Press Release  AG Healey Sues U.S. Labor Department for Undermining Workers, Enabling Wage Theft

Boston — Attorney General Maura Healey today joined a multistate group of 17 attorneys general in filing a lawsuit challenging the U.S. Department of Labor’s (DOL) decision to scrap a rule that holds employers jointly accountable for wage theft. 

In the lawsuit, the attorneys general challenge DOL’s extreme narrowing of the definition of joint employer under the Fair Labor Standards Act (FLSA) with a new rule that limits the liability of employers who share workers with another employer. The attorneys general contend that with the new rule, DOL relies on outdated analysis, and ignores existing law, as well as the changing nature of today’s workplace relationships.

“This new rule will allow employers to shield themselves from liability and make it easier to steal from workers,” said AG Healey. “In the midst of a changing economy, we need more tools to protect workers and fight wage theft, not an illegal rollback of existing laws.”

The attorneys general argue that the new rule is contrary to the FLSA’s purpose: to protect workers from overwork and underpayment. Under the rule, employers would only be liable for wage theft if they actually exercise their authority to hire, fire, and supervise their workers, thereby removing liability from other types of employers, such as third-party management companies, labor brokers, staffing agencies, and subcontractors. This interpretation ignores the changing nature of today’s workplace relationships, by which a growing number of companies are outsourcing integral business functions while still maintaining control over working conditions. The attorneys general contend these employers should be held responsible for wage theft under the old rule and existing caselaw, even if they do not directly hire, fire or supervise the employees. By narrowing the scope of the joint employment, the DOL’s change would leave millions of workers vulnerable to unchecked violations of federal and state labor laws.

According to the lawsuit, this rule change would harm Massachusetts by:

• Reducing the state’s tax revenue by increasing the likelihood of employer payroll fraud.
• Increasing the likelihood of minimum wage, overtime, and other labor law violations.
• Increasing the burden of administrative, investigatory and enforcement costs.

In May 2019, AG Healey co-led a coalition of 19 states in sending a comment letter to DOL opposing this rule. Massachusetts has held employers jointly accountable for wage and hour violations based on existing caselaw interpreting joint employment under the FLSA. The AG’s Office cited UnWrapped Inc. for its role in a labor scheme that deprived wages to hundreds of workers and, in  a related case, took action against the three staffing agencies that supplied workers to the company. The AG’s Office cited Shield Packaging Inc. for using staffing agencies to pay its workers in attempt to protect itself from liability for allegations of wage theft leveled against the company. The AG’s Office also reached a settlement with the commercial laundry company Bay State Linen and its owner in which they agreed to pay up to $900,000 in restitution for alleged violations of the state’s minimum wage and overtime laws based on joint employer liability.

If the federal standard fails to encompass companies that pay for subcontracted employees while also controlling the terms of employment, the attorneys general argue that gaps in legal compliance will inevitably increase, leaving workers at greater risk of exploitation.

Joining AG Healey in filing today’s lawsuit, which was co-led by the attorneys general from New York and Pennsylvania, and include the attorneys general from California, Colorado, District of Columbia, Delaware, Illinois, Maryland, Michigan, Minnesota, New Mexico, New Jersey, Oregon, Rhode Island, Vermont, and Virginia. 

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