DOL and FTC Will Collaborate on Investigations

​The U.S. Department of Labor (DOL) and the Federal Trade Commission (FTC) recently committed to collaborating more closely on legal enforcement efforts.

The two agencies signed a memorandum of understanding that took effect Aug. 30. The agreement enables the agencies to partner on investigative efforts, conduct cross-training for staff at each agency, and share information from investigative files, complaints and statistical analyses.

The agreement identifies certain areas of mutual concern, including:

• Business models designed to evade legal accountability, such as misclassifying employees as independent contractors.
• The imposition of one-sided and restrictive contracts, such as noncompete and training repayment provisions.
• The impact of algorithmic decision-making on workers.
• Illegal claims and disclosures about earnings and costs associated with work.
• The extent and impact of labor market concentration.
• Collusive behavior by companies.
  

"What's unfair for workers is also unfair for law-abiding employers, and this partnership will help both of our agencies combat unlawful behavior, such as misclassification and contract provisions that restrict accessible opportunities to our growing workforce," Solicitor of Labor Seema Nanda said in a press release.

"Deepening our partnership with the DOL will ensure that we can work collectively to tackle illegal conduct that suppresses wages, reduces access to good benefits and working conditions, and stifles economic liberty for workers across the economy," FTC Chair Lina Khan said in a press release.

It's too early to tell whether there will be more enforcement actions by the DOL and FTC, said Eric Akira Tate, an attorney with Morrison Foerster in San Francisco. Nevertheless, "one would expect that with the potential for more referrals and more information available to agencies, there would be a higher number of enforcement actions going forward," he said.

The DOL enforces the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Safety and Health Act, the Employee Retirement Income Security Act, the Worker Adjustment and Retraining Notification Act, and the Uniformed Services Employment and Reemployment Rights Act. The FTC enforces the Federal Trade Commission Act and other laws that prohibit unfair methods of competition and deceptive business practices.

If one agency detects a potential violation under the other agency's jurisdiction, it will notify that agency. The DOL and FTC also intend to coordinate training, outreach and education efforts.

"That's something employers need to be aware of," Tate said. "Even more so than previously, if an employer is dealing with one agency, the employer has to think about how the other agency might perceive it or what the other agency might do with the information the employer is providing."

This will be particularly important in one area of enforcement.

"Employers should expect that the [FTC's] cooperation and coordination with the DOL will give enforcers access to data and information that can assist in the development of evidence of anticompetitive impact on employees," said Lisa Phelan, an attorney with Morrison Foerster in Washington, D.C. Likewise, the cooperation on investigations will increase the staff and resources available to investigate suspected anticompetitive conduct, she said.

This partnership comes after the FTC released a proposed regulation to ban noncompete agreements, which stop employees from working for corporate competitors or opening their own competing business within a certain geographic area for a certain period of time after they leave a company. It's unclear when the FTC might issue a final rule or what revisions it might consider.

On Feb. 21, the FTC issued an order settling charges that two glass container manufacturers illegally imposed noncompete restrictions on workers across a variety of positions. The settlement directed the companies to tell workers that their noncompete agreements are nullified.

‘Whole of Government’ Approach

The partnership between the FTC and the DOL is part of a broader trend in the Biden administration of federal agencies working more closely together. The DOL signed similar memorandums of understanding with the National Labor Relations Board (NLRB) in January 2022 and with the U.S. Equal Employment Opportunity Commission last month. The FTC also entered an agreement with the NLRB in July of last year.

In general, this "whole of government" approach could mean more scrutiny for the fast-growing gig economy and related app-based platforms, which have come under fire from federal regulators in recent years for misclassifying workers as independent contractors. The DOL's independent contractor proposed rule, issued in October 2022, would change the factors that must be taken into account when determining whether someone is an employee or an independent contractor.

In 2022, Uber agreed to pay $8.4 million to settle a class-action lawsuit with California drivers who claimed they were misclassified as independent contractors, rather than employees. In a separate lawsuit that is still pending, another group of Uber Eats delivery drivers in California claimed they were misclassified as independent contractors.