CEI Statement on New Joint Employer Regulations

CEI labor policy expert Trey Kovacs criticized today's sudden announcement from labor regulators imposing new joint employer liabilities.

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. The maneuver by the Department of Labor – an “administrator’s interpretation” – takes a page out of the National Labor Relations Board's playbook by unilaterally expanding what is known as joint employment liability.

The new DOL enforcement effort will deem more employers jointly liable for minimum, overtime and employee classification violations of other employers with whom they contract. In addition, 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 new regulator-imposed liabilities will have a ripple effect nationwide. Businesses will be less able to outsource and use contractors and thus less able to quickly adjust labor needs up or down. They will be forced to bring non-core functions in-house and make other changes to account for invariably higher labor costs. That means less time and resources devoted to a business’s core functions. 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. With such a massive shift in the employment law landscape, the public and affected parties deserved to get prior public notice and a period of time to comment on how the new joint employment liability standard will impact future operations.

For background on the joint employer issue, see NLRB Joint Employer Decision Creates Barrier to Job Creation.