DOL Guidance on Employer Status of Caregiver Registries: Foreshadowing A More Tolerant Independent Contractor Approach

Seyfarth Synopsis: Department of Labor Acting Administrator Bryan Jarrett issued Field Assistance Bulletin No. 2018-4 (“FAB”) on July 13, to guide Wage & Hour Division (“WHD”) field investigators on how to determine whether home care, nurse, or caregiver registries are employers under the Fair Labor Standards Act.[1]  The notable FAB makes no negative reference to independent contractor status, shedding first light on the administration’s independent contractor classification approach following withdrawal of the DOL’s 2015 Administrator’s Interpretation last year. The guidance is welcome news for the growing number of companies that seek to match workers with individuals who seek in-home care, as well as to entities outside the healthcare sector that engage non-employed workers.

The DOL begins its guidance by recognizing that “a registry that simply facilitates matches between clients and caregivers—even if the registry also provides certain other services, such as payroll —is not an employer under the DOL.”  The FAB provides, however, “specific examples of common registry business practices which may, when the totality of factors is analyzed, establish the existence of an employment relationship under the FLSA.”  The FAB reveals a return to DOL’s historical approach of reviewing employer status on a “case-by-case” basis, by assessing a totality of circumstances without allowing any single factor to dictate the outcome.

The FAB highlights factors that the WHD will analyze during investigations, illustrating that registries should avoid becoming embroiled in the caregiver relationship or unduly controlling caregivers’ work. Registries should be aware in particular of the following:

• Performance of basic caregiver background checks does not indicate employer status.  If the registry actually interviews prospective caregivers or references, or pre-selects candidates for clients, however, it may be acting as an employer.
• Providing clients or caregivers with information about typical market-based pay rates  “to serve as a benchmark for negotiations” does not indicate employer status.  If the registry “designates a set wage range,” or “offers tailored direction concerning what a caregiver should charge for specific services,” it appears more like an employer. 
• Performing certain administrative payroll-related functions, such as preparing tax documents or compiling time records, will not create an employment relationship.  A registry’s direct payment of its own funds, or independent verification or adjustment of caregiver time records, however, may indicate employer status. 
• Charging a one-time fee for services to match a caregiver with a client, or ongoing fees for performing administrative functions like payroll, do not indicate that the registry is the caregiver’s employer.  However, charging ongoing fees to the client based on the number of hours a caregiver works, or based on the ongoing caregiver relationship, may indicate employer status, because “[t]he caregiver’s pay . . . depends, in part, on the amount the registry charges.”

Other factors that the WHD will analyze include the registry’s level of involvement in: hiring and firing; scheduling and assigning work (where the caregiver may “economically depend on the registry’s preferences and decisions”); controlling the caregiver’s work through trainings, setting policies, or monitoring and evaluating the caregiver’s performance; and purchasing equipment and supplies, including the caregiver’s licenses, insurance, or medical supplies.  According to DOL, requiring a caregiver to obtain an EIN, insurance, or bond in accordance with the law is “not relevant” to the analysis, nor is calling a caregiver an ‘independent contractor’ or issuing him or her a Form 1099.

The FAB’s focus exclusively on registries may indicate that the DOL intends to increase its scrutiny of employment relationships in the home health care industry, about which there has been little recent guidance outside the companionship arena.  More broadly, however, the factors that the DOL highlights in this FAB translate across a wide variety of industries, and reveal insight into how the current administration views the employer/independent contractor analysis under the Fair Labor Standards Act.  After withdrawing its formal guidance on independent contractor misclassification in June 2017,  thereby abandoning the relatively strict “economic realities” test that was widely viewed to favor employer status, the DOL has been relatively silent on the topic -- until now.  The FAB’s return to a “totality of circumstances” analysis portends a more tolerant approach to independent contractor classification, indicating that certain entities, like traditional match-making registries, can liaise between independent workers and their clients without creating an employer relationship.