at The 2016 federal budget: targeting independent contractor misclassification as part of the “fissured workplace”