It's a double whammy. On the one hand, the Department of Labor's Wage and Hour Division (WHD) is stepping up the heat on employers who misclassify workers as independent contractors. On the other, it plans to stop its longstanding practice of providing guidance to employers seeking clarification on specific wage and hour issues.
Among those that will benefit from the change are contractor compliance firms, law firms covering contingent labor issues and temporary staffing companies. We could see a rash of compliance firms cropping up. But end users of contingent labor will need to do their due diligence before bringing on a third party compliance firm on board.
In the past employers could ask the WHD to clarify intricate points of the law with regard to specific wage and hour issues. While attorneys complained even then that the process was slow, and obtaining an opinion was a frustrating process, at least there was recourse to that. No longer.
Ironically, the WHD may instead soon require employers -- regardless of size and sophistication -- to issue their own written opinion as to whether they are in compliance. "Any employers that seek to exclude workers from the Fair Labor Standards Act's coverage will be required to perform a classification analysis, disclose that analysis to the worker, and retain that analysis to give to WHD enforcement personnel who might request it." That change appears to be in the "proposed rule making" stage.
In announcing that it will change its approach to employer guidance, the WHD said it would issue "administrator's interpretations," general guidance on wage and hour issues that would apply to a broader range of employers rather than the fact-specific opinion letters. It said the interpretations would be issued only when they relate to "an entire industry, category of employees or all employees." According to the DOL, this will be a more efficient use of its resources.
But the lack of clear guidelines for when a worker can be classified as an independent contractor is one example of an area where employers need fact-specific guidance. The law in this case is tricky and often subject to interpretation. By not issuing opinion letters, the WHD just avoids being pinned down on an issue. It's discouraging for companies that have engaged independent contractors successfully. The agency's decision will make hiring contractors that much riskier and more expensive.
Among those that will benefit from the change are contractor compliance firms, law firms covering contingent labor issues and temporary staffing companies. We could see a rash of compliance firms cropping up. But end users of contingent labor will need to do their due diligence before bringing on a third party compliance firm on board.
