Liability for Back Wages Extends to Joint Employers

Michelle Galbraith, J.D.; HR Adviser, CalChamber, recently reported on liability for back wages. In the mid-1800s, a new form of industry arose that allowed corporations to minimize labor expenses while also limiting their exposure to liability for unsafe workplaces: the sweatshop. Corporations would hire a middleman — a “sweater” — to supervise workers who labored in poor conditions for very low wages. “By contracting with a ‘sweater’ to employ the workers, corporations were able to distance their brands from the unseemly conditions,” said Erika Frank, vice president of legal affairs and general counsel for CalChamber, “and of course protect their bank accounts from liability for the illegal labor practices that supported their operations.”

In response, states adopted rules recognizing joint employment, imposing liability not just on the middlemen, but also on the deeper pockets of the corporations who ultimately benefited from the workers’ efforts. Today, joint employers are each responsible for ensuring that workers receive all the rights and benefits — such as wages, sick leave and leaves of absence — to which they are entitled. And when a violation of those rights occurs, the worker can file a claim against both employers.

“It’s therefore important for workers and employers to have a clear understanding of when joint employment liability might arise,” said Frank.

To that end, in January 2020, the U.S Department of Labor (DOL) published a Final Rule on the issue of joint employment, with a stated goal of providing clarity to employers and employees as to when two employers will be considered joint employers. A recent decision by a federal district court in New York, however, has held that portions of that Final Rule are fatally flawed (State of New York, et al., vs. Scalia, et al., No. 1:20-cv-1689-GHW, Memorandum Opinion and Order (2020)).

Joint Employment and the Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) is a federal law designed to protect workers from “substandard wages and oppressive working hours.” Workers can sue their employers for FLSA violations, such as failure to pay minimum wage or overtime.