A Change of Opinion (Letters): The DOL Continues Its Retreat from Business-Friendly Positions
Employers may be saddened – but not surprised – by the U.S. Department of Labor’s about-face under the Biden administration on a number of issues of interest to businesses. The latest actions involve the withdrawal of Fair Labor Standards Act opinion letters on independent contractor status, tipped employees, and sleep time.
Opinion letters respond to an inquiry from an employer or other entity regarding DOL-enforced laws, and represent the DOL’s official position on that particular issue. Other employers may then look to these opinion letters for guidance. Employers may not, however, rely on withdrawn letters.
Independent Contractor v. Employee: As we discussed in our April 2019 E-Update, FLSA2019-6, which dealt with service providers for a virtual marketplace company, set forth a controversial new analysis that made the finding of independent contractor status more likely. This analysis was subsequently reiterated in the DOL’s revised final rule, issued in early January 2021 (discussed in our January 6, 2021 E-lert). On the eve of the change in administration, the DOL then released FLSA2021-8 and FLSA2021-9, both of which applied the new independent contractor analysis, respectively in the context of distributors of a manufacturer’s food products and tractor-trailer truck drivers. On February 5, 2021, however, the DOL proposed to delay the effective date of the final rule to allow “additional opportunity for review and consideration of the rule.” All three of these letters have now been withdrawn. In light of these actions, conventional wisdom expects substantial revisions to the final rule, once again favoring a finding of employee status.
Tipped Employees: FLSA2021-4 addressed whether a restaurant may institute a tip pool under the FLSA that includes both servers, for whom the employer takes a tip credit, as well as hosts and hostesses, for whom a tip credit is not taken. The FLSA provides that an employer who takes a tip credit may include only employees who customarily and regularly receive tips, such as restaurant servers and bartenders, in mandatory “tip pools” (i.e., the practice of requiring employees to contribute a certain amount of tips into a collective pool that is divided among employees). The DOL promulgated regulations in 2011 that applied this restriction on mandatory tip pools to all employers, whether or not those employers make use of the tip credit. In December 2020, the DOL issued a final rule reversing the restriction on tip pooling practices of employers that did not utilize the tip credit, as discussed in our December 2020 E-Update. On February 5, 2021, however, the DOL proposed to delay the rule, which was scheduled to take effect in March 2021. The DOL then withdrew this opinion letter and, on February 25, 2021, formally delayed the rule for 60 days for “additional review and consideration,” presaging a return to the prior restriction on all employers, regardless of the tip credit.
Sleep Time for Truck Drivers: FLSA2019-10, which we summarized in our July 2019 E-Update, addressed the issue of sleep time for truck drivers. Prior guidance from the DOL found that only up to 8 hours of sleeping time may be excluded in a trip 24 hours or longer, and no sleeping time could be excluded for trips under 24 hours. The DOL rejected such guidance as “unnecessarily burdensome for employers” in FLSA2019-10, instead stating that “the time drivers are relieved of all duties and permitted to sleep in a sleeper berth is presumptively non-working time that is not compensable.” However, with the withdrawal of this letter, the prior guidance has been reinstated and the under-24 hour period of duty prohibition on non-compensable sleeping time and the 8-hour limitation on sleeping time in a period of duty exceeding 24 hours once again applies to truck drivers.