ArticlePDF Available

Enforcing Labour Standards in Fissured Workplaces: The US Experience

Authors:

Abstract and Figures

The employment relationship in a growing number of industries with large concentrations of low wage workers has become ‘fissured’, where the lead firms that collectively determine the product market conditions in which wages and conditions are set have become separated from the actual employment of the workers who provide goods or services. Instead, the direct employers of low wage workers operate in far more competitive markets that create conditions for non-compliance. We examine this evolution in employment and its implications for public policy in the US, discuss the factors driving fissured employment and sketch its main features and outcomes. We then look at the traditional methods used for labour standards enforcement in the US and discuss why they are poorly suited to address fissured workplaces. Finally, we survey how public policies might better address the realities of the modern workplace, including efforts in this regard by the Obama administration.
Content may be subject to copyright.
The Economic and Labour Relations Review Vol. 22 No. 2, pp. 33–54
* Professor of Economics, Everett W. Lord Distinguished Faculty Scholar,
Boston University School of Management; Co-Director, Transparency Policy Project,
Harvard Kennedy School of Government
Enforcing Labour Standards
in Fissured Workplaces:
The US Experience
David Weil *
Abstract
e employment relationship in a growing number of industries with large con-
centrations of low wage workers has become ‘ssured’, where the lead rms that
collectively determine the product market conditions in which wages and condi-
tions are set have become separated from the actual employment of the workers
who provide goods or services. Instead, the direct employers of low wage workers
operate in far more competitive markets that create conditions for non-compliance.
We examine this evolution in employment and its implications for public policy
in the US, discuss the factors driving ssured employment and sketch its main
features and outcomes. We then look at the traditional methods used for labour
standards enforcement in the US and discuss why they are poorly suited to address
ssured workplaces. Finally, we survey how public policies might better address the
realities of the modern workplace, including eorts in this regard by the Obama
administration.
JEL Codes: J31; J38; J81; J88; K31
Keywords
Compliance; enforcement; ssured employment; labour standards; regulation.
1. Introduction
In recent decades, there has been a transformation of employment relationships
within those sectors employing low wage workers in the United States of America
(USA). e direct, two-party relationship assumed in federal and state legislation
and embodied in traditional approaches to enforcement no longer describes the
employment situation on the ground. Consider the following vignette.
A maid works in a well known, internationally-branded hotel. However,
the property where she works is owned by a Real Estate Investment Trust — a
legally established investment entity who is her employer of record. Her work
is supervised on a daily basis, her performance is evaluated, and the jobs hours
and payroll are managed by sta of a national, third-party hotel management
company. At the same time, her daily work routines regarding cleaning, room
34 The Economic and Labour Relations Review
set-up, and other work routines are set by standards established and monitored
by the hotel chain whose name the property bears. Where does ‘employment’
reside in this situation?
is vignette is not limited to the hospitality industry. As major companies
have invested in building well-known products as cornerstones of their busi-
ness strategy, they have also shed their role as the direct employer of the people
responsible for providing those products and services. In many cases, the jobs
have been shied to employers who pay low wages, seldom provide benets, and
frequently subject their workforce to conditions that violate wage and overtime,
health and safety, and other workplace protection standards. ese conditions
are not an inevitable result of the nature of those jobs, but a result of how those
sectors are organised.
Enforcement of labour standards in the millions of workplaces covered by
US laws has always been challenging. e agencies charged with labour inspec-
tions have limited budgets and stretched stang levels relative to their statutory
responsibilities. But this is not the crux of the challenge. Adding additional inves-
tigators is a necessary, but not sucient, requirement to address the regulatory
task. e fundamental changes in employment relationships require a revised
approach to enforcement, one that is built on an understanding of how major
sectors of the economy employing large numbers of vulnerable workers operate
and then using those insights to guide enforcement strategy. Just as the forces
driving compliance with labour standards have changed, so must the strategies
that agencies employ to improve conditions.
e employment relationship in a growing number of industries — particu-
larly those with large concentrations of low wage workers has become ‘ssured’,
where the lead rms that collectively determine the product market conditions
in which wages and conditions are set have become separated from the actual
employment of the workers who provide goods or services. Instead, the direct
employers of low wage workers operate in far more competitive markets that
create conditions for non-compliance. We examine this evolution in employment
and its implications for public policy in the US. We start by discussing the factors
driving ssured employment and sketching its main features and outcomes. We
then look at the traditional methods use for labour standards enforcement in the
US and discuss why they are poorly suited to address ssured workplaces. Finally,
we survey how public policies might better address the realities of the modern
workplace, including eorts in this regard by the Obama administration.1
2. The Fissured Workplace
Industry Concentration of Vulnerable Workers
It has been well documented that jobs with low wages tend to also have other
undesirable characteristics: few benets, high turnover, higher safety and health
risks, and limited opportunities for using voice, rather than exit, in dealing with
workplace problems. Not surprisingly, these jobs also tend to have some of the
highest rates of violations of basic labour standards as well as other workplace pro-
tections and rights (e.g. Carré et al. 2000; Bernhardt et al. 2008; Shulman 2003).
Enforcing Labour Standards in Fissured Workplaces: The US Experience 35
Bernhardt et al. (2009), in a landmark survey of low wage work in three
major US cities, documented high rates of violations with labour standards in a
number of low wage industries. Overall, 26 per cent of workers in their sample
were paid less than the required minimum wage; 76 per cent of the workers who
worked more than 40 hours in the previous week had not been paid the legally
required overtime rate; 70 per cent of workers who were asked to come in early
or stay aer their shi were not paid for that work and were subjected to retali-
ation by their employers for complaining in some way about work conditions.
Figure 1 presents estimates of the high rates of violation of standards regarding
o-the-clock work, overtime pay, and minimum wage requirements in many of
the industries discussed above.
Figure 1: Labour standards violation rates (per cent in violation) in selected
ssured industries
25.7%
22.3%
12.7%
18.2%
23.5%
12.4%
83.4%
62.6%
70.5%
67.7%
65.0%
73.6%
62.7%
70.0%
72.2%
74.2%
75.2%
87.5%
0.0% 20.0% 40.0% 60.0% 80.0% 100.0%
Retail and drug store
Security, bldg., grounds
Residential construction
Grocery stores
Home health care
Off the Clock
Overtime
Minimum wage
Source: Bernhardt et al. 2009
Not only do jobs in retail, food services, accommodation (hotel and motel), and
agriculture have high rates of labour standards violations, they also account for
a disproportionate share of low wage work relative to the number of people they
employ in the economy as a whole.2 us, while retail workers constituted 10.2
per cent of the total workforce, they made up more than 20 per cent of all low-
wage workers in the USA. Similarly, food and drinking services accounted for
6 per cent of employment but 12.5 per cent of all low-wage workers. Workers in
both accommodation (hotel and motel) and agriculture sectors accounted for
twice the proportion of low-wage workers that they represented in the economy
as a whole. Overall, these industries make up about 20 per cent of total US em-
ployment, but close to 40 per cent of the country’s low wage workers.
In contrast, construction contributed to about 5 per cent of all employment
in 2006, and about the same percentage (4.7 per cent) of the low-wage workers.
Workers in health care segments also accounted for about the same share of
low-wage workers as they did in the economy as a whole, while a slightly higher
share of low-wage workers (11.4 per cent) were found in manufacturing than
in the economy as a whole (9.4 per cent).
36 The Economic and Labour Relations Review
Industries with high levels of labour standards noncompliance and large
concentrations of low-wage workers are also a growing part of the US labour
market. Close to 30 million workers are employed in the retail and leisure and
hospitality industries in the US, the sectors employing the largest concentrations
of low-wage workers. ese sectors combined were projected to grow by almost
1.8 million workers between 2008 and 2018. Food services and drinking (the
major component of the leisure and hospitality sector) was projected to grow by
about 740,000 jobs over the same period (Woods 2009: 53, Table 4).
e factors responsible for the concentration of low wages and persistent
violation of labour standards arise from a variety of economic and social fac-
tors that have been widely discussed (Bernhardt et al. 2008). ese include
increasing levels of global competition; a large inux of immigrant (sometimes
undocumented) workers; changes in the organisation of work and in the struc-
tures of industries; and long-term declines in unionisation as well as workplace
enforcement by federal and state governments.
Although all of the above factors play signicant — albeit varying — roles, a
critical factor derives from the market dynamics and business strategies of the
sectors where those workers are concentrated. Lead rms in these industries
relate to other, subsidiary businesses in those markets in a distinctive way and
in so doing have altered the basic employment relationship.
Origins of Employment Fissuring
During much of the twentieth Century, the critical employment relationship was
between large businesses and workers in major sectors of the economy. Large
employers General Motors, US Steel, and Alcoa — dominated major sectors
of the manufacturing economy. Emerging industries also spawned giant compa-
nies: Kodak, IBM, and Xerox grew to be giants in their product markets and in
the labour markets where they drew their workforces. While the service sector
operated at a more local level, the national players that did emerge — Hilton and
Marriott in hotels, Macy’s and Sears in retail — similarly employed thousands
(Brown, Hamilton and Medo 1990).
Increasingly, however, the foci of employment shied away from being be-
tween major businesses and the workforce that made or delivered their products.
Large businesses with national and international reputations that operate at the
‘topof their industries continue to dominate the private sector landscape and
play critical roles in shaping competition in their markets. However, they no
longer directly employ legions of workers. Instead, like rocks split by elements,
employment has been ssured away from these market leaders and transferred
to a complicated network of smaller business units. Lower-level businesses typi-
cally operate in more competitive markets than those of the rms that shied
employment to them (Weil 2010).
Fissuring of this kind has been accomplished via the growing use of a wide
variety of organisational methods: subcontracting, franchising, third-party man-
agement, changing workers from employees to self-employed businesses, and
related contractual forms that alter who is the employer of record or make the
worker-employer tie tenuous and far less transparent (Carré et al. 2000; Stone
Enforcing Labour Standards in Fissured Workplaces: The US Experience 37
2004; Ruckelshaus 2007; Zatz 2008). Lower-level businesses operate in typically
more competitive markets, going head to head with other rms that also are
seeking to provide services or goods to the lead rm or are in the network of
one of the lead rms top-level competitors.3 More intense competition creates
pressure to lower costs, particularly the most sizeable cost and the one most
easily controlled: labour.
Multiple motivations underlie ssuring. In some cases, it reects a desire
to shi labour costs and liabilities to smaller business entities or to third-party
labour intermediaries, such as temporary employment agencies or labour brokers.
Employers have incentives to do so for obvious reasons. As has been documented
in numerous studies, shiing employment to other parties allows an employer
to avoid mandatory social payments (such as unemployment and workers com-
pensation insurance, or payroll taxes) or shed liability for workplace injuries by
deliberately misclassifying workers as independent contractors. Misclassication
of this sort is a major problem, particularly in industries like construction and
janitorial services (Carré and Wilson 2004; General Accounting Oce 2009).
However, ssuring does not always arise from such direct and pernicious
motivations. Some ssuring reects technological developments that allow busi-
nesses to focus more productively on core competencies while shedding activities
not central to the rm’s operation. With the falling cost of coordination arising
from information and communication technologies, productive reconguring of
the boundaries of companies and entire industries naturally occurs and creates
opportunities for new strategies.
Building Blocks
Employment ssuring represents the intersection of three business strategies, one
focused on revenues, one on costs, and the nal one providing the ‘glue’ to make
the overall strategy operate eectively. First, in terms of revenues, companies in
a wide variety of sectors have learned the competitive advantage arising from
creating distinctive brands and identities for products and services. A success-
ful brand creates a more loyal customer base more willing to pay premiums for
products and services. Branding strategies require rms to create quality and
performance standards to assure that the qualities underlying the brand are
consistently achieved.
e intention to reduce costs — the second element of ssuring — shis out
the production of services or goods to other business enterprises. is has the
impact of allowing lead companies to lower their costs since externalising activi-
ties to other rms operating in more competitive markets eliminates the need
to pay higher wages and benets that large enterprises typically provide. It also
obviates the need to establish consistency in human resource policies since they
no longer reside inside the rm. is aspect of ssuring also pushes liability for
adherence to a range of workplace statutes (and other public policies) outward
to other businesses.
Clearly, there is a tension between the two strategies: by shiing the provi-
sion of services to other businesses, companies that have created brands may
jeopardise them if quality standards are not adhered to closely. e third element
38 The Economic and Labour Relations Review
of ssured organisations is, therefore, the use of organisational structures and
practices that allow the lead rms to promulgate, monitor, and enforce brand
standards that the enterprises at lower levels must follow. ese requirements also
operate through organisational formats like franchising and licensing designed to
create mechanisms to align the interests of lead and lower-level organisations.
The Revenue Side of Fissuring: Building Brands and Pricing Premiums
Enhancing revenue streams through product dierentiation and the creation
of market niches represents one side of ssuring strategies. In many of the
industries where ssuring is common — hotel/motel, food services, retailing,
and consumer products — major companies have sought to enhance the value
of their products and services to enhance revenue streams. In part, this reects
the pressures on publicly and privately-held businesses to increase protability
to satisfy investors’ target rates of returns.
Reputation-focused business strategy attempts to create a distinctive bond
with consumers around products and services (Keller 2008). Successful branding
allows a company to dierentiate its products in the minds of consumers who,
over time, become willing to pay a higher premium for them. Branding acts on
the revenue side of protability: the more successful the brand, the more that the
business can charge a premium and expand and retain its customer base.
Take the fast food industry. Companies like Burger King, Subway and Mc-
Donald’s spend millions of dollars each year creating a well-known brand for
their products. is strategy ts an industry where perceptions of the quality,
consistency, and variety of the product are critical to competitive performance.
By establishing a brand, a fast food company can dierentiate its product and
create a loyal customer base willing to buy the product, and in some cases pay
a premium for it, on an ongoing basis (Kaufmann and Lafontaine 1994). In the
fast food industry, return business is partly based on the customer’s belief that
the experience will be the same in any outlet of the company visited. e invest-
ment in brand name and protection of its image is therefore a central part of
the competitive strategy of national chains and an integral part of the way that
it makes operational decisions.
The Cost Side of Fissuring: Solving the Webbs’ Dilemma
e most autocratic and unfettered employer spontaneously adopts
Standard Rates for classes of workmen, just as the large shopkeeper
xes his prices, not according to the haggling capacity of particular
customers, but by a denite percentage on cost. (Sidney and Beatrice
Webb 1897: 281)
ere is a more subtle and fundamental reason underlying employment ssur-
ing, oen missed by analysts who see it only in terms of attempts to avoid legal
obligations or proponents who defend it as a positive reection of the modern,
exible business organisation. As the social scientists Beatrice and Sidney Webb
pointed out at the turn of the last century, large employers that dominated the
economy and labour market of the last century required unied personnel
Enforcing Labour Standards in Fissured Workplaces: The US Experience 39
and pay policies for a variety of reasons: to take advantage of administrative
eciencies; to create consistency in corporate policies; and to reduce exposure
to violations of laws.
In addition, unied employment policies particularly compensation poli-
cies — reduced frictions among workers: workers operating under one roof did
communicate and might quickly discover that the person sitting in the next
cubicle was being paid more for doing the same job. Paying individuals who did
similar jobs dierent wages could have deleterious consequences on productivity,
increase turnover, or even inspire a union organising drive.
ere is a large empirical literature that shows that wages within rms vary
far less than one would expect given the existence of considerable dierences in
productivity among workers (see Manning 2003, ch. 5 for a summary). Firms
move towards a single wage policy for workers of similarly observable skill/abil-
ity because of the negative consequences arising from having multiple rates for
workers who otherwise seem similar. Seniority-based pay is one imperfect way to
vary wages based on dierences in average productivity that strike most as ‘fair.
But ‘wage discrimination’ (à la price discrimination) is rare with large rms.
Imagine instead if a large employer found a way to pay each worker a wage
exactly equal to his or her value of production (that is, match the worker’s wage
to his or her marginal productivity). One way to do this without the internal
organisational problems discussed above is to restructure its basic contract with
workers so that the additional productivity of each worker hired is matched to
his/her wage rate, and that the wage rate paid to one party has no impact on
that paid to anyone else already employed (or potentially hired if production
is expanded). In so doing, the employer captures the dierence between the
individual marginal productivity and what would be the prevailing single wage
rate if it set one. Such a mechanism would benet the employer over the case
where it set a single wage rate for workers with similar job titles but variation
in productivity, or in cases where an employer’s wage policy impacts on the
market as a whole.
A related argument for shiing work outward is related to the (dis)incentive
eects of having large dierences in wage rates in internal labour markets. Even
if workers have diering skill levels and job assignments, equity norms in rms
may lead large employers to pay lower skill workers higher wages because of the
presence of higher paid workers whose compensation becomes a referent wage
within the internal labour market. Shiing those lower skilled jobs outward
can solve this problem. See Abraham and Taylor (1996) for a model and results
showing that the likelihood of outsourcing low skilled work is higher in rms
with high sklled occupations than in rms with only low-skilled occupations.
Stark and Hyll (2011) provide a related discussion.
What happens, instead, if the large employer shis the task of employing its
workforce to multiple smaller parties who, in turn, compete with one another to
obtain that large rm’s business? Each small rm would oer its workers wages
to perform work for the lead rm. As a result the lead rm would receive a price
for the contractors’ services or production rather than being required directly
to set and pay wages to individual workers who actually undertake the work. As
40 The Economic and Labour Relations Review
such, the larger employer creates competition for work among dierent purvey-
ors, and pays them based on its assessment of their contribution. Less ecient
producers could be paid less than more ecient producers. In this way, the lead
organisation faces a schedule of prices for services rather than wages for labour,
leaving the task of compensation to the individual providers of the service or
product. In eect, the big player devolves its employment activity to a network of
smaller providers. In so doing, it creates a mechanism — a competitive market for
services that in the past was handled internally through direct employment — in
the form of a network of service providers (subcontractors).
By shiing employment to smaller organisations operating in competitive
markets, the lead rm creates a mechanism whereby workers will only receive
a wage close to the additional value they create. At the same time, this avoids
the problem of having workers with very dierent wages operating under one
roof. e lead rm captures the dierence between the individual additional
productivity of each worker and what would be the prevailing single wage rate
if it set one. As a result, two workers on the same project may eectively end up
being paid very dierent wages, closer to something reecting their individual
marginal productivity than would be the case if they were in the direct employ
of the ‘parent’ organisation.
The Glue: Brand Standards
A brand is a recipe for a particular product or service image in the mind of
consumers,that, if successful, results in customer loyalty and a willingness to pay
a premium for it. Creating a distinctive brand requires signicant investment in
the image (involving product development, consumer research and, of course
advertising). But it also requires developing and promulgating standards for
all units of the company to follow to ensure that the product meets consumer
expectations once established. If delivery of the product is ssured o to other
entities (franchisees, licensees, third party managers or others), the need to
promulgate and assure adherence to standards is all the more critical.
In service-based industries like food and accommodation, standards describe
how the product is made, presented, packaged, served or presented and adver-
tised. Standards also proscribe the design, look, upkeep, and maintenance of the
outlet or property where the product or service is provided. ey also establish
the role of the lead rm in assuring maintenance of those procedures.
e importance of standards to branding can be seen in the agreements
that franchisees sign when they become part of a national chain. For example,
the franchise agreement with Taco Bell states, ‘You must operate your facilities
according to methods, standards, and procedures (the “System”) that Taco Bell
provides in minute detail’ (Taco Bell 2009). Similarly, Pizza Hut’s agreement lays
out the distinctive operational decisions that underlie the brand:
A broad spectrum of the general public patronizes [Pizza Hut] Restau-
rants as a source of high-quality pizza and related products and services.
A unique system characterizes Restaurants that consists of special recipes,
seasonings, and menu items; distinctive design, décor, color scheme, and
Enforcing Labour Standards in Fissured Workplaces: The US Experience 41
furnishings; standards, specications, and procedures for operations;
procedures for quality control; training and assistance programs; and
advertising and promotional programs … (Pizza Hut 2009)
Not surprisingly, the methods, procedures, and guidelines regarding the creation
of a good or provision of a service are the ‘crown jewels’ of a branded business.
e book of standards associated with fast food or hotel/motel brands are highly
condential documents that are only provided to franchisees aer they have
been approved. Monitoring mechanisms, contract terms, and high-powered
incentives (including, in the worst case, loss of the franchise) are associated with
adherence to those standards (Blair and Lafontaine 2005).
Implications
Fissured employment, drawing on the three pillars of branding, shiing out the
provision of work to other organisations, and promulgation and enforcement
of standards plays out in a variety of ways. e factors pushing for devolution
take dierent forms given the role that lead companies play in their particular
industry structure.
Table 1: Fissured employment in selected industries
Industry Lead rm/organisation Lower level entity
Eating and drinking Brands (franchisors) Franchisees/outlets
Hotel and motel Brands (franchisors)
Brand operators
Independent operators
Hotel/motel properties
Residential construction Major homebuilders Contractors/subcontractors
Janitorial services Building service providers/
Franchisors
Contractors/franchisees
Moving companies/logistics
providers
Branded national moving
companies
Subcontracted local movers; interstate
trucking companies; warehouses
Agricultural products —
multiple sectors
Food retailers
Major food processors
Farms; Farm labour contractors
Retail food stores (prepared
foods)
Major food retailers Franchised prepared food providers
Home health care services Major purchasers of home
health care services
Health care intermediaries; home
health care providers
Employment decisions in the industries in Table 1 have been devolved from
major employers to a complex network of smaller employers. Hence, the small
contractor trying to win residential carpentry or masonry work in a small geo-
graphic area competes against a multitude of other small contractors, which
creates intense pressure for it to lower costs, particularly the cost that is most
controllable and that dominates its income statement: labour. On the other hand,
the parties that set many of the conditions of competition — fast food chains
or major hotel brands — operate in environments that aord them a variety of
options with which to pursue protability.
42 The Economic and Labour Relations Review
3. The Limits of Traditional Enforcement in a Fissured
Landscape
e primary federal law governing labour standards in the US is the Fair Labor
Standards Act (FLSA) of 1938. e FLSA sets a minimum wage for covered work-
ers, currently set at $7.25 per hour; overtime pay at a rate not less than one and
one-half time the regular rate of pay aer 40 hours of work in a workweek; and
sets standards regarding the employment of younger workers.4 e standards
and associated regulations of the FLSA are enforced by investigators of the Wage
and Hour Division (WHD).
Like most workplace agencies, the WHD receives very limited resources
relative to the size and scope of US workplaces covered by the FLSA. Budgets
for enforcement by WHD have been limited for more than a decade. Annual
spending for enforcement by WHD (in real, 1982–84 $US) went from $72 mil-
lion in 1988 (at the end of the Reagan administration) up to $95 million in 2000
(at the end of the Clinton administration) and back down to $82 million in 2008
(at the close of the George W. Bush administration).5 Over the same time period,
the number of workplaces grew 11 per cent, from 6.94 million establishments
in 1998 to 7.71 million in 2007. e number of paid employees rose similarly,
by 11.5 per cent, from 108.1 million to 120.6 million (U.S. Department of Com-
merce 2008).
Long-term budget restrictions have constrained the resources made available
to agencies for enforcement. e number of investigators fell 22 per cent from
942 in 1998 to 731 by 2008. WHD investigations declined substantially from
49,521 investigations in 1998, the closing years of the Clinton administration,
to 23,848 in 2008 at the end of the Bush administration.
e reduction in investigations compared to the overall growth in establish-
ments meant that the ratio of investigations to establishment declined by about
53 per cent over this period. Not all establishments are covered by the FLSA so
this comparison is approximate. However, since it is likely the rate of increase
in covered establishments grew at about the same rate as overall establishment
growth, the estimated change in the rate seems a reasonable estimate of the de-
cline. As a result, the estimated annual probability of investigation at a workplace
in industries with high levels of ssuring is .0027 that is about 0.3 per cent.6
Even well-known employers faced little chance of seeing an investigator: the
annual likelihood that one of the top 20 fast food restaurants (e.g., McDonald’s,
Burger King, Subway) received an investigation in recent years is about 0.008
(Ji and Weil 2011). Employers can therefore operate under an expectation that
government investigators are simply not a matter of rst order concern.
Even if an employer faced an investigation, the consequences for being found
in non-compliance were minimal for most US employers over the last decade.
Employers who repeatedly or wilfully violate the minimum wage and overtime
requirements of the Act may be subjected to civil monetary penalties (CMPs) of
up to $1,100 for each violation. As a practical matter, this means in most cases
Enforcing Labour Standards in Fissured Workplaces: The US Experience 43
that a prior investigation must have occurred before a CMP can be imposed.
Since the majority of employers investigated by WHD are rst-time oenders,
the number of investigations that assessed CMPs as a percentage of all inves-
tigations is extremely low. Less than 2 per cent of all investigations 1998–2008
assessed CMPs. What is more, CMPs were oen not assessed even in the case
of reinvestigations that found repeat violations. Indeed, among reinvestigations
where repeat FLSA violations were detected, CMPs were assessed in only about 43
per cent of cases (Weil 2010). During the period 1998–2008, even in cases where
CMPs were assessed, the amounts that employers agreed to pay were frequently
substantially reduced from the amount initially set. For all cases concluded by the
WHD that had CMPs assessed, the CMPs ultimately determined to be collected
by the WHD were only 61 per cent of the total amount originally assessed, from
an average of $13,899 to an average of $9,218 (Weil 2010).
Deterrence theory predicts that the likelihood of an investigation together
with the cost of penalties for violations aect an employer’s assessment of the
‘benets and costs’ of complying with a law (Ashenfelter and Smith 1979). e
higher the expected penalty relative to the benets of not complying, the more
likely a rational employer will be to comply with the law. e above enforcement
estimates suggest that deterrence incentives have been low and declining over
the last decade, given the tiny and diminishing probability of investigations and
the small monetary penalties associated with violations.
Historically, the WHD measured its impact and was evaluated by the US
Congress and other oversight bodies by the amount of back wages it recovered
for workers. For the years 2003 to 2008, the average back wages recovered for
workers per investigation were $15,823.
7
However, this average includes only
those investigations in which monetary violations were found. If one includes
all investigations concluded in this time period, average back wages found due
were $8,838 per investigation. e large dierence is explained by the relatively
high percentage of investigations where no monetary violations of the FLSA
were cited. Between 2003 and 2008, about one-quarter (24.6 per cent) of all
investigations found no such violations.
Making sure that workers who have been underpaid — or not paid at all
receive the compensation they are entitled is, of course, important. But dening
recovery of back wages as the principal measure of agency success is problematic.
An apt analogy would be to occupational health and safety. Although workers
compensation policies provide benets to workers who have been hurt at the
workplace and whose earnings have been impacted, the ultimate objective of
health and safety policy is to prevent injuries and fatalities in the workplace,
not simply to ensure that those injured are compensated (as important as that
objective is). Enforcement that only resolves past noncompliance but does not
alter behaviour puts investigators on a hamster wheel: running very fast and
working very hard, but not advancing the larger aim of protecting and enhancing
the welfare of the workforce. e next section suggests an enforcement strategy
more appropriate for protecting employees in today’s ssured workplaces.
44 The Economic and Labour Relations Review
4. Enforcement Strategy for Fissured Workplaces
e modern employment relationship bears little resemblance to that assumed
in core US workplace laws. Improving conditions in the workplaces where the
most vulnerable people in the economy work requires navigating the complicated,
ssured environment laid out in this essay. Some aspects of the ssured world
have desirable aspects. For example, consumers benet from companies that
try to market goods and services that conform to their tastes. As well, there are
productivity gains from many aspects of rms focusing on core competencies.
