Who Are Misclassified as Independent Contractors.”
This document pronounced misclassification as a
“problematic trend” and sought to limit the number
of businesses using independent contractors. In it, the
Department of Labor said that the test to determine
whether an individual was misclassified should be applied in a “broad” manner, and, once applied, most individuals would be considered employees. The agency
essentially boiled the issue down to a single question:
is the worker in business for himself (which leads to an
independent contractor finding) or economically dependent on the business (which makes him an employee)?
The problem with such a test was that, rather than providing the certainty that the law should provide and that
a business deserves, it left a lingering question about
possible misclassification issues. Under the 2015 test, a
business could take all of the typical steps necessary to
readily safeguard contractor status – drafting a comprehensive and easy-to-understand contractor agreement,
permitting workers the freedom to work for competitors, allowing them to choose their own schedules,
requiring them to make a substantial investment in their
own enterprise, forcing them to use their own tools and
equipment, etc. – but the USDOL could nevertheless
determine that the worker was economically dependent
on that business and, therefore, considered an employee. If the worker chose to cast his lot fully with that one
company and not take advantage of the freedom that a
contracting model provides, an overzealous court could
have followed the Department of Labor’s Interpretation to its logical extreme and found the worker to have
been an employee.
This was an especially thorny problem for businesses in
the nascent “gig” or “sharing” economy, where workers
are paired with consumers via a digital marketplace
(think your latest ride-sharing trip, or food delivery, or
handyman experience). These workers are most often
classified by businesses as independent contractors, but
a steady stream of class action litigation filed against
these on-demand companies has led to apprehension
about whether this classification system is accurate.
Both Uber and Lyft have attempted to settle such claims
against them for hundreds of millions of dollars, demonstrating the costly nature of misclassification claims.
Although some states have stepped into the breach to
do what they can to protect the classification status of
ride-sharing drivers so long as the businesses for which
they perform work permit them a certain modicum of
freedom (both Florida and Texas have passed state laws
in the last several weeks), the overwhelming number of
businesses in the sharing economy face the concern that
their business may be susceptible to a misclassification
claim. This is especially true given that state laws would
not necessarily insulate them from federal FLSA claims.
While today’s development does not eliminate all such
concerns, it is certainly a step in the right direction. No
longer will government investigators, judges, or plaintiffs’ attorneys be able to rely on the USDOL’s 2015
classification guidance for support when advancing
claims against sharing economy companies and other
Joint Employer Guidance Brushed Aside
Secretary Perez took another step to hamstring employers in January 2016 when the USDOL issued Administrator’s Interpretation No. 2016-1, subtitled “Joint
employment under the Fair Labor Standards Act and
Migrant and Seasonal Agricultural Worker Protection
Act.” Organizations engaged in multi-participant arrangements – such as outside-party management, joint
ventures, staffing services, employee leasing, temporary help, subcontracting, certain kinds of “job sharing,” and dedicated vendors or suppliers – were put on
notice that the USDOL wanted to put as many of them
as possible on the hook for any alleged wage and hour
violations filed under the FLSA or the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The
DAWN continued from page 1 FSVP continued from page 22
If importers determine that an audit is the appropriate
verification activity, they must make sure the audit
meets the requirements in the rule, namely that the
audit considers the FDA food safety requirements that
apply, and that the auditor is qualified to perform the
audit (e.g., education, training, experience). These
requirements are designed to be flexible and there
are a variety of audits currently being used within the
industry that may meet our requirements.
We are aware of several organizations, such as the
USDA’s Agricultural Marketing Service (AMS) and
the Global Food Safety Initiative (GFSI), that are
working to ensure their audits meet our requirements.
We have stated our intention to build on current private and public audit activity and we applaud the efforts of external organizations to align their standards
and practices with FDA food safety requirements.
That said, the agency would encourage all importers
to ensure the scope of the audits they currently use
consider all applicable FDA food safety regulations,
including the PC and produce safety rules if they apply to their supplier. In addition, they should ensure
that the auditors performing the audits are qualified
auditors in accordance with the FSVP rule.
Q: For importers whose compliance date hasn’t ar-
rived yet, what should they be doing to prepare for
I mentioned earlier that all importers subject to the
FSVP rule should obtain a DUNS number. I would
urge importers subject to the rule to obtain a DUNS
number prior to their compliance date if they do not
already have one.
