Federal labor officials issued a new interpretation of traditional employment law Wednesday that could make employers liable for wage violations against employees they do not directly employ.
The 1938 Fair Labor Standards Act (FLSA) dictates how employers must treat their workers. It establishes minimum wage, overtime pay and youth employment standards. The Department of Labor (DOL) issued a new interpretation of the law effectively making it easier for a company to be held liable for the employment violations of another company if the two businesses have a contract with one another.
“The interpretation identifies common scenarios in which two or more employers jointly employ an employee and are thus jointly liable for compliance,” a DOL notice detailed. “It pulls together all the relevant authorities – statutory provisions, regulations, and case law – to provide comprehensive guidance on joint employment.”
The new interpretation expands what is commonly known as joint employer liabilities. Competitive Enterprise Institute scholar Trey Kovacs notes the change furthers efforts by the National Labor Relations Board (NLRB) to expand a similar area of labor law known as the joint-employer standard.
“President Obama’s labor regulators today abruptly made it known they will hold more employers liable for wage violations against employees they do not directly employ,” Kovacs told The Daily Caller News Foundation. “The DOL plans to hold the larger company responsible for ensuring other smaller employers, like contractors, comply with the newly interpreted law and hold them financially responsible for penalties if a contractor goes out of business.”
The joint-employer standard dictates when multiple companies that contract with another must be declared a single employer. It has traditionally been based on whether one company has direct and immediate control over the employees of another. The control could be over wages, benefits or other employment factors. The expanded joint-employer standard now considers factors beyond just employment.
“The new regulator-imposed liabilities will have a ripple effect nationwide,” Kovacs continued. “Businesses will be less able to outsource and use contractors and thus less able to quickly adjust labor needs up or down.”
The DOL and NLRB have denied working together on the policy despite the similarities in their rule changes. Congressional Republicans renewed their inquiry Tuesday into an alleged multiple-agency effort to change employment law after receiving information that conflicts with what agency officials have said.
“That means less time and resources devoted to a business’s core functions,” Kovacs continued. “The end result will be fewer jobs created and fewer opportunities for entrepreneurs. Worse, the DOL is bypassing the regulatory process that is supposed to give people a chance to comment on big changes to existing rules.”
The DOL did not respond to requests for comment by TheDCNF.
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