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New Federal Guidance on Independent Contractors


On June 7, 2017, U.S. Secretary of Labor Alexander Acosta announced that the U.S. Department of Labor was withdrawing the Obama-era informal guidance on joint employment standards and independent contractor misclassification. While the 2015-2016 guidance letters did not carry the force of law, they were used by USDOL investigators and courts when evaluating allegations of misconduct.

The former guidance protected workers as “employees under the FLSA,” and even employed an economic realities test to determine if a worker is in business for himself or financially dependent on an employer. This guidance also clarified that designating a worker as an independent contractor was not relevant to the actual analysis of the worker’s status.

Understanding the Current California Law

This withdrawal was one of the first deregulatory actions taken by the Trump Administration’s Department of Labor. According to U.S. Secretary of Labor Acosta, this action should be viewed as the first step in increasing protections for companies against misclassification and joint employments claims. However, employers still need to be careful when developing policies regarding joint employment principles, especially since federal courts and attorneys can no longer rely on the withdrawn guidance when handling cases.

According to the state of California, “The basic test for determining whether a worker is an independent contractor or an employee is whether the principal has the right to control the manner and means by which the work is performed. When the principal has the ‘right of control,’ the worker will be an employee even if the principal never actually exercises control. If the principal does not have the right of control, the worker will generally be an independent contractor.”

Employers in California can complete an Employment Determination Guide to determine if a worker should be classified as an “employee” or an “independent contractor.” If they still aren’t certain about a worker’s status after completing the guide, they can contact the Taxpayer Assistance Center or request a written ruling by completing a Determination of Employment Work Status.

However, if you want to avoid a potential legal dispute, you should schedule annual meetings with your HR managers and legal representatives to review your business model, hiring practices, and any policies or agreements that pertain to independent contractors.

Schedule a Consultation Today

Contact the Monterey County labor and employment lawyers at JRG Attorneys at Law if you have questions about this withdrawal and require legal guidance. Our attorney, Sergio H. Parra, is proud to represent California employers and businesses in cases that necessitate employment-related litigation. No matter the complexity of your case, you can count on Attorney Parra to provide practical advice on employment matters, internal complaints and investigations, employment agreements, and wage and hourly matters.

Contact JRG Attorneys at Law at (831) 228-5619 to schedule a consultation today.