“Alright Alright Alright “

--Matthew McConaughey playing David Wooderson in the movie Dazed and Confused

On October 13, 2022, the U.S. Department of Labor (“DOL”) announced  yet another round of proposed rulemaking on classifying employees and independent contractors. See https://www.dol.gov/newsroom/releases/WHD/WHD20221011-0. I am not going to analyze the rulemaking here, except to say it is old wine in a new bottle. Here is how DOL characterizes the proposed rule:

“This NPRM, Employee or Independent Contractor Classification Under the Fair Labor Standards Act, proposes to:

• Align the Department’s approach with courts’ interpretation of the FLSA and application of the economic reality test;

• Restore the longstanding multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA;

• Ensure that all factors are analyzed without assigning any predetermined weight to any particular factor or set of facts;

• Return to the longstanding interpretation of the factors, including the investment factor, control factor, profit or loss factor, and the integral factor, which considers whether the work is integral to the employer’s business; and

• Rescind the 2021 Independent Contractor Rule.”

The proposed regulations dump the Trump era rules (no surprise) and essentially revert to the Obama era  rules on classifying employees and independent contractors. Suffice it to say, they are intended to make classifying workers as independent contractors harder and riskier for employers. If you want to know more about the proposed rules, here they are:  https://www.federalregister.gov/documents/2022/10/13/2022-21454/employee-or-independent-contractor-classification-under-the-fair-labor-standards-act. Go ahead and have at it. You now have until December 13, 2022 to file any comments, since yesterday DOL agreed to extend the comment period to 61 days. 

I mention the new DOL rulemaking here only as an introduction to the modern hazing ritual which can happen to employers who go to far out on the ledge in classifying workers as independent contractors. The latest example of such hazing is evident from a press release issued by DOL on September 27, 2022, involving a company called U.S. Medical Staffing Inc. out of Philadelphia, PA. https://www.dol.gov/newsroom/releases/whd/whd20220927#:~:text=26%2C%202022%2C%20the%20judgment%20in,willful%20nature%20of%20its%20violations. Read and weep. The Philadelphia  Inquirer  has the consent judgment if you want to see that:  https://www.inquirer.com/news/us-medical-staffing-inc-back-wages-settlement-20220927.html

The 1,756 employee staffing company admitted to falsely claiming to be a “medical registry” where workers were connected with their ultimate employer and thereby conceded misclassifying workers and improperly hiring independent contractors.  To their credit, they apparently paid a straight time rate for all hours worked, including those over 40 hours per week, but failed to pay the extra one-half pay due for the premium overtime work performed. We know this because the employer conceded it and “agreed to the complaint filing and a consent judgment.” Ouch!

Now, here is where the rubber meets the road. If the back and forth of the independent contractor rule isn’t confusing enough, the aggressive nature of the DOL enforcement apparatus is what  is most surprising. In its press release, DOL says it “is prepared to use every tool available…” to secure compliance. I presume this means a sledgehammer too. I say this because the consent judgment here entered into by U.S. Medical Staffing Inc. calls for about $9.3M in back wages and damages. The liability gets there by calculating $4,650,000 in back wages for overtime, an equal amount in liquidated damages, and a civil monetary penalty of $700,000.  The scope of the remedy makes you wonder what was in it for the employer. Perhaps even more back wages were possibly due, or they just couldn’t afford the legal fees to fight it.

Anyway, the clear message being sent by DOL is don’t mess around with them in a dispute about independent contractors.