Guest Post: 2016 Steps Forward on Joint Employer Liability – OnLabor – 2/2/16

Jennifer (JJ) Rosenbaum (@RosenbaumJJ) is a Robina Foundation Visiting Human Rights Fellow at the Orville H. Schell, Jr. Center for International Human Rights at Yale Law School.

From the on-demand economy to construction sites and fields, joint employer liability continues to be fundamental to combating growing inequality and substandard conditions for workers.

The U.S. Department of Labor (USDOL) started 2016 with two strong commitments on this issue – new administrative guidance and new data collection efforts.  The International Labor Organization (ILO) also takes up these issues in June as part of its general discussion on decent work in global supply chains.  And trade unions and workers’ centers continue their organizing and campaigns providing critical information, analysis, and momentum.

New Joint Employer Administrative Interpretation

On January 20, 2016, the USDOL issued a new Administrative Interpretation (AI) from Wage and Hour Administrator David Weil reminding business entities that they may be jointly liable for minimum wage and overtime obligations towards workers even where they are not the “employer” for purposes of payroll or other common law definitions.  The AI follows six months after USDOL’s guidance on independent contractor misclassification and the National Labor Relations Board’s decision in Browning-Ferris Industries of California, which expanded the NLRB’s joint employer standard.

Of course, broad joint employer liability under the Fair Labor Standards Act (and the Migrant and Seasonal Agricultural Worker Act which uses the same test) is long established as a protection for the lowest wage workers in the U.S. economy.  Still, the USDOL’s guidance and graphics are helpful tools to remind business entities that using temporary staffing agencies, subcontracting, and other similar business structures may not insulate them from responsibility to ensure that workers receive basic minimum wage and overtime protections.  And the USDOL’s message is clear to business entities — their growing use of alternative work arrangements does not shield them from liability.  In fact, it makes joint employment relationships and resulting liability more common.

New Data and Layered Contingency

On the heels of the joint employer AI, USDOL also announced this week that the Bureau of Labor Statistics will rerun the contingent worker supplement for the first time since 2010.   The term contingent work is usually used to mean jobs that are either temporary or include alternative employment relationships, i.e. those workers employed through temporary staffing agencies, as independent contractors, as on call workers etc.  Contingent work, especially where the contingency is involuntary, is usually associated with lower wages and benefits, and in some cases difficulty accessing even legally protected wages.  With USDOL’s announcement, the Bureau of Labor Statistics will again count the number of  workers who hold temporary jobs and those who are in alternative work arrangements as part of a monthly nationwide survey of about 60,000 households for the first time since 2010.

More data will not only clarify the scope of contingent work, it will also contribute to an understanding of how employers are increasingly combining elements of contingency in their business practices.  For example, some workers experience both involuntary temporary work and alternative work arrangements – “layers” of contingency that lead to cumulative disadvantage.  In a recent example highlighted in The Nation, a hotel employer in Florida used a subcontracted staffing agency to hire temporary guestworkers.  The result is a subclass of workers doing the same work at the same worksite but earning over a dollar an hour less than union workers.

A campaign by the National Guestworker Alliance showed how the introduction of multiple aspects of contingency collectively led to subminimum wages and substandard health and safety conditions.  Using cultural exchange visas brokered by recruiters in the U.S. and students’ home countries, the Hershey Company relied on a warehousing subcontractor, which contracted a temporary staffing agency to bring on over five hundred foreign college studentsfrom China and Eastern Europe.  When the students organized to expose the exploitative conditions, each of the business entities and recruiters pointed the finger at the other while the workers faced unchecked retaliation.  The Hershey case demonstrated that where employers construct work arrangements with layered contingencies, enforcement of joint employer liability is even more important and at the same time more difficult based on worker vulnerability.  More data, from the BLS contingent worker survey and other sources, and additional in depth analysis of the data is critical to mapping the layering of contingency in different sectors.  Ultimately, this analysis should inform programs to enforce existing joint employer liability along with new policy recommendations.

Accountability on Global Supply Chains

Timed with the opening of the World Economic Forum in Davos, on January 18, the International Trade Union Congress (ITUC) issued what it called a Scandal Report last week.  The report analyzed the global supply chains of fifty multinationals in U.S., Europe, and Asia including McDonalds, Wal-Mart, H&M, Samsung and Apple.  Only six percent of the employees on the global supply chains of these fifty multinationals, with combined revenue of $ 3.4 trillion, are in a direct employment relationship with the multi-national brand.  And of the other 94%, many are employed as contract workers in violation of the national laws of the countries where they work.  The ITUC is specifically calling on the multinational brands to accept joint responsibility for minimum living wages, health and safety, and collective bargaining.  Workers’ Centers who are members of United Worker Congress and other worker advocates will also be launching a series of reports this spring.  These reports will further make the case for joint employer liability within and across national borders by lifting up voices of workers on global supply chains and highlighting new models of transnational organizing to raise workplace standards.

These discussions will build leading up to the June 2016 ILO tripartite general discussion on global supply chains with the potential to advance a more robust regulatory and enforcement role for the ILO given the current limited reach of many national legal regimes.

Where Do We Go From Here?

Business entities expand their use of contingent work arrangements because these arrangements lower labor costs and in practice often shield liability even when the law says otherwise.  The power of a joint employer liability legal regime – whether USDOL, ILO or any other – rests significantly in the effectiveness of its enforcement arm.  It is therefore encouraging that USDOL’s AI linked to significant penalties paid by joint employers subject to enforcement action.  Continued robust enforcement by USDOL will be critical to address the existing gap between law and practice.  Rutgers Prof. Janice Fine’s work on “coproduction” of enforcement offers a roadmap to maximizing enforcement capacity and in the U.S. context, the roles USDOL, state and local government, high road business, trade unions and worker centers can play.

We also need innovative legal concepts at the national and international level.  Legal scholars and advocates have started putting forth new concrete proposals for greater joint employer liability based on case studies of current business models.  The National Employment Law Project’s report “Who’s the Boss” offers a menu of additional U.S. policy recommendations for increased accountability in “outsourcing, contracting, and beyond.”  From the European perspective, Oxford Prof. Jeremy Prassl has developed a “functional concept of the employer” looking at cases studies including private equity investors in corporate groups and temporary agencies.  Fordham Law Professor Jennifer Gordon has laid out directions for joint liability in labor markets with migrant workers addressing the “recruitment governance gap” from a global labor supply chain context highlighting how foreign recruiters add layer(s) of contingency to migrant workers’ employment relationships.

And of course keep looking to strong campaigns from trade unions and workers’ centers like the Fight for FifteenAsia Floor WageBeat the Blacklist, to keep leading the charge.

Guest Post: 2016 Steps Forward on Joint Employer Liability

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