The Sophisticated Employer Blog

Buckle up, we might be in for a long ride!

As many of you know, the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) issues guidance primarily through Opinion Letters, Ruling Letters, Administrator Interpretations, and Field Assistance Bulletins. The WHD has explained:

An interpretation or ruling issued by the Administrator interpreting the Fair Labor Standards Act (FLSA), the Davis-Bacon Act (DBA), or the Walsh-Healey Public Contracts Act (PCA) is an official ruling or interpretation of the Wage and Hour Division for purposes of the Portal-to-Portal Act. 29 U.S.C. § 259. Such rulings provide a potential good faith reliance defense for actions that may otherwise constitute violations of the FLSA, DBA, or PCA. However, a withdrawn ruling or interpretation, or the withdrawn portion of a ruling or interpretation, may not be relied upon as an official ruling or interpretation of the Administrator or the Wage and Hour Division for any purpose, including under the Portal-to-Portal Act.

What does that mean for your business? Be wary of the term “withdrawn” interpretations and opinions and pay close attention to the DOL’s actions under the new Biden Administration.

To bring you up to speed, on President Biden’s first day in office, his chief of staff, Ronald Klain, asked all federal agencies, including the DOL, to freeze proposed regulations (including those with pending effective dates). Klain explained in a letter that President Biden’s appointees should “have the opportunity to review any new or pending rule[.]”

Since then, while a number of regulations remain frozen, the DOL has taken affirmative steps to withdraw (that scary word we mentioned above!) notable FLSA opinion letters, which may have provided some assurances to businesses in the specific industry areas.  In particular, now withdrawn are:

• FLSA 2021-4: addressed whether a restaurant may institute a tip pool that includes both servers, for whom the employer takes a tip credit, along with hosts, for whom the tip credit is not taken
• FLSA 2021-8: addressed whether certain distributors of a manufacturer’s food products are employees or independent contractors
• FLSA 2021-9: addressed whether requiring tractor-trailer truck drivers to implement safety measures required by law constitutes control by the motor carrier for purposes of their classification as employees or independent contractors and whether certain owner-operators are accurately classified as independent contractors

And, if you thought that the DOL’s Jan. 6, 2021 Final Rule clarifying the standard for employee versus independent contract classification under the FLSA would bring some certainty to your life, think again! Most commentators anticipate that the “regulatory freeze” spells certain doom for the Final Rule, predicting that although it has merely been delayed, it will ultimately be scrapped in its entirety by anticipated Secretary of Labor Marty Walsh.

Where does that leave employers and, more importantly, their businesses? Although we certainly cannot see the future, we expect a few themes to prevail throughout the Biden administration:

• The DOL will aggressively pursue intentional misclassification of employees as independent contractors.
• Regulatory investigation and enforcement actions will increase.
• The Biden administration will push to establish a federal standard for whether a worker is properly classified, turning on an “ABC” test, meaning that the worker is considered an employee unless all three tests are met:
  • the worker is free from the control and direction of the company in connection with the performance of the work, both under the contract for the performance of such work and in fact;
  • the worker performs work that is outside of the “usual course” of the company’s business; and
  • the worker is customarily engaged in an independently established trade, occupation, or business that is of the same nature as the type of work performed for the company.

For now, we urge all businesses to carefully review their independent contractor classifications and be wary of “joint employer” consequences.  Trump-era guidance on these issues, in particular, will be closely scrutinized and may not provide a helpful defense to your decision-making process in 2021 and beyond. 

The members of Plunkett Cooney’s Labor & Employment Law Practice Group are closely monitoring these, and other employment law developments, and will provide regular updates to assist you through these complicated and evolving times!