United States: How Broad Is Broad? New DOL Guidance Determines "Most Workers Are Employees"

Last Updated: July 23 2015
Article by Michael J. Lotito, Elizabeth Parry and Brendan Fitzgerald

In a move that is expected to have far-reaching consequences for employers, the U.S. Department of Labor issued new guidance on the classification of independent contractors as employees under the Fair Labor Standards Act (FLSA). Dr. David Weil, the DOL Wage and Hour Administrator, issued a July 15, 2015 Administrative Interpretation (the "Interpretation") warning employers that the definition of "employ" is very broad under the FLSA.1 The guidance reads as an argument, complete with references to favorable federal court decisions, which will likely be used to support future DOL enforcement actions.

Dr. Weil begins his Interpretation by stating:

[m]isclassification of employees as independent contractors is found in an increasing number of workplaces in the United States, in part reflecting larger restructuring of business organizations. When employers improperly classify employees as independent contractors, the employees may not receive important workplace protections such as the minimum wage, overtime compensation, unemployment insurance, and workers' compensation.

A Presumption of Employment

Under the statute's definition of employment, the DOL would find that most workers qualify as employees, not independent contractors. Dr. Weil asserts the statute defines "employ" broadly as including "to suffer or permit to work," which covers more workers as employees. The legal test is whether the worker is economically dependent on the employer or in business for him or herself. "In light of the broad statutory definition of employ, a worker who is economically dependent on an employer is suffered or permitted to work by the employer."

Dr. Weil directs the DOL to be guided by this broad statutory definition when determining whether a worker is an employee or an independent contractor. The employer's title for the employees is irrelevant in making the determination. Similarly, a 1099 form issued by the employer shows only that the employer does not view the worker as an employee.

The DOL applies six economic realities factors when determining the classification of a worker. Dr. Weil cautions that all the factors must be considered in each case, and no one factor is determinative. According to Dr. Weil, those factors include: whether the worker's work is an integral part of the employer's business, whether the worker has an opportunity for profit or loss, the nature of the worker's investment in the company (investment in tools and equipment is "probably" not enough), a worker's use of business skills and initiative as opposed to technical skills, the permanence or indefiniteness of the relationship, and, finally, the nature and degree of the employer's control.

Dr. Weil asserts that the factor of control would not be determinative. He rejects the common-law control test, which analyzes whether a worker is an employee based on the employer's control over the worker, because the "suffer or permit" standard broadens the scope of employment relationships covered by the FLSA. He notes also that "technological advances and enhanced monitoring mechanisms" allow companies to engage workers without exercising traditional control over their duties and that the control factor should not play an "oversized role" in the analysis of whether a worker is an employee or an independent contractor.

By stating that "most workers are employees under the FLSA's broad definitions," the guidance may be viewed as creating a presumption of employment for workers. The new DOL expansion of the employment relationship means that employers must review all their relationships with independent contractors carefully because the DOL will treat most workers as employees.

We anticipate that this approach to the classification of workers as employees will quickly be used by the DOL in enforcement actions. If and when such enforcement actions are challenged in court, the DOL is expected to use this guidance to support its increasingly broad definition of employee under the FLSA.

Another Example of Sub-Regulatory Guidance v. Rulemaking

Dr. Weil is instituting these changes through an interpretive bulletin rather than going through the official rulemaking process. This avoids the notice-and-comment procedures that normally apply to rulemaking. As noted by the U.S. Supreme Court in Perez v. Mortgage Bankers Association,2 not all rules enacted by an administrative agency must be issued through the notice-and-comment process. The Administrative Procedures Act (APA) notice-and-comment requirement applies only to "substantive rules," not to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice.

Unfortunately, the APA does not define substantive or interpretive rules. In Perez, the Supreme Court acknowledged the debate over the definition of what is a substantive or interpretive rule, but refused to clarify the issue, stating that it would not "wade into" the debate.

The drawback to this process for agencies is that interpretive guidance is not given full Chevron-style3 deference.4 On the other hand, the interpretive "sub-regulatory" process is faster and less transparent as it allows a rule to be issued without any notice or providing stakeholders an opportunity to weigh in. Moreover, while the agency is not entitled to full deference for interpretive rules, some courts give more Chevron-like deference to interpretive rules like the Interpretation.5 Thus, we expect courts will likely defer to the DOL's Interpretation, even though the DOL did not use the substantive rulemaking process.

Will the Interpretation Be Challenged?

The Supreme Court's refusal to define what constitutes an agency's substantive or interpretive rule in Perez has left the door open for such a challenge to the Interpretation. Specifically, it can be argued that the Interpretation is not an interpretive rule exempt from the APA's notice-and-comment procedures, but rather is a substantive rule that should have been issued through the APA's formal notice-and-comment process.

Whether the Interpretation was enacted without the proper notice-and-comment period, or was a valid interpretive rule, will depend upon the DOL's intent in issuing the Interpretation.6 Proving the intent was to issue informally a substantive rule, however, may be difficult. In fact, some federal courts have determined that similar Administrator's Interpretations are interpretive rules and therefore need not comply with the APA's notice-and-comment requirements.7

Employers have been feeling the heat from a number of recent Administration initiatives and proposals. This DOL administrative interpretation comes only a few weeks after its proposed rule to expand FLSA overtime provisions to millions of employees by substantially increasing the salary requirements for the "white collar" exemption from overtime. At the same time, the National Labor Relations Board's Office of the General Counsel is attempting to expand the joint-employer standard to unrelated businesses through complaints it has filed against a franchisor for alleged unfair labor practices of its franchisees, and in its brief in the pending Browning-Ferris case, in which the Board is poised to adopt a much looser standard for determining whether a business is considered a joint employer with another entity for liability purposes under the National Labor Relations Act. The bottom line is that businesses are facing a time of unprecedented uncertainty as the government continues to change the definition of both who is an employer and who is an employee.


1. See Administrator's Interpretation No. 2015-1, United States Department of Labor (July 15, 2015), available at http://www.dol.gov/whd/workers/Misclassification/AI-2015_1.htm.

2. 575 U.S. __ (2015).

3. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Chevron deference requires that courts defer to reasonable interpretations of the statutes they are charged with administering when the plain language of the statute is not otherwise clear, or the statute is reasonably susceptible to more than one interpretation.

4. Christensen v. Harris Cnty., 529 U.S. 576, 587 (2000).

5. See, e.g., National Wildlife Fed'n v. Browner, 127 F.3d 1126 (D.C. Cir. 1997).

6. See, e.g., Am. Min. Cong. v. Mine Safety & Health Admin., 995 F.2d 1106, 1109 (D.C. Cir. 1993).

7. See, e.g., Lewis v. Huntington Nat. Bank, 838 F. Supp. 2d 703 (holding a 2010 interpretation regarding the application of the administrative exemption mortgage loan officers was not a substantive rule that required a notice-and-comment period).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Michael J. Lotito
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions