New Federal Guidance on Independent Contractors
In June 2017, U.S. Secretary of Labor Acosta announced the withdrawal of the U.S. Department of Labor’s previously asserted guidance on independent contractors.
The prior guidance adopted the position that “most workers are employees under the FLSA” and adopted an economic realities test that focused on whether the worker is really in business for himself or is economically dependent on the employer (as an employee). The former guidance also went as far to state that any agreement between an employer and a worker designating the worker as an independent contractor was not relevant to the analysis of the worker’s status.
Although the withdrawal of this guidance is not binding, it hampers the ability of federal courts and plaintiffs’ attorneys to rely upon it in support of their cases. Employers operating under California law must still heed the California legal tests as it pertains to defining an employee versus an independent contractor.
For this reason, employers should consult with counsel to minimize their legal exposure as it pertains to their company’s independent contractor/employee classifications. Regular review of policies and agreements as it pertains to independent contractors should be conducted by HR managers with the assistance of counsel on an annual basis.
Contact our firm if you are looking for more information and guidance on this very important issue.