DOL’s Recent Administrator’s Interpretation Asserts “Most Workers Are Employees” Under the FLSA
In recent years, the Department of Labor’s (DOL) Wage and Hour division has focused much of its enforcement efforts at workers who have been misclassified as independent contractors rather than employees entitled to protections provided by the Fair Labor Standards Act (“FLSA”). Indeed, misclassification continues to be the single most investigated issue by the DOL, and since 2011, the agency has signed agreements with wage and hour state enforcement agencies in Colorado, California, Louisiana, Iowa, New York, Alabama, Florida, Wisconsin, Rhode Island, Kentucky, and most recently Idaho, as well as a Memoradum of Understanding with the Internal Revenue Service, all aimed at reducing such misclassification. Given this, the issuance of the DOL’s recent Administrative Interpretation (“AI”) on the subject came as little surprise.
The DOL’s July 15, 2015 AI emphasizes that the FLSA’s definition of “employ” is “defined with ‘striking breadth’” and that the “Supreme Court ‘has consistently constructed the [FLSA] liberally to apply to the furthest reaches consistent with congressional direction.’” While the agency recognizes that “independent contracting relationships can be advantageous for workers and businesses,” it cautions that “[m]isclassification also results in lower tax revenues for government and an uneven playing field for employers who properly classify their workers,” in addition to denial of “important workplace protections” for those workers who have been misclassified. The agency warns that “most workers are employees under the FLSA’s broad definitions” and that “[m]isclassification of employees as independent contractors is found in an increasing number of workplaces in the United States.”
In the AI, the agency then goes on to explain and provide analysis with respect to each of its “economic realities factors,” which courts have used in determining whether a worker is properly classified as an independent contractor. The DOL’s analysis on each of these factors includes citations to case law from across the country, as well as examples from the construction, nursing, publishing, and housekeeping industries. The DOL emphasizes that the “ultimate inquiry under the FLSA is whether the worker is economically dependent on the employer or truly in business for him or herself.
As mentioned above, nothing in this AI is particularly surprising. It is just another reminder of the DOL’s laser focus on the issue of independent contractor misclassification. The AI does provide some concrete examples that employers can use as a litmus test in determining the validity of their own decisions about which of their workers are to be treated as independent contractors.