Seyfarth Synopsis: Department of Labor Acting Administrator Bryan Jarrett issued Field Assistance Bulletin No. 2018-4 ("FAB") on July 13, to guide Wage & Hour Division ("WHD") field investigators on how to determine whether home care, nurse, or caregiver registries are employers under the Fair Labor Standards Act. A "registry" is "an entity that typically matches people who need caregiving services with caregivers who provide the services, usually nurses, home health aides, personal care attendants, or home care workers with other titles (collectively, caregivers)."
The notable FAB makes no negative reference to independent contractor status, shedding first light on the Trump administration's approach to independent contractor classification following withdrawal of the DOL's 2015 Administrator's Interpretation last year. The guidance is welcome news to the growing number of companies that seek to match workers with individuals who seek in-home care, as well as to entities outside the healthcare sector that engage non-employed workers.
The DOL recognizes that "a registry that simply facilitates matches between clients and caregivers—even if the registry also provides certain other services, such as payroll services—is not an employer" under the FLSA. The FAB provides, however, "specific examples of common registry business practices which may, when the totality of factors is analyzed, establish the existence of an employment relationship under the FLSA." The FAB reveals a return to DOL's historical approach of reviewing employer status on a "case-by-case" basis, by assessing a totality of circumstances without allowing any single dispositive factor to dictate the outcome.
The FAB highlights factors that the WHD will analyze during investigations, illustrating that registries, as well as other staffing sources, should avoid becoming embroiled in a relationship with the workers, or unduly control their work, and should be aware in particular of the following:
- Performance of basic background checks does not indicate employer status. If the registry actually interviews prospective workers or references, or pre-selects candidates for clients, however, it may be acting as an employer.
- Providing clients or workers with information about typical pay rates in the area "to serve as a benchmark for negotiations" does not indicate employer status. If the registry "designates a set wage range," or "offers tailored direction" concerning what should be charged for specific services, it appears more like an employer.
- Performing certain administrative payroll-related functions, such as preparing tax documents or compiling time records, will not create an employment relationship. Direct payment of registry funds, or independent verification or adjustment of workers' time records, however, may indicate employer status.
- Charging a one-time fee for service, or ongoing fees for performing administrative functions like payroll, do not indicate employer status. However, charging ongoing fees to the client based on the number of hours a worker works, or based on the ongoing relationship, may indicate employer status, because "[t]he [workers'] pay . . . depends, in part, on the amount charged."
Other factors to be analyzed by the DOL include the level of involvement in: hiring and firing; scheduling and assigning work (where the worker may "economically depend on ... preferences and decisions"); controlling the worker's work through trainings, setting policies, or monitoring and evaluating performance; and purchasing equipment and supplies, including licenses and insurance. According to DOL, requiring a worker to obtain an EIN, insurance, or bond in accordance with the law is "not relevant" to the analysis, nor is calling the worker an 'independent contractor' or issuing him a Form 1099.
The FAB's focus exclusively on registries may indicate that the DOL intends to increase its scrutiny of employment relationships in the home health care industry. More broadly, however, the factors that the DOL highlights in this FAB translate across a wide variety of industries, and reveal insight into how the current administration views the employer/independent contractor analysis under the FLSA.
After withdrawing its formal guidance on independent contractor misclassification in June 2017, thereby abandoning the relatively strict "economic realities" test that was widely viewed to favor employer status, the DOL has been relatively silent on the topic — until now. The FAB's return to a "totality of circumstances" analysis portends a more tolerant approach to independent contractor classification, indicating that certain entities, like traditional match-making registries, can liaise between independent workers and their clients without creating an employer relationship. Employers should note, however, that enforcement agencies and courts in various states continue to take a more restrictive view of independent contractor status.
In Dynamex Operations v. Superior Court the California Supreme Court recently held that a defendant disputing employee status must prove each of the three "ABC test" prongs: (A) the worker is free from control and direction of the hirer in connection with performing the work, both under contract and in fact; (B) the worker performs work outside the usual course of the hiring entity's business; and (C) the worker customarily engages in an independently established trade, occupation or business of the same nature as the work performed for the hirer. Employers are well advised in light of the DOL's FAB and such state court decisions to consider reviewing their independent contractor relationships under both state and federal evolving law.
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