How to correctly classify workers as employees or independent contractors is a murky subject that continues to confound businesses and lawyers alike.
That’s one reason why worker classification will likely be the subject of a Labor Department opinion letter soon, attorneys and former DOL staff from prior administrations say. Employer representatives sent at least three requests to the department in recent months for it to weigh in on their clients’ questions on independent contractors, documents obtained by Bloomberg Law through a Freedom of Information Act request show.
Opinion letters help clarify the gray areas of labor law in specific circumstances. There is plenty of that in the ever-confusing issue of worker classification, highlighted by the growing gig economy. Unlike contractors, employees often receive benefits such as health care and are entitled to minimum wages and overtime pay under federal law.
“It’s not surprising” that the DOL would try to address the worker classification issue and explain how existing laws should be applied to the gig economy,
The letters are highly coveted tools that can serve as a legal defense should employers or employees find themselves in litigation. Anyone can ask for an opinion letter, but employer-side representatives are frequent requesters of a DOL letter.
The Labor Department responded to six requests in August, but there are still hundreds of questions posed to its Wage and Hour Division that the agency could potentially respond to, according to documents obtained by Bloomberg Law. That includes the recent requests asking the WHD to clarify its position on whether certain workers are employees or independent contractors.
The DOL has issued 26 opinion letters this year, but didn’t have any announcements to make regarding issuing new opinion letters, a department spokeswoman said. Labor Secretary
Gray Area on Gigs
The practice of releasing opinion letters was revoked early in the Obama administration because DOL officials felt the letters were a drain on agency resources and had limited applicability. The Obama administration implemented two administrator interpretations on “joint employer” liability and independent contractor misclassifications in 2015 and 2016. But those were withdrawn in June 2017 under the Acosta-led DOL.
A lack of opinion letters over the last eight years—as issues over gig economy workers and independent contractors became more prominent—likely contributed to the growing interest among employers to request an opinion letter now, Parlo said.
Greg Jacob, a former DOL solicitor and now partner at O’Melveny & Myers, said the process could be held up as the WHD waits for a permanent leader. Cheryl Stanton’s nomination to head the agency is still in limbo while Acting Secretary Bryan Jarrett leads the division.
The WHD might be unwilling to answer tough questions until Stanton is on board, Jacob said. But they can’t wait forever on this “burning issue,” he said.
Requests Submitted So Far
If the DOL is looking for an opportunity to respond to an opinion letter request on the gig economy, the more recent requests might not do the trick, attorneys said.
Stacy Strolla, an attorney for a Florida-based company, and Debi Reynolds, a human resources consultant for Marsh & McLennan in North Carolina, submitted requests asking the DOL to weigh in on whether independent contractors were correctly classified and if contractors can also receive health benefits.
Strolla’s client employs more than 50 people and provides electrical contracting services to the public. Reynolds’ client runs a physician’s practice that contracts with a health coach to provide services to her pediatric patients.
Another request came from the National Limousine Association in July. The NLA asks the department to take the stance that all drivers for a transportation network company are employees. The department has regularly treated limousine chauffeurs as employees, while ride-share services like
All three opinion letter requests aren’t detailed enough to warrant a response from the DOL, multiple sources said.
An opinion letter request must include incredibly fact-specific scenarios from the position of the employer named in the request,
Additionally, the NLA asked the department to categorize workers of Uber and Lyft and not its own drivers, Parlo said.
“I don’t believe the department will respond to a request where it looks like the requester is seeking an advantage over other companies or other segments of an industry,” Parlo said.
Strolla said Oct. 15 that she hasn’t received a response from the DOL.
Why Go to DOL?
Seth Harris, the deputy secretary of labor during the Obama administration, remains skeptical that employers in the gig economy will go to the DOL for clarity. So far, companies like Uber and Lyft are doing fairly well getting worker classification issues handled in court, he said.
In April, a Pennsylvania federal court ruled that UberBLACK drivers were properly classified as contractors and couldn’t maintain wage and hour claims against the company. The case was Razak v. Uber Technologies.
At the state level, however, gig economy companies could be facing a battle. A California Supreme Court decision from April in a case involving delivery company Dynamex Operations West Inc. is expected to make it much harder for gig companies to treat workers as contractors in the state. Critics of the decision worry that other states will similarly amend laws to take the same approach. This would be out of the DOL’s hands as opinion letters cover federal and not state laws.
Harris and Smith agreed that unless an employer was certain of what the DOL would say, there wouldn’t be a good enough reason to put themselves at risk.
“Any sort of savvy lawyer is only asking for letters if they know it will come down the way they want,” Smith said. The last thing an employer wants, she said, is for the DOL to say what they’re doing is illegal.
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(Updated to clarify the National Limousine Association's request in the fourth graph under 'Requests Submitted So Far.')