Trump administration rule change would stymie workers’ suits against employers

“The Future of Work.”

It sounds so promising, with its emphasis on flexibility, app-based employment, and following your passion.  Some of that future is here now, and it’s not living up to the promise.

Workers misclassified as independent contractors lose out on valuable benefits.  Workers cobble together multiple “gigs” in a vain attempt to keep their financial heads above water.  And corporations make out like bandits by very effectively distancing themselves from any responsibility for their employees.

Now the Trump Administration wants to increase that distance.  They propose to do so by adopting new regulations that change how you determine when a top level corporation is sufficiently involved in an employee’s work, limiting a worker’s ability to sue them – not just the middleman – when those employees aren’t paid correctly.

Right now, there is a broad test used by courts to determine who is an employer when there is more than one possible answer to that question.  The proposed new rule would significantly narrow that test – making it much harder for workers to go up the food chain and sue the entity that may be most responsible for the wage violation.  Not unexpectedly, that higher level company may also be the only one who can afford to pay the workers who have been cheated.

In 2014, dozens of hardworking janitorial employees who cleaned Durham schools learned that the subcontractor who employed them had declared bankruptcy and would not be paying them their final two weeks of wages.  Not only that, but the workers were owed overtime and back wages for underpayment of the promised hourly rate.

Because these workers were jointly employed by the school system and the higher level contractor, as well as their bankrupt subcontractor, they were able to reach a settlement and receive back wages.  Had the proposed new rule been in effect at the time, it is unlikely these workers would have been able to recover anything, since the contractor and school system who contracted out the work would probably not be considered employers who were responsible for ensuring the workers were properly paid.

Temporary workers and those who work through staffing agencies will be particularly impacted if the proposed joint employer rule goes into effect.  In North Carolina, temporary employment has grown faster than in the nation as a whole, increasing by 52 percent between 2009 and 2014.[1]  Temporary and staffing work has particularly increased in low-wage, “blue-collar” occupations, especially in more hazardous industries such as construction, manufacturing and logistics.

If the joint employer rule goes into effect, it will incentivize the use of temporary, staffing, and subcontracted workers rather than direct hires because it will protect companies from liability.  This is a problem because these so-called “contingent” workers earn considerably less money than permanent, direct-hire workers.  Contingent workers lose out on training, benefits, and overtime pay.  The janitors employed by the cleaning subcontractor in Durham, for example, received no vacation pay and a much lower hourly wage than those workers hired directly by the school system.

American agriculture provides a stark example of the consequences of letting higher level employers ignore their responsibility for workers.  Most farmworkers in North Carolina are employed through farm labor contractors, who typically act as joint employers of the workers together with the farm where the crops are planted, cultivated, and harvested.

The crewleader system has existed for decades in the United States.  In 1963, Congress passed the Farm Labor Contractor Registration Act (FLCRA), which tried to end the historic abuses of farmworkers by regulating farm labor contractors.  FLCRA was ineffective, largely because growers were not accountable for violations.  Recognizing the importance of establishing responsibility and liability for growers as employers, Congress replaced the FLCRA with the Migrant and Seasonal Agricultural Worker Protection Act (AWPA) in 1982.

Unfortunately, the crewleader system has been newly reinforced by changes in the regulations governing the H-2A visa program, which allow farm labor contractors to petition the government for visas on their own, rather than requiring the fixed site grower to apply.  Since the government has allowed growers to distance themselves from the employer relationship with H-2A workers, we have seen a steady increase in illegal living and working conditions for these workers in North Carolina.  The problems usually include failure to pay the required wage rate.

In a purported attempt to clarify who is an employer, the government is actually erasing decades of law that place responsibility for working conditions on every party to the employment relationship.  Workers, franchisees, subcontractors, and others who will be adversely impacted by this effort to undermine the employer/employee relationship should speak in opposition to the Trump Administration’s proposed joint employer rule.

[1] The Age of Contingent Employment: How changes in employment relationships are impacting worker wages, power, and prospects, North Carolina Justice Center, 2015, available at https://www.ncjustice.org/wp-content/uploads/2018/11/WRP_CONTINGENT-WORKERS-report-NEW.pdf, p. 13.

Carol Brooke is a senior attorney with the N.C. Justice Center’s Workers’ Rights Project.