Yesterday, SWACCA submitted comments opposing the U.S. Department of Labor’s proposed rule to narrow the scope of joint employer liability under federal wage and hour law. SWACCA’s comments object to making it more difficult to hold prime contractors and higher-tier specialty subcontractors liable when labor brokers they utilize misclassify workers as independent contractors or otherwise fail to compensate them in accordance with the Fair Labor Standards Act (FLSA) and other federal, state, and local laws.
SWACCA explains that joint employer liability is “essential in industries like construction to permit recourse up the contracting chain,” rather than limiting liability to “thinly capitalized labor brokers” who “just declare bankruptcy and reincorporate under another name” while continuing to compete against SWACCA members and other law-abiding contractors. The comment letter further explains how narrowing the current scope of joint employer liability would encourage greater reliance on labor brokers and details the significant and unfair competitive advantage such firms gain by failing to pay overtime, required taxes, and other costs associated with maintaining a properly classified and compensated construction workforce.
SWACCA also argues that the proposed rule is inconsistent with court decisions interpreting the FLSA. In addition, the comments explain how reducing joint employer liability and encouraging greater use of labor brokers that exploit undocumented workers is inconsistent with President Trump’s Executive Order 14406, “Restoring Integrity to America’s Financial System,” issued last month, as well as related implementing guidance discouraging business models that facilitate the use of workers not legally authorized to work in the United States and fail to properly withhold or remit payroll taxes.