Of course, they should also be working to ensure that
they know the requirements of the FSVP rule, beginning to put together their FSVPs, and, if appropriate, conducting verification activities prior to their
compliance dates. There is a lot of information on our
website that can help importers comply, including fact
sheets and other materials. Questions about how the
rule may apply to you can also be submitted to our
Technical Assistance Network (TAN) for a response
by experts here at FDA. They can find information
about the network online, and I would encourage them
to be very specific about their circumstances when
they submit questions to help the FDA experts give
them the best advice on how the rule applies to them.
There is also training for importers available through
the Food Safety Preventive Controls Alliance (
FSP-CA) designed to provide the knowledge required to
meet the FSVP requirements. The training is also
available to others who have an interest in ensuring
that FSVP requirements are met, such as brokers,
foreign suppliers, and representatives of foreign
Q: We’ve talked a lot about what importers need to
know to be in compliance, but what about the big
picture: How does FSVP protect our food supply?
FSVP is a significant new tool in our import tool-kit. We have many tools that help protect consumers
from unsafe imported products. Some of those tools
have been around for a while, like examinations and
sampling at ports of entry and foreign inspections,
but the volume of food imports and the logistics and
cost of foreign inspections require something more to
ensure the safety of imported food. FSVP allows us to
hold importers accountable for ensuring the products
they bring into the United States are held to the same
safety standards as domestically produced food. That’s
a significant change to the way we currently do business, and complements our other import tools. FSVP
provides us a way to get information about foreign
suppliers to help ensure that they are meeting U.S.
safety requirements and, thus, keeping food safe for
guidance portended both an expansive interpretation of
the principles governing the standards and a new and
aggressive agency enforcement posture.
Under the FLSA and MSPA, a worker can be employed by two or more employers simultaneously.
In such a situation, each joint employer would be
deemed to share the same compliance responsibility
for each jointly employed worker, potentially on the
hook for wage and hour liability and other claims.
The 2016 informal guidance focused on two joint-employment scenarios: “horizontal” and “vertical”
The guidance announced that “horizontal” joint
employment relationships could exist when two or
more employers separately employ a worker, but the
employers are deemed to share a sufficiently close
association or relationship with respect to the employee’s work. It then provided a series of relevant
considerations that should be taken into account by
government investigators, courts, and others when
making a joint employment determination, including
whether and to what extent there is common ownership, overlapping officers, directors, executives, or
managers; shared or intermingled operational control;
shared clients or customers; supervisory authority
over employees; or relevant written agreements between the entities.
It then described “vertical” joint employment relationships, which, according to the USDOL, exist when
one company contracts for workers who are directly
employed by what the agency calls the “intermediary”
company supplying their labor. The guidance purportedly embraced an “economic realities” analysis
to determine whether a joint employment relationship existed, announcing that the ultimate question is
whether the worker is “economically dependent on
the potential joint employer who, via an arrangement
with the intermediary employer, is benefitting from
These tests were skeptically viewed by many as too
broad, failing to take into consideration the flexibility
necessary to conduct business in today’s modern work-place environment. The rise of staffing arrangements
and contingent relationships offers businesses the ability
to better manage costs and business operations, and
have been adopted by countless entities in recent years.
Luckily, with today’s announced withdrawal of the rigid
and overbroad standard, businesses should enjoy a more
flexible and realistic approach when it comes to their relationship with other businesses and contingent workers.
What This Means For Employers
Today’s development is a positive one for employers.
It begins to tilt the playing field back to a level surface,
and kick starts the process of introducing an element of
certainty to modern business relationships. That said,
joint employment remains an issue that employers need
to be cognizant of under the FLSA, and the USDOL’s
actions today have no impact on other federal statutes
that could entangle employers in these areas, such as
under the National Labor Relations Act.
We now await whether the Trump-era USDOL will take
further steps to assure 21st-century businesses more
certainty in these areas, whether through replacement
guidance letters, FLSA opinion letters, or brand new
regulations. We will monitor these developments and
provide updates as warranted.
For more information, contact your regular Fisher
Phillips attorney, or any member of our Staffing and
Contingent Workers Practice Group, Wage and Hour
Law Practice Group, or Gig Economy Practice Group.
This Legal Alert provides an overview of a specific
regulatory announcement. It is not intended to be, and
should not be construed as, legal advice for any particular fact situation.