February 26, 2020
Unlawful Department of Labor Rule Will Make It Harder to Recover Stolen Wages for District Workers
WASHINGTON, D.C. – Attorney General Karl A. Racine today announced that he has joined 16 other attorneys general in filing a lawsuit to stop the Trump Administration from making it harder to hold companies accountable for violating labor laws. The coalition is challenging a rule issued by United States Department of Labor (USDOL) that revises what is known as the joint employment standard, a standard that determines when multiple businesses may be held accountable for wage theft and other workplace violations. This new rule unlawfully narrows the joint employment standard, undermining protections for low-and middle-income workers in the District and nationwide and potentially leading to increased wage theft.
The Fair Labor Standards Act (FLSA) is the federal law establishing a baseline of critical workplace protections, such as minimum wage and overtime, for workers across the country. The joint employment standard determines when more than one employer that exerts control over a worker’s employment can be held responsible under FLSA.
The joint employment standard is particularly important because of the growth of contract work. Over the past several decades, businesses have increasingly outsourced and subcontracted many of their core responsibilities to intermediary entities instead of hiring workers directly. Because these intermediary entities tend to be less stable, less well funded, and subject to less scrutiny, they are more likely to violate wage and hour laws.
In the suit, the coalition argues that USDOL’s new rule incentivizes businesses to offload employment responsibilities to smaller companies to shield themselves from legal responsibility for wage and hour obligations under the FLSA. This will result in lower wages and increased wage theft for workers, especially for workers in low-wage jobs. Further, the new rule will make it more difficult to collect unpaid back wages for workers.
The coalition asserts that Trump administration’s new rule limiting the joint employment standard directly undermines Congress’ purpose in passing the FLSA to protect workers. In the complaint, it argues that the USDOL violated the rulemaking process requirements, and that the rule violates the law by attempting to overturn a 75-year-old Supreme Court Decision via regulation. The coalition also argues that the rule would create significant regulatory burdens for states and harm residents. The coalition is urging the court to declare the rule unlawful and invalidate it.
AG Racine joined the lawsuit, led by New York Attorney General Letitia James and Pennsylvania Attorney General Josh Shapiro, along with the attorneys general of California, Colorado, Delaware, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, New Jersey, Oregon, Rhode Island, Vermont, and Virginia.
What is Wage Theft?
Wage theft is the illegal practice of denying workers wages or benefits they have earned. Some examples of wage theft include paying workers less than the minimum wage, refusing to pay overtime, or misclassifying employees as independent contractors. Wage theft affects millions of workers nationally and occurs across job types and income levels, though immigrants and workers in low-wage jobs are particularly vulnerable.
Under the District’s wage and hour laws, businesses must pay employees a minimum wage of $14 per hour (rising to $15 per hour in July 2020), provide overtime pay, and allow workers to accrue paid sick leave. Businesses must also follow legal requirements governing which workers must be considered direct employees and which may be categorized as “independent contractors.” Worker misclassification is a form of payroll fraud used by unscrupulous companies to illegally reduce costs, evade paying their fair share of payroll taxes, and strip workers of labor protections. The District’s Workplace Fraud Act, which applies to the construction industry, requires companies to classify most workers as employees. Those who violate the law can face significant monetary penalties.
OAG’s Increased Efforts to Protect Workers
In 2017, OAG worked with the Council of the District of Columbia to gain independent authority to investigate and bring wage theft cases, and to increase penalties on employers who violate the District’s wage and hour laws. Since then, OAG has launched more than 30 investigations into wage theft and payroll fraud and has taken action against a home health care provider, KFC franchises, a cell phone retailer, a cafe chain, multiple construction companies, and other businesses that harmed District workers. AG Racine also recently testified before Congress and highlighted findings from an OAG report about how worker misclassification hurts workers, undercuts law-abiding businesses, and cheats taxpayers.
Workers can learn more about their rights under District law at: https://oag.dc.gov/workers-rights
Workers who have experienced wage theft or other wage and hour violations can contact OAG by phone at: (202) 727-3400.