Public Comments on Labor Department’s Joint Employer Proposal

June 24, 2019

Amy DeBisschop
Division of Regulations, Legislation, and Interpretation
Wage and Hour Division
U.S. Department of Labor
200 Constitution Avenue, NW
Room S-3502
Washington, D.C. 20210

Re: Comments on RIN 1235-AA26, Joint Employer Status Under the Fair Labor Standards Act

Submitted online at: https://www.regulations.gov/comment?D=WHD-2019-0003-0001

Dear Ms. DeBisschop:

Thank you very much for providing the opportunity to comment on this proposed rulemaking. However, Public Citizen opposes this Department of Labor (“Department” or “DOL”) proposed rulemaking to narrow the Department’s interpretation of joint-employer status under the Fair Labor Standards Act (“FLSA” or “the Act”). Specifically, it severely limits the responsibilities of contracting employers under the FLSA, in contravention of the Act’s purposes and its statutory definitions. The DOL’s proposed rule ignores a statutory definition, U.S. Supreme Court authority and decades of federal Circuit Court precedent with a test that would encompass almost no subcontracting companies, and would especially hurt those low-wage workers who need the protections of the FLSA the most: those who are placed in jobs via temp or staffing agencies, and those, including children, who work in heavily contracted janitorial, construction, manufacturing, and warehousing jobs, to name a few.

Public Citizen is a national consumer advocacy and public interest organization with more than 500,000 members and supporters. Since 1971, Public Citizen has advocated for stronger health, safety and consumer protection measures, as well as curbs on corporate wrongdoing. We view this proposed rule as a direct assault on worker protections.

In today’s economy, more and more corporations, especially those in lower-wage industries, outsource to labor contractors and use labor intermediaries such as staffing firms, and this can result in degraded working conditions and a lack of employer responsibility.[1] Companies that outsource their labor must share responsibility for any child labor, wage theft, and overtime violations that occur in their business. When operating correctly, joint employment rules result in better overall protections for workers and ensures fair competition among businesses.  It also improves compliance by ensuring that corporations cannot skirt the law simply by outsourcing responsibility for their workers.

The actual number of workers employed by temporary staffing agencies has increased dramatically in recent years, especially in low-wage, “blue-collar” occupations. This reflects a shift in companies using temp and staffing placements in only clerical work to now also using it for more hazardous industries, such as construction, manufacturing and logistics. There are more than three million workers employed through temporary staffing agencies, and the aggregate number of hours and total number of jobs (part-time and full-time) has grown faster than work overall, according to an analysis by the National Employment Law Project.[2]

Workers employed through intermediaries like temporary and staffing agencies earn less money and endure worse working conditions than permanent, direct-hires. Full-time staffing and temporary help agency workers earn 41 percent less than do workers in standard work arrangements. They also experience large benefit penalties relative to their counterparts in standard work arrangements.[3] In addition, staffing and temporary agency workers typically work in more hazardous jobs than permanent workers, and yet they often receive insufficient safety training and are more vulnerable to retaliation for reporting injuries than workers in traditional employment relationships.[4]

The joint-employer standard is used to establish when two or more entities are collectively responsible for the terms and conditions of employment over the same group of employees. Under DOL’s proposal to narrow its interpretation of joint-employer status, workers are less likely to know who their responsible employer is – making it more difficult for workers to seek improvements and to hold their employers accountable for workplace violations. In effect, work conditions are more likely to deteriorate: wage theft increases, and workplace injuries rise. With the U.S.’ steady economic growth over the last decade and a record low unemployment rate since 1969, we should be looking for ways to increase workers’ pay, economic security, and health and safety, not laying the groundwork for a race to the bottom and incentivizing working conditions reminiscent of sweatshops.

Under the proposed rule, an entity would be considered a joint employer “only if that person is acting directly or indirectly in the interest of the employer in relation to the employee” as determined by a four-factor test based on the entity’s direct ability to exercise control over the employee. This proposed rulemaking to limit the responsibilities of the contracting employer is contrary to existing law. Labor and employment laws, including the FLSA, have long held that more than one employer can be the employer of a worker and the multiple employers have shared responsibilities to implement worker safety requirements. When more than one employer can be found, jointly with another employer, responsible for wrongdoing to their employees, companies provide better oversight of working conditions, including ensuring that child labor, minimum wage and overtime rules are followed. The FLSA’s definitions of covered employment and employers have not changed since the Act was enacted, and companies have been operating under these rules for more than 80 years.

The proposed rulemaking  is also contrary to U.S. Supreme Court precedent that has said the definition of employer is not based in common law concepts and applied Section 203(g) of the FSLA to determine that multiple entities are the employers of a group of employees.[5]  And the proposed rule runs afoul of the majority of federal Circuit courts that have considered the scope of covered employers, and found employers jointly responsible with companies they contract with for their workforce. Finally, the proposed rulemaking is contrary to the intent of the FLSA, because it will enable employers to insert labor intermediaries between their company and their workers and then walk away from any accountability for the child labor, minimum wage and overtime violations that may occur.[6]  This will further degrade fair pay and employment standards in these industries.

The incredibly narrow proposed test included in this proposed rule leaves out many work relationships that are well within the long-understood scope of the FLSA’s employment relationship, and it is thus impermissibly contrary to law and the Act. For these reasons, the proposed rule is arbitrary and capricious, lacks a rationale based in the statute, and could permit employers of low-income workers to skirt responsibility.

Corporations that engage low-road contractors and then look the other way gain an unfair advantage over companies that play by the rules, resulting in a race to the bottom that rewards cheaters and harms workers.

For these reasons, we oppose the proposed rule.

Sincerely,

Shanna Devine
Worker Health and Safety Advocate
Public Citizen’s Congress Watch Division

 

[1] America’s Nonstandard Workforce Faces Wage, Benefit Penalties, According to U.S. Data, NELP, June 7, 2018, https://bit.ly/2Rxro8O.

[2] NELP analysis of Current Employment Statistics, NAICS 561320, https://bit.ly/2ZDwJyi.

[3] America’s Nonstandard Workforce Faces Wage, Benefit Penalties, According to U.S. Data, National Employment Law Project, June 7, 2018, https://bit.ly/2Rxro8O.

[4] Rebecca Smith & Claire McKenna, Temped Out: How the Domestic Outsourcing of Blue-Collar Jobs Harms America’s Workers, June 10, 2014, at 11, https://bit.ly/2Xx3AaE.

[5] David Weil, Administrator’s Interpretation No. 2015-1, U.S. Department of Labor, July 15, 2019,  https://on.wsj.com/2Rw4eQg.

[6] Id.