DOL Ramping Up Investigations of Employers That Use Independent Contractors, Temp Agencies
Author: Michael Cardman, XpertHR Legal Editor
March 6, 2015
Federal enforcement of wage and hour laws is evolving in a way that may give comfort to more traditional employers but give pause to those that use a more flexible workforce.
The US Department of Labor's Wage and Hour Division (WHD) recently released new statistics showing that it "proactively" initiated more than 43 percent of its investigations last year, rather than launching them based on receiving a complaint - a notable increase over five years ago, when only 35 percent of investigations were launched on the WHD's own initiative.
That's significant because the WHD targets these enforcement efforts at what it calls fissured industries, in which the use of franchising, independent contractors, subcontracting and third-party intermediaries such as temporary employment agencies or labor brokers has distanced employers from their workers. These targeted industries include restaurants, hotels and motels, residential construction, janitorial services, moving companies, agricultural products, landscaping, health care and home health care services, grocery stores and retail stores.
The proportion of innocent employers that are subjected to an investigation has declined as WHD has focused its approach. It found that workers had been underpaid in 78 percent of its agency-initiated investigations in fiscal 2014, up from 65 percent in fiscal 2009.
"These measures show that we are investigating the right industries, and within those industries we are looking in the right places," WHD Administrator David Weil stated.
The nation's most populous state also concentrates some of its enforcement efforts on particular industries rather than casting a wide net.
A coalition of California agencies called the Labor and Enforcement Task Force (LETF) has been focusing on "underground employers in high-risk industries known to frequently abuse the rights of low wage workers" such as car wash, restaurant, garment manufacturing, roofing, construction, agricultural and auto repair businesses.
Since it was launched in 2012, the LETF has inspected 4,300 businesses, of which more than 80 percent were assessed penalties for noncompliance, according to a report released March 5.
Government agencies often justify their enforcement actions by saying that they not only help employees but also level the playing field for employers that put in the time and money to comply with the law.
"Employers in the underground economy are a threat to the financial security of millions of workers in our state who aren't paid properly and are exposed to dangerous working conditions. These underground operations also have an unfair advantage over legitimate, law-abiding employers," said Christine Baker, director of the California Department of Industrial Relations, which oversees the LETF.