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Trump’s Contractor-Status Test Bolstered by New Agency Guidance

Jan. 19, 2021, 8:36 PM

Select businesses may continue classifying manufacturing distributors and truck drivers as independent contractors, rather than employees who are owed wage protections, the Labor Department said on the Trump administration’s last full day in office.

In publishing four new opinion letters on the eve of Inauguration Day, the outgoing administration aimed to provide additional guidance on how employers can take advantage of a landmark final rule the Labor Department issued earlier this month.

That rule, which makes it easier for businesses to consider workers as independent contractors, is slated to be frozen from taking effect once President-elect Joe Biden is sworn in Wednesday, and could eventually be revoked.

In one opinion letter, DOL’s Wage and Hour Division found that a transportation and logistics company is not the employer of its truck drivers, who own and operate their own vehicles. That’s because the drivers exercise significant control over important elements of their work and can earn profits or suffer losses as a result of their personal initiative and investment—satisfying the two core factors of DOL’s new five-part standard for determining whether workers should be considered contractors or employees under federal wage-and-hour law.

A second letter, also relying on the new test, informed a company that manufactures perishable food products that its distributors, who sell the products to retailers, are in fact independent contractors, not employees. The letter walked through the five factors under the new rule, noting, for instance, that distributors set their own schedules, have almost complete freedom to choose assignments, and are largely not subject to manufacturer supervision.

Labor Department opinion letters issued in response to fact-specific requests from businesses have been highly coveted by management attorneys and employers throughout the Trump administration because they can serve as a legal defense in the event of a future lawsuit or Wage and Hour Division investigation.

However, it remains to be seen if the Biden administration will continue this form of guidance, which critics view as overly favorable to employer interests. The Obama administration’s DOL leaders opted not to issue opinion letters, preferring instead to disseminate broadly applicable administrator interpretations.

Staffing Agencies, Media

In another letter Tuesday, the WHD further broadened the types of industries that may qualify for an exemption to overtime pay requirements under the Fair Labor Standards Act.

A staffing agency that recruits and places workers in “temp-to-hire positions” may qualify for the law’s retail or service establishment exemption even though “employment agencies” were specifically listed as non-retail establishments in an interpretive rule from 1961. The DOL eliminated that list of 89 businesses in May, paving the way for further exemptions under the law.

Employees at staffing agencies may qualify for the exemption as long as more than half of their wages over a representative period come from commissions and their regular rate of pay is at least 1.5-times the minimum wage.

In the fourth opinion letter released Tuesday, the agency stated that journalists working in small markets qualify for professional exemptions to FLSA’s overtime and minimum wage requirements if their duties extend beyond collecting, organizing, or recording information.

The letter was issued at the request of several employers in small-town print, broadcast, and digital media, according to the opinion. The requesting party emphasized that recent changes in the industry had altered the duties of a journalist to provide “context-based” reporting, rather than simply a “just-the-facts” approach. As a result, employers have demanded higher educational and analytical standards of their employees, exempting them as professional employees.

The agency agreed, writing that the journalists’ roles as described satisfy its primary duties test, regardless of a media market’s size.

“It is the journalists’ duties, not who employs them—whether small-town or rural newspaper, major metropolitan daily newspaper, or local broadcast station—that are relevant to this determination,” wrote WHD Administrator Cheryl Stanton in the letter.

To contact the reporters on this story: Ben Penn in Washington at bpenn@bloomberglaw.com; Austin R. Ramsey in Washington at aramsey@bloombergindustry.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com