From MBO Partners, I discuss the top independent contractor compliance stories from 2017. Here are the top 3:
Here’s a look at the top 7 stories.
1. The United States Department of Labor (DOL) Withdraws Guidance on Independent Contractor Misclassification
On June 15, 2015, the DOL issued Administrators Interpretation 2015-01 with guidance on how the DOL viewed the misclassification of employees as independent contractors. On June 7, 2017, just a few days before the two-year anniversary of the Administrators Interpretation 2015-01, the DOL withdrew Administrators Interpretation 2015-01. This move is perhaps not entirely surprising as the Trump administration has pledged to reduce regulation—a trend that we predict will continue to impact the future of work.
The withdrawal of the Administrators Interpretation does not change substantive law. The original guidance expressed the DOL’s view on how the Fair Labor Standards Act (FLSA) would be interpreted by the DOL, but any case alleging misclassification would be evaluated based on existing precedents. The withdrawal does not change any precedents, but it does signal this Administration’s position with respect to the classification of employees as independent contractors.
2. The United States Supreme Court Will Determine the Future of Arbitration Requirements and Class Action Waivers in Employment Agreements
Employment agreements frequently contain a requirement that all disputes be resolved through arbitration, and prohibit an employee from participating in any class action. These arbitration provisions have been challenged because they may violate the National Labor Relations Act (NLRA).
Arbitration agreements are a key line of defense to prevent class actions by workers who are alleging that they have been misclassified as independent contractors. The National Labor Relations Board (NLRB) has taken the position that a class-action waiver is a violation of the NLRA. Some Circuit Courts of Appeal agreed with the NLRB, while others said that the Federal Arbitration Act (FAA) took precedence in upheld the validity of the arbitration agreements with the class-action waivers.
In October, the United States Supreme Court reviewed the question and a decision is expected in January or February 2018. The Supreme Court’s decision will determine the future of class action waivers in arbitration agreements.
In Florida, one court said that an arbitration agreement with the class-action waiver was valid in part because the agreement had an opt-out clause. When there’s an opt-out clause, it is hard to argue that the requirement to arbitrate disputes is a condition of employment, and therefore a violation of the NLRA.
3. The NLRB General Counsel Says Misclassification is Not a Violation of the NLRA
The new NLRB General Counsel issued a memo in December saying that it would no longer argue that an employer’s misclassification of employees as independent contractors, in itself, violates the NLRA. The General Counsel said that misclassification could still be a violation of the NLRA if the employer actively used the misclassification to interfere with the protected rights of employees.
This is a dramatic change for the NLRB. Previously the NLRB had taken the position that misclassification of employees was a violation of the NLRA.
Read the full story at Top Independent Contractor Compliance Stories from 2017