On the other hand, the association of ssuring with poor employment condi-
tions represents a matter of public policy concern that cannot be remedied by
traditional enforcement (particularly as government will never be sucient).
Nor will it be addressed by empty appeals to the corporate social responsibility
of lead rms. e incentive system of ssured employment creates a landscape
that is sloped towards downward pressure on labour costs and non-compliance
with basic statutes. Governing a workplace characterised by ssured employ-
ment requires a dierent approach to thinking about the structure of workplace
laws and how they are administered. is is a major topic of its own which I
address elsewhere (Weil 2008, 2009, 2010). Several major categories of remedies,
however, can be identied here.
Reimagining Enforcement
Traditional enforcement strategies assume that enforcement eorts should focus
at the level where workplace violations are occurring (Weil 2008). Yet the forces
driving noncompliance in many industries arise from the organisations located at
higher levels of industry structures. Strategic enforcement should therefore focus
on higher-level, seemingly more removed business entities that aect the compli-
ance behaviour ‘on the ground’ where vulnerable workers are actually found.
Enforcement in a ssured industry requires creating a ‘map’ of business
relationships indicating the dierent players that drive employer behaviour.
e map, in turn, indicates which organisations ultimately must be considered
in developing investigation plans. An eating and drinking initiative should, for
example, include not only investigations of outlets with violations, but also of
other units owned by the particular franchisee. It would also include a systematic
analysis of all other investigations of the franchisor (brand) in question to detect
the presence of multiple instances of violations at other franchisees. Finally, it
could entail contacting the brand itself regarding the results of these investiga-
tions if it was clear that signicant violations extended beyond the boundaries
of any one franchisee or owner group.
Specic outreach could be geared to major brands depending on their prior
records of compliance. Major brands in those industries with good employ-
ment reputations and a positive record of system-wide compliance could be
approached to work with the WHD to be a leader in the industry and help
ensure compliance with workplace policies across their systems of franchisees (or
similar subordinate businesses). is would require generating clear, replicable
criteria about positive employment practices. ese could include transparency
Enforcing Labour Standards in Fissured Workplaces: The US Experience 45
in human resource policies, wage and benet policies that exceed industry aver-
ages, and objective evidence of worker satisfaction such as turnover levels below
industry averages. A cooperative agreement could include a commitment by the
brand to cascade information through its company-owned properties and outlets,
and to its franchisees, as well as a commitment to review employment practices
with franchisees when other franchise standards are being reviewed — with the
intention that such eorts could be a model for other progressive brands.
e ip-side would be to target several major brands that had a documented
history of systemic violations among its franchisees. ese brands could be
identied through evaluation of past investigation records. For example, in the
fast food sector, Ji and Weil (2011) nd signicantly higher back wage violations
among particular brands, even aer statistically holding constant other factors
that might also explain noncompliance. In particular, compared to typical outlets
of McDonald’s (which had the best overall compliance record among the top 20
branded companies studied), Subway, Domino’s Pizza, and Popeyes Chicken all
had back wages per investigation that were more than $8000 higher.
Once identied, workplace agencies could undertake broad and coordinated
investigations in multiple parts of the country and across multiple franchisees,
in order to establish the level of system-wide violations, and pursue statutory
penalties for those violations. In some industries, they could draw on the ‘hot
goods’ provisions of the FLSA that allows the WHD to embargo goods engaged
in interstate commerce where there have been violations of standards at some
stage of production process. is has proven a powerful tool where used to alter
supply chain behaviour (Leonard 2000; Weil 2005).
Equally important to a ‘top-focused’ strategy is developing dierent mecha-
nisms to improve systemic compliance in ssured employment structures. As part
of its process of resolving violations, the WHD could negotiate a comprehensive
agreement with the lead rm covering all outlets/properties. Such an agreement
would entail outreach, education, and monitoring. ese types of monitoring
arrangements, built on a combination of public enforcement pressure and private
monitoring systems, have proven eective methods of improving compliance
with minimum wage and overtime standards (Weil and Mallo 2007).
Fissured employment also requires changes in enforcement practices so that
they better support an objective of changing employer behaviour rather than
focus on recovery of back wages. Because of the inherently limited resources
available to stimulate behavioural change, enforcement activity must be thought
of in the context of their deterrent eects on lead rms and the network of
employers who work with them. It would include the selection of investigation
targets, coordination of investigation activities across employers in a ssured
industry, use of penalties, publicity surrounding activities, and the choice of
legal strategies including settlement agreements. is is not easy. Traditional
enforcement focused on short-term recovery of lost wages and on a particular
rm (or more oen individual establishment) — entails a very dierent set of
policies and activities than a behaviour-focused approach that seeks more sys-
temic change in the operations of rms and industries. Changing enforcement
strategy therefore requires reforming the structure of enforcement.
46 The Economic and Labour Relations Review
Harnessing Transparency to Forge a New Balance
An alternative (or complementary) strategy is to use transparency and hence
also public accountability to act on one of the key components underlying
ssuring: brand reputation. Business strategies based on reputation and the
maintenance of quality standards have become pervasive. ey make good busi-
ness sense; by creating strong consumer allegiances or by assuring tight quality
standards (or the combination of the two), businesses can expand market share
and create margins through higher pricing . is is a legitimate aim that is oen
benecial to the consumer.
However, these business strategies lead, in a growing number of cases, to
great sensitivity to any form of threat to image or disruption of carefully craed
standards. reats to these systems — private, public, or otherwise lead to busi-
nesses putting in place private systems to pre-empt the loss of reputation among
consumers or, more ominously, more onerous public interventions. Whether
one looks at Nike’s response to accusations that its shoes are being made in
sweatshops or at Wal-Mart’s responses to any number of labour, environmental,
or consumer campaigns, lead businesses are sensitive to reputational attacks.
