Dive Brief:

• The Department of Labor has withdrawn Obama-era guidance that held companies to a stricter interpretation of rules governing the use of independent contractors and made more firms jointly responsible for misclassified employees, according to ValueWalk.
• The informal guidance was considered a crackdown on worker misclassification and made it easier for companies to be held equally responsible for labor violations committed by contractors who they had "indirect control" over.
• However, the National Labor Relations Board's stance on joint employment has not changed, which means that employers aren't entirely off the hook, according to HR Dive. A case regarding this question, Browning-Ferris, is still working its way through the courts.

Dive Insight:  

Construction industry groups said the guidance created a too-broad definition of joint employment. The Associated General Contractors of America lauded the DOL's announcement Wednesday. However, because courts are not bound by this new interpretation, a great deal of uncertainty remains for employers.

The construction industry has always struggled with the independent contractor issue, with some companies stepping over the line and misclassifying those who should have employee status so that they don't have to pay employment taxes and other benefits associated with those workers.

According to a May Workers Defense Project report, workers in southern U.S. cities are particularly susceptible to this tactic. In addition, a recent Polaris report on slave labor in the U.S. construction industry indicated that small residential and commercial contractors are the most likely to exploit employees by misclassifying them as independent contractors so that they don't have to pay benefits or cover the cost of their injuries.

Federal and state governments don't hesitate to crack down on these violators when they find them. For example, in September of last year, Texas contractor R&R Construction Services was cited by the Hawaii Department of Labor and Industrial Relations for allegedly misclassifying 65 employees as independent contractors on a $25 million hotel project in Waikiki, HI. The agency also fined R&R $767,095.