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DOL, State Agencies, and Litigants Proceed With Challenges to Worker Misclassification

Tuesday, August 14, 2012

CHICAGO--The Labor Department and federal and state agencies will continue to focus on the misclassification of workers as independent contractors or overtime-exempt employees, so employers need to review their employment practices carefully, panelists told an audience Aug. 2 at the American Bar Association's annual meeting.

DOL will continue to pursue coordinated efforts to combat misclassification of workers and make employers see “the full effect” of the laws they are breaking, DOL's Solicitor M. Patricia Smith told the group. She also said the agency will continue to file amicus briefs in significant appellate court cases under the Fair Labor Standards Act despite questions raised about court deference to positions taken in such briefs.

Lawyers representing employers and employees expressed some disagreement about whether a recent U.S. Supreme Court decision involving pharmaceutical sales representatives will have significance outside the pharmaceuticals industry. But they generally agreed that employers should take great care in a legal climate that has recently placed increasing emphasis on the proper classification of workers under federal and state labor, benefits, and tax laws.

Agency Coordination Seen as Key

Smith, who was New York commissioner of labor before assuming her DOL post in March 2010, said DOL's misclassification initiative is in large measure a product of her experience in the state. There she worked to connect agencies and departments with an interest in misclassification, which had previously operated in a “siloed” manner without sharing information, she said.

Employers confronted about misclassification by a single agency or under one employment related law might address one issue, but Smith said they “weren't seeing the full effect of the laws they were breaking.”

DOL now has partnership arrangements with states, Smith said, including approximately 13 memoranda of understanding (62 BTM 305, 9/27/11) that allow the federal agencies and state governments to share information and, in some cases, participate in joint enforcement efforts.

She said worker misclassification has been a priority target of the Obama administration. Recognizing that Internal Revenue Service authority over misclassification-related tax law violations is “the biggest stick out there,” Smith said DOL has been providing a lot of information to IRS in order to facilitate effective enforcement of federal laws.

DOL Solicitor Reacts to Christopher

Addressing the U.S. Supreme Court's recent decision in Christopher v. SmithKline Beecham Corp. d/b/a GlaxoSmithKline ( 132 S. Ct. 2156, 19 WH Cases 2d 257 (2012); 63 BTM 193, 6/19/12), Smith said she was “obviously disappointed” that the court decided 5-4 that pharmaceutical industry “detailers” were outside sales employees who were exempt from the protections of FLSA.

The Christopher majority observed that DOL had not brought enforcement actions challenging employers who treated the employees as overtime-exempt, but Smith said that did not reflect a lack of conviction on the issue. “It was just never the highest priority” for an agency with limited resources that in the past did not file a lot of FLSA enforcement lawsuits, she said.

Although the majority questioned DOL's articulating positions on FLSA issues in amicus briefs rather than through formal rulemaking, Smith said the agency will continue to file amicus briefs in private litigation matters. She said it is important for the department to express its views in appellate cases that may affect the development of the law. Smith commented that the agency will be attentive to positions it has taken in the past on FLSA issues, as well as the agency's current views.

Court's Comments Noted

Maureen Salas, a member of Werman Law Office in Chicago where she represents plaintiffs in wage and hour class and collective actions, expressed concern about Justice Samuel A. Alito's writing in the majority opinion in Christopher that employees averaging earnings of more than $70,000 per year were “hardly the kind of employees that the FLSA was intended to protect.”

Salas said the total earnings of an employee do not limit an employee's overtime eligibility under the FLSA and regulations at issue in Christopher, and should have been considered irrelevant.

Jeremy J. Glenn, a partner in Meckler Bulger Tilson Marick & Pearson in Chicago, said the income noted by Alito was relevant, and he commented that Christopher may be relevant for employers in all industries. The decision reflects the high court's willingness to consider the “industrial reality” in which wage and hour cases arise.

By Lawrence E. Dubé  

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