Targeted transparency — the disclosure of standardised information about
organisations regarding their performance to serve a regulatory purpose — has
become widespread (Fung, Graham, and Weil 2007). Disclosure of informa-
tion regarding workplace practices in ssured industries could use the power
of transparency to create incentives for the creation of alternative methods to
address problems arising in ssured industries.
An interesting example of a public policy revealing variations in the per-
formance of a franchisee is the impact of transparency on restaurant hygiene in
Los Angeles County. Jin and Leslie (2009) show that, prior to the imposition of
mandated restaurant disclosure, franchisees within a brand had worse hygiene
performance than company-owned outlets in the same brand. Ji and Weil (2011)
show similar kinds of dierences in FLSA compliance between franchisees and
company-owned outlets of the top 20 fast food brands in the eating and drinking
industry. In 1998, LA Country required restaurants to publicly post grades, based
on restaurant hygiene inspections, on their front window. Along with improving
overall compliance with hygiene practices and a reduction in restaurant-related
hospitalisations, this public disclosure system led to a narrowing and ultimately
elimination of these discrepancies between franchisee and company-owned
behaviour within brands.
Reputation can therefore be a powerful source of regulatory pressure — even
without recourse to direct legal eorts to make lead rms liable. Since investiga-
tion records collected by the government are matters of public record, agencies
already make such information available. e information from WHD inves-
tigations, for example, could be mapped to indicate the relationships of the
workplaces that were inspected to the lead companies that had an overarching
role in their activities. Reports could be provided both to the lead entity as well
as disclosed on an ongoing basis via the Web. e report might also benchmark
one brand against other major brands in the same industry, based on similar
Enforcing Labour Standards in Fissured Workplaces: The US Experience 47
investigations over the same time period. e results could be linked to other,
similar reports on a publicly available web-page regarding the sector-based
initiatives. Although the disclosed information may lead some consumers with
particular interest in working conditions to avoid companies with poor records,
this need not be the only channel through which disclosure operates. If viola-
tions are perceived as indicators — or reasons — for compromised food or service
quality, disclosure creates incentives for lead rms to change practices in order
to protect the brand. is includes preemptive responses, which are frequently
the result of mandatory disclosure policies (Fung, Graham and Weil 2007).
Such an eort particularly if coupled with well targeted enforcement eorts
where clear lines of responsibility were illuminated could engender lead rms
to rethink relationships with subordinate companies, from simply providing more
information and training to them on responsibilities at one end of the spectrum
to creating monitoring systems or perhaps even pulling certain operations back
within the lead rm on the other. In the longer term, the use of transparency and
strategic enforcement could change the dynamics of how parent organisations
relate to lower-level organisations, leading these businesses to take a greater role
(and perhaps pay a higher price to subordinates) in assuring adherence to both
brand standards and compliance with workplace responsibilities.
Longer Term Policy Responses: Rethinking Employer Responsibility
A ssured employment relationship requires rst and foremost serious reconsid-
eration of how we think about responsibility for workplace conditions. ere is a
large body of legal precedent, rulemaking, and academic debate on the question
of joint employment and its interpretation under existing laws (see Ruckelshaus
2008; Rogers 2011; Stone 2004; Zatz 2009). A reexamination of denitions of
these questions particularly under the Fair L abor Standards Act which includes
a broad denition of ‘employ’ is warranted.
e FLSA provides a broad denition of the word ‘employ’. Goldstein et al.
(1999) argue that the Act’s denition, that ‘employ includes: “to suer or permit
to work” , not only covers direct employer-employee relationships (i.e., the
master-servant relationship described in the Common Law), but is a broader
denition that required only that the business owner have the reasonable
ability to know that the work was being performed and the power to prevent it.
us, work performed as a necessary step in the production of a product was
almost always suered or permitted by the business owner’ (Goldstein et al.1999:
984). is broader denition of employer responsibility has been used in the
past as the basis for creative policies in agriculture and garment.8
But the spread of ssured employment goes beyond past debates about joint
employment in part because it reects market and organisational developments
that were unforeseen by the craers of many federal and state workplace laws. A
clear example of this is the common law doctrine of vicarious liability. Vicarious
liability refers to liability imposed upon one party because of the actions of an-
other (Arlen and MacLeod 2005). Vicarious liability aects the degree to which,
in a principal-agent relationship, the principal attempts to inuence behaviour
by asserting more direct control on the agents’ activities.
48 The Economic and Labour Relations Review
is leads to some very complicated and sometimes contradictory incentives.
As Arlen and MacLeod (2005: 4) note,
… far from encouraging organizations to assert control, vicarious li-
ability oen discourages organizations from controlling their agents,
even when it would be ecient for them to do so. Vicarious liability
discourages the ecient exercise of control because organizations which
exert control over agents are likely to be deemed ‘masters’ and thus face
liability for their agents’ torts.
Reluctance to monitor behaviour of contracted entities can lead to profound
workplace problems. For example, in a study regarding the petrochemical in-
dustry, Rebitzer (1995) found that a series of major petrochemical explosions
and worker fatalities were linked to the use of independent contractors. Major
petrochemical companies used these contractors to undertake dangerous ‘turn-
around’ operations (which allow a plant to switch from one type of end product to
another). In order to reduce their exposure to liability claims, the petrochemical
companies distanced themselves from training and supervision of contractors
despite the potentially devastating impact of improperly performed work.
