Trump DOL’s joint-employer rule would cost workers more than $1 billion in annual wages

The Trump Department of Labor (DOL) is proposing a joint-employer standard under the Fair Labor Standards Act (FLSA) that would cost workers more than $1 billion annually by incentivizing workplace “fissuring,” which depresses wages, and lead to workers experiencing greater losses due to wage theft.

The FLSA provides wage and hour protections to the vast majority of U.S. workers.

Rather than ensuring companies that use staffing, temp, or subcontractors in their business operations are held accountable for complying with the FLSA’s basic provisions (including minimum wage, overtime, and child labor protections), the proposed joint-employer rule would give those companies a pass, making subcontractors solely responsible for violations of the FLSA.

$1 BILLION LOSS FOR WORKERS
Heidi Shierholz, director of the Economic Policy Institute (EPI), — a Washington, D.C.-based think tank that conducts research and analysis on the economy and proposes and assesses policies that impact low and middle-income workers — estimates workers would lose more than $1 billion each year as a result of the rule.

“The Department of Labor’s mission is to foster, promote, and develop the welfare of American wage earners, but this rule would strip away important worker protections and make it easier for employers to steal from workers’ paychecks,” said Shierholz.

“We urge the DOL to abandon this flawed rulemaking and ensure a meaningful joint-employer standard under the FLSA, and fulfill its obligation to support American workers.”

Celine McNicholas, EPI’s director of government affairs, said “This rule serves only the interests of large corporations — creating an incentive for them to outsource to temp and staffing companies — and enabling them to escape responsibility under the FLSA.

“The proposed rule would make it nearly impossible for many workers to enforce their workplace rights and will completely take away the ability of workers to recover unpaid wages from firms who use subcontractors in their work,” McNicholas said.

ENCOURAGES ‘FISSURING’ AND WAGE THEFT
According to EPI’s analysis, the proposed rule would encourage workplace “fissuring,” in which employers increase their reliance on contractors, temporary help agencies, and franchises rather than hiring employees directly.

EPI estimates the increase in workplace fissuring, as a result of the rule, would result in a transfer of at least $954.4 million from workers to employers annually, severely limit the ability of millions of workers to recover unpaid wages and likely lead to an increase in wage theft.
EPI estimates that the proposed joint-employer rule would cost workers more than $138.6 million due to increased wage theft.

OPPOSED BY ATTORNEYS GENERAL
Nineteen attorneys general sent a letter to the Labor Department last month expressing their opposition to narrowing the interpretation of joint employer status, saying the rule would complicate “how states enforce labor laws” and leave “millions of workers vulnerable to labor violations” according to a statement from New York Attorney General Letitia James’s office.

“USDOL has failed to justify this new rule and draws on outdated analysis that does not consider the changing nature of today’s workplace relationships, including the fact that a growing number of businesses are changing organizational models by outsourcing integral functions, but still maintaining control of workers,” the statement said, referring to the Labor Department.

Attorneys general from New York, Massachusetts, Pennsylvania, California, Connecticut, Delaware, the District of Columbia, Illinois, Maryland, Minnesota, New Jersey, New Mexico, Oregon, Vermont, Virginia, Washington, Rhode Island, North Carolina and Wisconsin sent the letter.

OPPOSED BY PRESIDENTIAL CANDIDATES
Six of the seven senators running for the Democratic presidential nomination in 2020 have expressed “strong opposition” to the proposed rule’s narrowing of liability for franchised businesses and companies that rely on temps and other contractors.

In a June 25 letter to Labor Secretary Alexander Acosta, Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), Cory Booker (D-N.J.), Kamala Harris (D-Calif.), Kirsten Gillibrand (D-N.Y.), Amy Klobuchar (D-Minn.), and several other Democratic leaders said: “The proposed interpretation would violate the language and intent of the Fair Labor Standards Act (FLSA) and weaken the enforcement of wage-and-hour protections on behalf of many of the most vulnerable workers in the country, directly contradicting DOL’s mission.”

SUPPORTED BY REPUBLICANS
Republican leaders, meanwhile, have applauded the proposed rule.

Rep. Virginia Foxx (R-NC), leader of the Committee on Education and Labor; Rep. Bradley Byrne (R-AL), ranking member of the Subcommittee on Workforce Protections; Sen. Lamar Alexander (R-TN), chairman of the U.S. Senate Committee on Health, Education, Labor and Pensions; and Sen. Johnny Isakson (R-GA), chairman of the Subcommittee on Employment and Workplace Safety, sent their own letter to Acosta, stating “The rule is good news for everyone who wants to realize the American dream of owning a small business.”