Today, EPI Director of Policy Heidi Shierholz and Director of Government Affairs Celine McNicholas submitted comments to the Wage and Hour Division of the U.S. Department of Labor (DOL), opposing the DOL’s proposed joint-employer standard under the Fair Labor Standards Act (FLSA). The rule, Shierholz and McNicholas find, would cost workers more than $1 billion annually. The more-than-$1 billion in losses would occur both because the rule would incentivize workplace “fissuring,” which depresses wages, and because it would lead to workers experiencing greater wage losses due to wage theft.

The FLSA is our nation’s fundamental worker protection statute, providing wage and hour protections to the vast majority of U.S. workers. The authors explain that it was drafted broadly, creating employer coverage to ensure that companies that use staffing, temp, or subcontractors in their business operations are held accountable for complying with the FLSA’s basic provisions, including minimum wage, overtime, and child labor protections. Under the proposed joint-employer rule, a subcontractor would be solely responsible for violations of the FLSA.

“The proposed rule would make it nearly impossible for many workers to enforce their workplace rights and will completely take away the ability of workers to recover unpaid wages from firms who use subcontractors in their work,” said McNicholas. “This rule serves only the interests of large corporations—creating an incentive for them to outsource to temp and staffing companies—and enabling them to escape responsibility under the FLSA.”

The new rule would also encourage workplace “fissuring,” i.e. employers increasing their reliance on contractors, temporary help agencies, and franchises rather than hiring employees directly. EPI estimates that an increase in workplace fissuring, as a result of the rule, would result in a transfer of at least $954.4 million from workers to employers annually.

The proposal would also severely limit the ability of millions of workers to recover unpaid wages. Further, there would be a reduction in wage theft deterrence as a result of the rule—which would likely lead to an increase in wage theft. EPI estimates that the proposed joint-employer rule would cost workers more than $138.6 million due to increased wage theft. In total, EPI estimates that each year, workers will lose more than $1 billion as a result of the rule.

“The Department of Labor’s mission is to foster, promote, and develop the welfare of American wage earners, but this rule would strip away important worker protections and make it easier for employers to steal from workers’ paychecks,” said Shierholz. “We urge the DOL to abandon this flawed rulemaking and ensure a meaningful joint-employer standard under the FLSA, and fulfill its obligation to support American workers.”