The Sophisticated Employer Blog

It’s time to provide you with a couple of quick updates from the Department of Labor (DOL). Spoiler alert… this is good news for employers!

First, in January 2016, I wrote an article about the then new DOL guidance concerning joint employer relationships (both “horizontal” and “vertical”). Opinion Letter Fair Labor Standards Act, Administrator’s Interpretation No. 2016-1. The article cautioned that “the mere fact that an employee works for two completely separate companies (as many workers today do) does not make those companies ‘joint employers.’ But, where a joint employment relationship exists, the employers may be held equally responsible for ensuring compliance for all provisions of the FLSA including overtime pay, and the DOL may seek to hold both employers responsible for any violation.”   

While the DOL guidance was a tad confusing, it made clear -- at least to me -- that the DOL intended to stretch the joint employer relationship principle as far as it could so there would be many deep pockets to reach into when a wage violation occurs.

Well, the DOL has now pulled that guidance (and the guidance it had issued concerning independent contractors/employment relationships, Opinion Letter Fair Labor Standards Act, Administrator’s Interpretation No. 2015-1). But a word of caution – the fact that the guidance was pulled does not change the law and employers should remain watchful for potential joint employer relationships. However, pulling the guidance removes the ability to cite to, or rely on, the guidance when there is a wage dispute. Since the guidance was beneficial to employees’ wage claims, this is good news for employers. 

The other noteworthy DOL tidbit involves the application of the fiduciary standard to financial advisors working with ERISA (retirement) plans.  In short, the fiduciary standard would require advice that is in the best interest of the plan and its participants and prevent an advisor from pushing financial products because they are the most lucrative for the advisor.  

The fiduciary standard was to take effect on April 10, 2017, but soon after he took office, President Trump signed an executive order requiring the DOL to take another look at the issue. It did.

The DOL has now concluded that the fiduciary rule should be implemented. The rule was given partial effect on June 9, with full implementation set for Jan. 1, 2018.  While there is a lot of anxiety in the financial services industry, and a lot of false information being spread (like this will take away an investor’s choice), this is absolutely good news. The only products that may become unavailable to investors are those that were not in their best interests because advisors may no longer be able to recommend them.

It’s not often that I am able to report good news from the DOL to employers, so this pleases me. If you need further information about joint employment relationships or the fiduciary rule, please consult with an experienced labor/employment attorney.