The United States Department of Labor’s Solicitor of Labor announced on Tuesday that the agency would target seven specific employment-related contract provisions that she believes could discourage workers from exercising their rights under federal workplace laws including coercive contract provisions that require employees to agree that they are independent contractors. The Department of Labor (DOL) brings enforcement actions against employers that attempt to defend their non-compliance by wrongly claiming that workers are independent contractors under the FLSA. In those cases, the Office of the Solicitor (SOL) argues against any claim that the worker’s status as an independent contractor is proven by the “independent contractor agreement” that the worker was required to sign by the employer. The announcement states:
II. Contractual Provisions that Require Employees to Agree that They Are Independent Contractors
Combatting the misclassification of employees as independent contractors is fundamental to the enforcement of most labor laws. This is because under most federal labor laws, only workers who are employees under those laws are entitled to the benefits and protections of the laws. Misclassifying workers as independent contractors, among other harms, denies workers legal benefits and protections that they should receive, such as minimum wage, overtime pay, and health and safety protections. Some employers seek to bolster their misclassification of workers by requiring the misclassified workers to sign agreements claiming that they are independent contractors under the law. Such agreements, however, do not determine the worker’s status as an employee or independent contractor under the law.
The Department’s longstanding position has been that a provision in an agreement stating that a worker is an independent contractor is not relevant to, or at the very least does not determine, whether the worker is an employee or independent contractor under the FLSA. In other words, labeling an employee as an independent contractor does not remove the employee from the FLSA’s protections. As the Department’s Fact Sheet #13 explains, a worker’s classification is determined by the economic realities of the worker’s relationship with the employer. A contractual provision stating that the worker is an independent contractor tends to reflect mere labels rather than the economic realities of the relationship: “agreeing verbally or in writing to be classified as an independent contractor—including by signing an independent contractor agreement—does not make a worker an independent contractor under the FLSA.” Fact Sheet #13.
The Department brings numerous enforcement actions against employers that attempt to defend their non-compliance by wrongly claiming that workers are independent contractors under the FLSA. In those cases, SOL consistently argues against any claim that the worker’s status as an independent contractor is proven by the “independent contractor agreement” that the worker was required to sign by the employer. This is because in a typical misclassification case, the agreement does not reflect any meaningful negotiation between the parties or the workers’ intent to be in business for themselves. For example, in a brief filed in March 2024 with the Fourth Circuit in Su v. Medical Staffing of America, Case Nos. 23-2176 & 23-2284, SOL argued that labels or agreements characterizing a worker as an independent contractor are not determinative and, accordingly, that the independent contractor designation in the employer’s agreements with the nurses was not material to the analysis of whether the nurses are employees or independent contractors under the FLSA.
Similarly, in Occupational Safety and Health Act (OSH Act) cases, SOL has successfully argued that contracts purporting to establish that workers were independent contractors did not detract from the workers’ status as employees. See A.C. Castle Construction Co., Inc. v. Acosta, 882 F.3d 34, 40-41 (1st Cir. 2018); Absolute Roofing & Construction, Inc. v. Sec’y of Labor, 580 Fed. App’x 357, 362 (6th Cir. 2014) (noting that blanket contracts covering all work for an indefinite time are used to skirt the system and avoid the responsibilities of an employer-employee relationship); Speedy Rooter/Capital Plumbing, Inc., 2019 WL 7373712 (OSHRC ALJ Docket No. 17-0274).