United States: DOL Withdraws Guidance On Independent Contractors And Joint Employers: What It Means And What Employers Should Do Now

Last Updated: July 4 2017
Article by Alexander J. Passantino, Richard L. Alfred and Brett C. Bartlett

Most Read Contributor in United States, December 2017

Seyfarth Synopsis: United States Secretary of Labor Alexander Acosta recently withdrew the federal Wage & Hour Division's (WHD) Obama-era guidance documents on independent contractors and joint employment. Those documents, known as Administrator Interpretations, set forth WHD's understanding of the concepts involved in determining "employer" status under the Fair Labor Standards Act. By now, you have likely seen the numerous immediate reactions of lawyers and other commentators published in the wake of the withdrawals. Ours was among them. Now that there has been some time to give deeper contemplation to the withdrawals, this Alert offers a more detailed analysis of what happened and what it means.

What happened last week?

On June 7, 2017, Secretary Acosta announced the withdrawal of the 2015 and 2016 Administrator Interpretations on independent contractors and joint employment. The press release announcing the withdrawal noted that "[r]emoval of the administrator interpretations does not change the legal responsibilities of employers under the [law], as reflected in the department's long-standing regulations and case law. The department will continue to fully and fairly enforce all laws within its jurisdiction . . ."

What were the Administrator Interpretations?

Administrator Interpretations first made an appearance at WHD in 2010. In part, they were replacements for opinion letters, which had been issued for decades in response to specific requests made by the regulated community and could potentially be a complete defense to liability or liquidated damages under the FLSA. In contrast to the fact-specific (and, thus, more helpful to the requestor) analysis provided in opinion letters, the AIs were sweeping statements of policy, intended to "provide meaningful and comprehensive guidance and compliance assistance to the broadest number of employers and employees."

The AIs, however, including those on independent contractors and joint employment, were not regulations and did not go through notice-and-comment rulemaking. As a result, they could be (and can continue to be) withdrawn as easily as they were issued.

The AI on independent contractors was issued in 2015 and represented the first comprehensive statement of WHD's understanding of that issue. There, WHD took the multi-factor "economic realities" test that courts commonly used to interpret the issue and added an extremely expansive reading of the FLSA's "suffer or permit to work" definition of "employ." The end result of that combination was intended to severely restrict the use of independent contractors under federal law and to require businesses to reclassify workers as employees subject to the minimum wage and overtime requirements of the FLSA.

In early 2016, WHD issued an AI on joint employment that took a similarly expansive view of the law. Again, WHD applied the economic realities test and explained the scope of joint employment as being "as broad as possible." This created concern among upper-tier contractors, franchisors, staffing agencies, lenders, and private equity firms, among others, that they could be tagged with joint employer exposure in relationships where there had previously been little risk.

As we noted at the time the AIs were issued, however, the true impact of the AIs would be seen as courts had the opportunity to consider WHD's position and determine whether to accept it. As mere guidance documents issued by WHD (as opposed to regulations, for example), the AIs ultimately were reliant upon acceptance by the courts to have any lasting legacy.

What does the withdrawal of the AIs mean?

Initially, the withdrawal is simply the removal of WHD's positions on these issues. There have been no replacement guidance documents issued in which WHD takes a different position.

The withdrawal may also portend a shift in focus by WHD investigators. The AIs took the most expansive understanding of employment possible, ultimately seeking to interfere with traditional contractual and other business relationships. Eliminating that understanding signals to the investigative staff that they should not spend limited resources focused on those relationships.

Finally, the withdrawal of the AIs means that most courts will not even have the opportunity to consider -- whether formally or informally -- WHD's positions. This does not necessarily mean that courts will reach different decisions; it means only that, when reaching that decision, they will be unable to rely upon WHD's statements. Of course, there may be a handful of cases in which AIs continue to have relevance, and, thus, have some continued influence on the development of the law in this area: for example, any pending cases or cases addressing relationships during the short time when the AIs existed. Such cases, however, are likely to have a fairly limited impact given the AIs' withdrawal.

How does this impact employers?

Although the withdrawal of the AIs is certainly good news for employers, it would be premature to celebrate. Neither the issue of independent contractor misclassification nor the concerns over joint employment have been eliminated. Plaintiffs' attorneys will continue to bring misclassification cases; they also will continue to seek to apply joint employment principles broadly. Unless and until WHD issues replacement guidance, it will be up to the courts to create the parameters, and those parameters are likely to be inconsistent, varying from within the federal judiciary and by applicable state laws. And the parameters need not necessarily be more employer-friendly; in some circumstances, the AI standards may actually have been better for employers. For example, in a recent case, the Fourth Circuit appears to have created a new joint employment test that has the potential to force federal courts within that Circuit to conclude that a joint employment relationship exists in almost any case where two or more businesses derive the benefit of work done by an employee of one of them. That case is unchanged by the AIs' withdrawal.

Also unaffected by the withdrawal of the AIs are the myriad standards for independent contractor and joint employment in other federal, state, and local contexts. For example, the EEOC and NLRB have had a significant focus on these issues in the past several years. Although it is certainly possible that (once fully constituted) the EEOC and NLRB, may follow DOL's lead and dial back their focus, but there is no guarantee that they will do so. Unless and until that happens, employers should continue to comply with those requirements.

In addition, many state governments have had intense focus on the issues, with state legislatures passing laws that, for example, more strictly apply independent contractor standards. State agencies enforcing these laws have taken more aggressive stances on their application and have sought increased penalties for classifying workers as independent contractors. For example, in Massachusetts, the requirements for independent contractor status are particularly restrictive and employers are subject to treble damages for violations; in California, where the standards are similarly restrictive, willful violations are subject to statutory penalties of $5,000 to $15,000; and, in New York City, repeat violations could result in penalties (in addition to damages) up to $25,000. In the potential absence of federal focus on these issues, other state and local governments may follow suit, using the withdrawal as an opportunity to "fill the gap" and pursue a more expansive understanding of the employment relationship, with more consequential penalties for failing to comply with that understanding.

As a result, employers cannot take their eyes off of these issues. They should continue to review independent contractor relationships, to analyze agreements with third parties, and to determine whether they are exercising "too much" control over the employees of other entities, such as subcontractors, franchisees, and down-stream companies with whom they do business.

Finally, employers should continue to monitor development on these issues in federal, state, and local legislatures, governing bodies, and regulatory agencies. Particularly at the state and local level, independent contractor and joint employment issues will continue to be front and center.

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.

Brett C. Bartlett
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