Today, the U.S. Department of Labor announced a significantly narrowed interpretation of independent contractor status. The Obama administration has made clear that one of its key strategic objectives for 2015 and beyond is to expand the scope and breadth of wage/hour rules applicable under the Fair Labor Standards Act. A first critical step in this regard happened just weeks ago, when the U.S. Department of Labor announced a proposed rule to change the minimum salary required to qualify for “white collar” exemptions under the FLSA. (DOL Proposes Dramatic Increase in Salary Threshold for White Collar Exemption, 6/30/15 E-Alert). The second step happened today, with the issuance of “Administrator’s Interpretation No. 2015-1,” regarding independent contractors.
The theme of Administrator’s Interpretation No. 2015-1 is seemingly familiar: in determining whether a worker is an employee versus an independent contractor, the determining question is “whether the worker is economically dependent on the employer (and thus [an] employee) or is really in business for him or herself (and thus [an] independent contractor).” But it is the application and interpretation of these concepts announced in Interpretation No. 2015-1 that should cause employers to be wary. By combing case law throughout the United States and cherry-picking both cases and quotations within those cases that provide the most expansive interpretation of the law possible, Administrator David Weil has used the vehicle of Interpretation No. 2015-1 to establish a higher threshold to distinguish independent contractors from employees.
Companies that have workers who provide services as independent contractors will want to closely scrutinize the “economic realities” of the business relationship in light of the standards set forth in Administrator’s Interpretation No. 2015-1. Even if the Administrator’s Interpretation does not technically have the force of law, it certainly provides the Agency’s view and enforcement priorities on these issues. If you have questions about Administrator’s Interpretation No. 2015-1, including whether it impacts your existing independent contractor relationships, please contact any of our Labor and Employment or Employment Litigation attorneys.