From JDSupra, Richard Reibstein discusses the back and forth approaches to the misclassification of workers by the United States Department of Labor in recent years including a recent post in which the Department recognizes “the important role legitimate independent contractors play in our economy.” Richard writes:
The U.S. Labor Department has been playing musical chairs in its approach to classifying workers as independent contractors or employees under the federal Fair Labor Standards Act since the middle of the Obama Administration. But the regulatory initiatives by the Obama, Trump, and Biden administrations have little impact on the legal landscape of independent contractor law. In 2015, when the Administrator of the Wage and Hour Division of the Obama Administration’s Labor Department issued an Administrator’s Interpretation, our blog post was titled: “The Labor Department’s New Guidance on Independent Contractor Misclassification Is Nothing New Legally.” Five years later, when the Labor Department under the Trump Administration issued a proposed regulation that was finalized just before the onset of the Biden Administration, our blog post bore the heading “Much Ado About (Almost) Nothing.” And when the Biden Administration issued a rule withdrawing the prior administration’s regulation, our blog post was called “Independent Contractor Misclassification Ping Pong.” Last month, the Labor Department notified the public that it plans to issue yet another regulation on this issue. When issued, it too will have little legal significance because the U.S. Department of Labor does not decide FLSA cases, only the courts do. Indeed, the federal courts have been doing so for decades, developing their own versions of the so-called “economic realities test” for independent contractor status, based on a standard first enunciated by the U.S. Supreme Court many years ago.
While the Labor Department has no final say about who is and who is not an independent contractor or employee under the FLSA, each administration’s articulation of a (slightly) different classification test has received outsized attention in mainstream media and in business and legal publications. Last month, the Labor Department conducted two public forums, one designed to capture the views of businesses and the other to hear the thoughts of workers, as a prelude to the Department formulating a new regulation on independent contractor classification. Most informative about the announcement of the forums in a June 3 blog post by the Acting Wage and Hour Administrator was the acknowledgment that, although there are businesses that have misclassified employees as independent contractors, the Labor Department nonetheless “recognize[s] the important role legitimate independent contractors play in our economy.” This recognition should prompt businesses to enhance their independent contractor compliance to better demonstrate that their relationships with independent contractors are indeed legitimate. Many companies do that using a process such as IC Diagnostics (TM), a customized and sustainable way to structure, document, and implement independent contractor relationships consistent with each company’s business strategy.