DOL and NLRB Memorandum of Understanding (MOU) May Cause Employer Headaches

On January 6, 2022, the U.S. Department of Labor’s Wage and Hour Division (DOL/WHD) and the National Labor Relations Board (NLRB) announced a memorandum of understanding (MOU) between the agencies to share information, collaborate, and coordinate on investigations of potential violations of federal labor and employment laws. The MOU places particular emphasis on worker misclassification (both independent contractor and joint-employment relationships) and retaliation and represents the latest in the Biden administration’s efforts to ramp up enforcement in these areas.

The MOU will take effect immediately, with the DOL/WHD announcing that it was reviewing cases currently under investigation that may have some overlap with the NLRB.

Based on the MOU unveiled today, employers may see the following:

Workers Referred Between DOL/WHD and NLRB

The agencies agreed to create a formal referral process, including advising workers of potential violations of laws enforced by the other agency and providing workers with both information about and a contact at the other agency.

DOL/WHD and NLRB Sharing Information and Data

The agencies agreed to create a system to exchange information and data across the two agencies. This includes sharing confidential information and data not otherwise subject to production to the public, such as the identity of individuals providing information during an investigation; internal opinions, memoranda, or recommendations of investigators; information covered by attorney-client privilege or work product; protected personal information; and, confidential business information and trade secrets.

Joint or Coordinated Investigations

The MOU calls for joint or coordinated investigations between the DOL/WHD and NLRB when matters fall within the agencies’ jurisdictions. The MOU instructs that if the agencies find overlapping statutory violations, they should consider conducting a single investigation in abeyance while one agency advances the matter based on the statute under which “it would be most feasible and practical to proceed.” This presents a scenario where an employer could resolve a matter with one agency only to learn that the other agency is waiting in the wings.

Increased Scrutiny of Employment Relationships and Structures

Not only does the MOU indicate that the agencies will target employers that misclassify individuals as independent contractors as a part of their business models, the MOU also indicates an intent to closely scrutinize organizations with “complex or fissured employment structures,” including “joint employer, alter ego, and business models designed to evade legal accountability.” In short, companies that use independent contractors will be heavily scrutinized.

In connection with the MOU, the DOL/WHD and NLRB will be holding joint training sessions for their field staff and will team up on outreach and education efforts involving worker classification issues and labor law violations.

Key Takeaways

Information-sharing agreements such as the one entered into between the DOL/WHD and NLRB are certainly not new. In 2011, the IRS and DOL entered into a similar MOU as part of a joint worker misclassification initiative. That MOU came under fire publicly in 2018 in a report issued by the U.S. Treasury Inspector General for Tax Administration, which criticized the IRS for not effectively implementing the 2011 misclassification MOU.

Given the current landscape, it is easy to see how the new MOU between the DOL/WHD and NLRB may be more successful in cracking down on alternative workforce arrangements and not suffer the same fate. David Weil, a public opponent of independent contractor relationships, has been nominated to head the DOL/WHD. In addition, the NLRB recently invited the parties and amici in The Atlanta Opera, Inc. case to submit briefs addressing whether the NLRB should reconsider its standard for determining independent contractor status. The tide in this area will continue to turn.

Companies that use independent contractors or alternative workplace arrangements may want to consider monitoring these developments and auditing their own worker classifications to minimize the ever-growing risks in this area, to the extent possible. Ogletree Deakins’ Wage and Hour and Traditional Labor Relations practice groups will continue to monitor developments with respect to these and other policy changes and will post updates on the Wage and Hour and Traditional Labor Relations blogs as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.