The Trump Administration, yet again, seeks to weaken the rule of law to benefit companies at the expense of low wage workers.
Jonathan Rose is a Senior Research Advisor for US Policy at Oxfam America.
Earlier this month, the Department of Labor announced its retraction of two critical pieces of recent administrative guidance: the first on employee misclassification and the second on joint employment . Behind this complex jargon is an anti-worker policy that makes it easier for companies to avoid their basic employer responsibilities.
At the core of the issue is the phenomenon of contingent work in the United States. A contingent worker is employed by a company on a non-permanent basis, where the work is generally part time or contractual (including when the person is employed by a third party who is then offers services). Employers often use contingent workers because they are able to pay less, offer fewer benefits, and skirt many responsibilities.
Consider hospital janitors, who work through a contract firm, earning just above the minimum wage, and do not receive employer-sponsored health insurance. Or workers in food processing plants, who are technically employed by a temp agency, even though they have worked at the plants for years, and earn less per hour than directly employed colleagues doing similar work. Or truck drivers who are misclassified as “independent contractors” even though they are hired and have the responsibilities of full-time employees.
Why is contingent work bad for low-wage workers? First, contingent workers usually pay higher taxes on their earnings and receive fewer benefits, all while having insecure jobs. Contingent workers who are independent contractors pay double for Social Security and Medicare taxes, because a direct employer would generally pay half of these taxes, which adds up to an additional 7.65 percent in tax. Moreover, contingent workers rarely have access to health benefits from their employer.
Second, there is a race to the bottom on wages in a way that does not occur when workers are directly employed by companies. Under the old system, a direct employee had established wages that increased from year to year and were often “lifted up” by the success of the firm. Once these companies shed these direct employment relationships and hired contractors for such roles as janitorial and cafeteria services, wages and benefits for those workers were often on the chopping block due to the highly competitive market in which the companies offering these services function. There are other negative effects as well, including the inability of contingent workers to organize (due to conditions on their employment status or precarious employment situations), and the challenges for government, trade unions and civil society to monitor the working conditions.
The administrative guidance revoked by the Trump administration sought to prevent employers from avoiding their most basic responsibilities (I would provide a link, but they are no longer available on the DOL website.). The first addressed misclassification of workers as independent contractors, which is especially common in the construction industry, but also found in many other low wage industries such as transport, agriculture, home care, and building maintenance. While many workers are legitimate contractors, and some prefer the flexibility of this arrangement, millions of others do the same work as regular employees but are placed under this alternative category. By playing the system this way, employers avoid paying taxes – estimated at $3,710 for a worker who earns $43,007 per year. They also deny workers the right to become union members and to earn overtime wages. The second addressed the issue of joint employment. The directive basically states that companies that effectively control the work life of an employee must bear responsibility for violations of labor law. For instance, food processing plants that hire full time workers at a temp agency should be liable under the law. Other common examples are in franchise industries such as fast food and hospitals, where franchisors set strict policies for the local units but take no responsibility for the workplace conditions in those units.
Unfortunately, the removal of this administrative guidance signals a broad trend of the Trump administration to favor management at the expense of workers. Instead of being a nation that prioritizes the ‘rule of law’, it shows that this administration will help companies skirt the law, even when some of poorest and most vulnerable workers are the victims.