DOL Increases Focus on Worker Misclassification Violations

In January, the Department of Labor (DOL) announced a partnership between its Wage and Hour Division (WHD) and the National Labor Relations Board (NLRB), an independent federal agency. The partnership is designed to “enhance information sharing, enforcement, training, [and] outreach.”

Here’s what employers need to know about this increased enforcement effort.

What’s the Difference between the DOL’s Wage and Hour Division and the National Labor Relations Board?

The Wage and Hour Division (WHD) is a DOL agency responsible for enforcing requirements of the Fair Labor Standards Act (FLSA)—including recordkeeping, child labor, overtime pay, and the federal minimum wage—among other federal laws.

The National Labor Relations Board (NLRB) is an independent federal agency responsible for enforcing requirements of the National Labor Relations Act (NLRA)—including issues of unionization, collective bargaining, and unfair labor practices. As an independent agency, the NLRB does not report to another executive department, such as the DOL.

What Does This New WHD-NLRB Partnership Mean for Employers?

While the jurisdictions of the WHD and NLRB occasionally overlap, neither is required to share information or resources with the other.

However, the agencies recently signed a Memorandum of Understanding (MOU) outlining their plan to “strengthen the agencies’ partnership through greater coordination in information sharing, joint investigations and enforcement activity, training, education, and outreach.” The MOU does not obligate either agency so much as it makes clear how they plan to coordinate efforts to share information and refer charges. 

For example, if an NLRB investigation uncovers potential wage and hour violations, the investigator may directly refer the case to the appropriate regional WHD office or notify the employee who filed the initial complaint, providing them with information on how to file an additional WHD charge. Similarly, the WHD may notify an individual of potential NLRA violations and provide information to file a charge. Unlike the WHD, the NLRB does not have the authority to initiate an investigation without an individual filing a charge.

The DOL’s announcement makes the MOU’s intentions clear: “better enforcement against unlawful pay practices, misclassification of workers as independent contractors and retaliation against workers who exercise their legal rights.”

More specifically, the agencies appear to be targeting so-called “fissured employment”—a term coined by David Weil, President Biden’s nominee to lead the WHD, who also led the agency during the Obama administration. According to labor attorney Thomas Stanek:

Weil asserts that the fissured workplace results from businesses shedding noncore activities to other entities—for example, janitorial, facilities maintenance, security—while still maintaining tight control over these activities through high standards, monitoring and other mechanisms of enforcement. This theory reflects Weil's previous position in favor of a broad test for joint employer status and a narrow test for independent contractor status.

The NLRB and the WHD have been very active under the Biden administration. This interagency agreement arrives on the heels of the NLRB’s announced plans to review the regulations governing independent contractors and joint employers. Additionally, a few weeks after the partnership was made public, the DOL announced plans to hire 100 more WHD investigators.

How Can Employers Prepare for Increased WHD and NLRB Enforcement Efforts?

To avoid joint employer status—which broadens the liability of compliance—labor attorney Peter Spanos recommends that corporations with multiple entities review operations to ensure that “interrelated operations are handled at arm's length.” This means that the exercise of control over employment terms and conditions is only within the “relevant entity.” Further, employers should make sure “employment and labor relations decisions are made independently for each entity.”

To avoid employee misclassification violations, Spanos advises most employers to avoid dependence on independent contractors to provide “primary services or products.” He adds, “All employers should…avoid independent contractors who are economically dependent upon the company and ensure that independent contractors have an opportunity for profit.”

For more information on correctly classifying employees as hourly or salaried, check out Classifying Employees as Exempt and Non-Exempt.

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