DOL has withdrawn its independent contractor guidance

Back in 2015 and 2016, the Department of Labor (“DOL”) issued guidance on independent contractors known as Administrator’s Interpretations (“AI”) Nos. FLSA 2016-1 and FLSA 2015-1. The guidance followed DOL’s “war” on the use of independent contractors in all but the clearest situations. During the Obama- era, the DOL position was that no one was a bona fide independent contractor except those traditional situations where the informal transitory relationship was self-evident. The guidance set up a difficult gamut for “employers” to run before risking the classification of workers as independent contractors, interpreting the current law in a manner calculated to limit the use of such workers.

 With the advent of the Trump Administration, employers awaited a reversal or at least moderating of the DOL stance. Last summer, DOL’s 2015 and 2016 informal guidance on joint employment and independent contractors were withdrawn effective June 7, 2017. Removal of the two administrator interpretations did not change the legal responsibilities of employers under the Fair Labor Standards Act (“FLSA”) or the Migrant and Seasonal Agricultural Worker Protection Act (“MSAWPA”), as reflected in the Department's long-standing regulations and case law. DOL stated at that time that it will continue to fully and fairly enforce all laws within its jurisdiction.

The recent events do not mean that DOL has abandoned the fight against the use of independent contractors. That struggle goes on. DOL Investigators are still challenging employer classification of workers as independent contractors. They are just doing so now on the standard playing field identified by the courts over years of litigation. DOL is no longer pressing it thumb on the scale to skew the outcome of the examination. It likely means that more employers who engaged workers sporadically may be able to utilize independent contractor s for the work.

Government contractors should note that the Service Contract Act (“SCA”) and the Davis-Bacon Act (“DBA”) can apply regardless of contractual relationship. If there is no employment relationship, the prime contractor may still be contractually responsible to assure compliance with the prevailing wage laws. Just because a worker is an independent contractor, that doesn’t mean they are not supposed to be paid prevailing wages and fringe benefits. Of course, no one furnishes fringe benefits to an independent contractor. Thus, government contractors probably need to carve out a separate “cash fringe benefit” payment in their engagement agreements to satisfy any applicable prevailing wage laws.