What to Take Away from New Secretary of Labor’s Withdrawal of Obama-Era Wage and Hour Interpretations

Hinckley Allen Labor & Employment Alert

June 8, 2017

On June 7, 2017, the newly confirmed United States Secretary of Labor, Alexander Acosta, announced the withdrawal of two Obama-era informal interpretations that had been issued by the Department of Labor’s (DOL) Wage and Hour Division in 2015 and 2016.

The 2015 guidance concerned the misclassification of employees as independent contractors and suggested that most workers should be classified as employees under the Fair Labor Standards Act (FLSA).  The 2016 guidance concerned joint employment and when companies should be considered joint employers under the FLSA and Migrant and Seasonal Agricultural Worker Protection Act (MSAWPA).  The joint employment guidance was issued because of the previous administrator of the Wage and Hour Division’s view that the increased use of various organizational and staffing models—as opposed to traditional employment relationships—raised a multitude of wage and hour compliance issues.

The short, one-paragraph announcement by Secretary Acosta indicated that the removal of these interpretations “does not change the legal responsibilities of employers” under the FLSA or MSAWPA.  While it is true that the removal of these interpretations does not alter the text of the statutes at issue, the removal is still significant for many reasons. Courts grant deference even to the informal interpretations of the Secretary of Labor.  Withdrawing these interpretations has the immediate impact of removing the interpretations from consideration (at least formally) by courts.

Additionally, the relatively quick action on removing these interpretations likely provides some insight into the Trump administration’s views on labor enforcement and compliance issues more broadly.  Secretary Acosta had previously expressed an interest in reintroducing the Wage and Hour “opinion letter” program, which provided individual responses to employers who submitted requests for compliance issues they were facing.  Removing the interpretations can be viewed as taking a step towards reintroducing the program and getting away from the issuance of broad policy pronouncements that had the effect of expanding employer liability.

However, while the withdrawal of these interpretations can generally be viewed as positive for employers, as noted in the press release from Secretary Acosta, the underlying federal legislation remains in place and employers will still face myriad compliance issues on both the federal and state level. For example, in his Senate confirmation hearings, Secretary Acosta was particularly aware of the impact of independent contractor and joint employer issues on the growing “gig economy.”  Secretary Acosta recognized that the DOL needs to adapt to the changing employment dynamics, but also that a lot of changes need to first take place on the state level.  This is a keen observation, as state laws—like the Massachusetts Independent Contractor Law,   M.G.L. c. 149, s. 148B—can have a tremendous impact on an employer’s operations.

The coming months will likely reveal even more about the different directions the new administration and Secretary Acosta will take with respect to wage and hour and other laws.  Employers should be cognizant of the changes and be prepared to respond accordingly.

 


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