On June 7, 2017, U.S. Department of Labor Secretary Alexander Acosta withdrew the 2015 informal guidance on independent contractor misclassification offering a victory to independent contractors across the county. The Administrator’s Interpretation 2015-1 expanded the “economic realities” test used to define the term “employee” for purposes of the Fair Labor Standards Act (“FLSA”), jeopardizing the ability of employers to classify workers as independent contractors.
Secretary Acosta also withdrew the 2016 informal guidance (Administrator’s Interpretation 2016-1) on joint employment that expanded the test for determining the degree of control employers have over an individual employee under the FLSA. This informal guidance changed the previous “direct” control standard to a more ambiguous “indirect” control standard, creating uncertainty for franchisors when structuring franchise programs to avoid joint-employer liability.
As emphasized in the Department’s press release, removal of these administrator interpretations does not change the legal responsibilities of employers under the FLSA. NAR will continue to monitor federal and state action on these issues.
Additionally, the Department of Labor will soon be issuing a Request for Information (RFI) regarding the currently enjoined overtime rule that will likely seek feedback on the economic impact of the last Administration’s proposed increase to the minimum salary level threshold exemption. Recall, in November, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction prohibiting the new rule from going into effect on December 1, 2016. This rule would have doubled the salary threshold (to $47,476) under which non-exempted workers are guaranteed time-and-a-half pay if they work more than 40 hours in a given week. The RFI will provide the Department with evidence to determine how to proceed with both the pending litigation and future rulemakings.