Thoughts: 5.11.17–6.12.17

Providing Continuing Guidance on Misclassification and Joint Employment in a Fissured Workplace  [6.12.17]

On June 7, 2017, the Trump Administration leadership at the U.S. Department of Labor pulled down two important guidance documents that were issued when I served as President Obama’s Administrator of the Wage and Hour Division.  These guidance documents, called Administrator’s Interpretations, deal with critical issues related to the fissured workplace: misclassification of workers as independent contractors and joint employment responsibility of employers in business organizations.

The Department of Labor announcement of the decision to remove the two documents was notably terse:

The Department of Labors 2015 and 2016 informal guidance on joint employment and independent contractors were withdrawn effective June 7, 2017. Removal of the two administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act or Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the Department's long-standing regulations and case law. The Department will continue to fully and fairly enforce all laws within its jurisdiction including the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.

We issued Administrator’s Interpretations as guidance to help employers understand their responsibilities under the law.  In response to frequent requests, we not only sought to clarify those responsibilities, but also to provide multiple examples to make them more clear and easily applied to specific circumstances.  That, in our view, is what a responsible law enforcement agency does to achieve its mission of improving labor standards through increasing compliance.  Media coverage and discussion of the misclassification and joint employment guidance was intense, but reflected the desire for clarification of these issues as well as their importance to the regulated community.

As the Department’s statement above makes clear, these documents are about guidance and never represented new statements of policy. The underlying laws, regulations, and case law remain unchanged and employers remain responsible for following them, particularly because workers have a private right of action under the Fair Labor Standards Act.  

Since it is therefore clearly in the interest of assuring compliance with our labor standards for workers and responsible employers, I am posting both guidance documents in their original form here where they will remain.
Relevant Documents
Administrator Interpretation on Misclassification 2015. Download pdf.
Administrator Interpretation on Joint Employment 2016. Download pdf.

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Want to know if a job is safe? The government should let you find out. 

Wouldn’t it make sense to be able to find out before applying for a job in a dangerous industry, which firms have a safe record, and which do not? The Obama administration thought the answer was “yes” and proposed a system to provide easy accessibility to workplace safety information via the web. Read more of this Op-Ed piece by David Michaels and David Weil, published on The Hill on 5.30.17.

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A New Era for

Both as an academic researcher and as President Obama’s head of the Department of Labor’s Wage and Hour Division, the agency responsible for enforcing our nation’s most basic labor standards, I have watched this story of what I call the “fissured workplace” unfold. In geology, a fissure in a once solid rock both deepens and spreads. Once an activity like janitorial services or housekeeping is shed, the secondary businesses doing that work deepen the fissures even further, often shifting those activities to still other businesses. The farther down in the fissure one goes, the slimmer the profit margins and the greater the incentives to cut corners. At my former agency, we saw this fissuring result in the failure to pay janitors, cable installers, carpenters, housekeepers, home care workers, or distribution workers the basic wages and overtime they had earned—losses typically equivalent to losing 3-4 weeks of earnings.

But fissuring not only undermines compliance with basic labor standards.  It muddies responsibility for health and safety, raising the likelihood of injury, illness, and even death at the workplace.  Even more, it unwinds the basis for social safety net policies that protect against the downside risks of the labor market such as workers compensation and unemployment insurance.  When you work as an employee for a major business, decades of research shows your wages and benefits tend to get a bounce, regardless of whether that large employer is a union shop or not.  But if you’re cut off, you’re suddenly no longer a member of the corporate family. Earnings fall significantly when a job is contracted out—even for identical kinds of work and workers.  Opportunities for “climbing the ladder” fade because the person in the mail room (or, more likely, at the IT service desk) is now a subcontractor without a pathway. That not only means lower wage growth and reduced access to benefits, but also diminished opportunities for on-the-job training, access to valuable social networks, and other pathways to upward advancement.  Taken together, the fissured workplace contributes to growing earnings inequality.

A great deal of research is being done about the growth, impacts, and extent of the fissured workplace, not only in the US but around the world.  At the same time, government agencies at all levels, worker advocates, unions, and other civil society groups, and progressive businesses are trying different ways to address these profound changes. The will attempt to pull this growing body of research, data, reporting, and experience together.  We urge you to follow us on twitter as well as use this site for updates, commentary, and links on this pressing issue.