Department of Labor sends warning shot to clients of temp staffing agencies
In an increasingly outsourced economy, the administration says more companies should take responsibility for the workers they hire indirectly.
The Department of Labor thinks more companies should take responsibility for their contracted workforces, and it's just told them exactly how and when.
If there's one trend that's characterized the changing American workforce more than any other in recent decades, it's been the fracturing of the employment relationship, as companies focus on their "core competencies" and pay other businesses to do everything else.
Subcontracting, outsourcing, and the use of staffing agencies allows businesses to inexpensively scale up and scale down their labor needs, without the extra hassle and liability of adding payroll. But it also adds another layer between workers and the bosses who call the shots, shielding managers from responsibility when the labor provider doesn't follow the law.
Department of Labor' Wage and Hour Division director David Weil, a former business school professor, calls this trend "fissuring." He thinks lots of those client companies should really be considered "joint employers," together with the contractors that sign the checks, making them liable for violations. And Wednesday, his department issued detailed guidance drawing the categories in black and white, sending a message to employers that they had better fall on the right side.....
Weil's division has stepped up its proactive enforcement of situations where companies are functionally controlling the workers they order up from labor providers — and broadcasts its enforcement of egregious violations. Back in October, for example, investigators found that temp workers at a snack food producer in New Jersey were cheated out of overtime wages, and ordered the company to pay back wages, damages, and civil penalties.That's the most typical form of joint employment — a "vertical" arrangement, with one company hiring another, as the guidance describes. But joint employment can also be "horizontal," when a worker might employed by two subsidiaries of the same company, but they never get overtime because their hours are tracked separately.
Weil says they've found similar problems in all kinds of industries, like agriculture, construction, and shipbuilding. Higher rates of wage theft at outsourced labor providers have been well documented, as are safety lapses that lead to sometimes fatal injuries. Another division of the Department of Labor, the Occupational Safety and Health Administration, has been running an initiative on temporary workers, often reminding clients of their joint responsibility.
The issue of joint employment is similar in nature to misclassification of employees as independent contractors, on which Weil's office issued similar guidance back in July. It's also related to the National Labor Relations Board's recent decision on the definition of joint employment for the purpose of union organizing, which is likely to have a bearing on the massive McDonald's case that's currently waiting for a hearing in New York.....The franchise industry has been particularly irked by the administration's regulatory approach. Before having seen the Department of Labor's new guidance on joint employment, the International Franchise Association didn't like it. "This is just another example of regulatory fiat that raises even more questions for employers," said senior vice president Matt Haller. "The administration should consider going through formal rulemaking instead of just issuing a 'guidance' without even an outreach to targeted industries who may be impacted.".....
At the same time, however, joint employment doesn't always solve the problem for temporary employees. Dave DeSario, who runs a group called the Alliance for the American Temporary Workforce, says that some staffing agencies and clients still point fingers at each other when something goes wrong. Without a union, it's difficult for temp workers to get the representation that would allow them to pursue a claim before an agency says it don't have any more work for them to do."Temp workers can't afford lawyers, and are in a poor position to defend themselves," DeSario says. "Joint employer complicates the employment situation, for sure, and when things are complicated, it's workers who have a harder time understanding it."....