Labor agency warns clients of temp staffing agencies
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 hassle and liability of adding payroll. 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.
David Weil, director of the Department of Labor’s Wage and Hour Division, calls this trend “fissuring.”
Weil thinks a lot of those client companies should be considered “joint employers,” together with the contractors that sign the checks, making them liable for violations.
On 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 it broadcasts its enforcement of egregious violations. 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 it can also be “horizontal,” when a worker might be employed by two subsidiaries of the same company but never get overtime because the hours are tracked separately.
The Obama administration’s aggressive stance on joint employment has irritated some large industries, particularly the franchise industry. Before seeing the Labor Department’s new guidance, the International Franchise Assn. didn’t like it.
“This is just another example of regulatory fiat that raises even more questions for employers,” said Matt Haller, the group’s senior vice president. “The admin- istration should consider going through formal rulemaking instead of just issuing a ‘ guidance’ without even an outreach to targeted industries.”
Not everyone is so disturbed. The staffing industry itself, for example, says that most of its clients recognize the joint employment relationship with no adverse effects.
“This should not be of concern to staffing clients, as potential liability for temporary workers is the same as ( and in some cases less than) liability for the client’s internal employees, and can be mitigated and controlled by clients,” American Staffing Assn. general counsel Stephen Dwyer wrote in an email. To avoid costly lawsuits, he says, clients should simply select labor providers with good compliance records.