Several recent articles call for addressing the broader question of liability in
changing incentives that underlie outsourcing of work. Rogers (2010), building
on the hot goods provision of the FLSA and state legislation that emulates it,
puts forward a proposal based on a broad expansion of a duty-based test that
would expand employer responsibility to end-user rms who fail to exercise
due care in assuring that suppliers have complied with labour standards. Glynn
(2011) goes a step even further, arguing that the nature of ‘disaggregated’ employ-
ment requires abandoning ne grained arguments over immediate or extended
employer liability. He argues (2011: 105), instead, that ‘ … commercial actors
would be held strictly liable for wage and hour violations in the production of
any goods and services they purchase, sell, or distribute, whether directly or
through intermediaries’.
Given the current political climate in Washington, sweeping changes in li-
ability or even more modest changes to denitions of joint employment seem
unlikely for the foreseeable future. In the longer term, however, addressing the
question of whether companies legally can have it both ways seems fundamental
to changing the calculus underlying ssured employment.
Obama Administration Eorts in the First Two Years
In its rst two years in oce, the Obama administration has pursued strategies
in the US Department of Labor and the WHD in particular to address many of
the challenges discussed in this article. It signaled its intention to do so through
a number of initiatives, four of which bear particular emphasis.
First, it dramatically increased the number of investigators at the Wage and
Hour Division by 250 on a base of 730 and increased agency resources for en-
forcement from $82 million at the end of the Bush administration to $91 million
in the rst year of the Obama administration. Subsequent budget proposals
called for additional increases in agency resources.
Enforcing Labour Standards in Fissured Workplaces: The US Experience 49
Second, as part of its long-standing planning process along with the larger
strategic planning process for the Department, it explicitly targeted industries
with large concentrations of vulnerable workers, including many of the indus-
tries discussed in this article. e justication for this focus is based, in part, on
the propensity of those industries, given their organisation to be tilted towards
non-compliance (US Department of Labor 2010a). e 2012 budget proposal
includes appropriations for additional investigators to work with state govern-
ments to address misclassication of employees as independent contractors, a
particularly pernicious form of ssuring (US Department of Labor 2010a).
ird, the WHD has emphasised a variety of enforcement policies aimed
at enhancing deterrence. is includes an eort to increase use of the penalty
authority granted by the FLSA. ere has also been an eort to use related poli-
cies such as liquidated damages that raise the expected costs of non-compliance.
e FLSA provides that employers can be liable for liquidated damages in an
amount equal to the back wages. Unlike civil money penalties, liquidated dam-
ages are paid directly to the aected employees. As well, the WHD has been
reviewing the use of criminal sanctions for egregious violations of the law. e
FLSA provides for criminal prosecution for wilful violations. A conviction can
result in a ne of not more than $10,000, imprisonment for up to six months, or
both. Imprisonment is only upon a second conviction, however. Finally, there has
been coordinating of investigations across WHD oces for targeted initiatives in
specic industries (US Department of Labor, Wage and Hour Division 2011).
Finally, as a part of its broader ‘open government’ initiative, the Obama ad-
ministration has actively encouraged all regulatory agencies to post more of their
data regarding ongoing investigations on the Web and to make the information
user friendly (Oce of Management and Budget 2010). e Department of Labor
has been one of the most active departments in providing such information on its
Web site and in allowing users to link information across regulatory agencies.9
It is too early to gauge the impact of these policies on patterns of compliance
in ssured industries. However, another feature of these initiatives is their explicit
evaluation in targeted industries through the use of benchmark evaluations of
compliance and subsequent surveys to gauge the impact of various interventions
(US Department of Labor 2010b).
Changing entrenched regulatory routines is dicult in the best of circum-
stances (Bardach and Kagan 1982). e very contested political environment
facing the Obama administration makes movement towards more aggressive
enforcement policies all the more dicult. Nonetheless, the initiatives provide
promising steps in terms of changing the orientation of enforcement from a short
term focus on back wage recovery to a longer term emphasis on changing the
underlying incentives for compliance in targeted industries.
5. Conclusion
e literature on outsourcing and related forms of restructuring focuses almost
exclusively on the cost side of the equation, viewing outsourcing as a strategy
that seeks to minimise labour costs by moving activities formerly undertaken
inside the boundaries of an organisation to labour markets located outside of
50 The Economic and Labour Relations Review
the organisation. Fissured employment arises from a coordinated strategy that
businesses have increasingly chosen to take. is is rooted in both the revenue
and cost sides of their income statements. In particular, these strategies use
branding and other avenues for securing allegiance by customers to a company’s
products or services in order to generate, for themselves, more inelastic demand
and hence price premiums. e lead company then focuses only on activities
related to core functions, while allocating to other entities the production of
products or provision of services. Lead rms thereby become the coordinators
of other organisations rather than the vertically integrated company that most
employment laws assume.
e coherent strategy underlying ssured employment makes it clearer why
it is oen dicult to alter the decisions made by companies in this regard. Since
ssured employment is a reection of larger integrated strategies, enforcement
that responds to the eects of them as if they were only an expression of labour
cost avoidance will be unsuccessful. Unwinding the labour cost strategy might
be dicult without aecting the revenue side strategy.
On the other hand, by understanding that ssured employment rests on a
desire to balance the benets of branding with the benets of shiing employ-
ment responsibility, a whole range of policy options reveal themselves. Interven-
tions that can aect the tipping point of lead rm decisions may have the best
chance to impact the underlying drivers of compliance behaviour and change
them in signicant and lasting ways.
Notes
is article draws on a series of studies examining how industry structures 1.
aect the way employers behave and, in particular, their likelihood to comply
with the important provisions of the Fair Labor Standards Act (FLSA). Re-
search contained in this article arose from the collective work of a Boston
University research team over a number of years. I am particularly grateful
to Amanda Pyles, Rae Glass, Min Woong Ji, Anne Klieve, Tucker DeVoe, and
Claire Gerson. e central ndings of this larger research eort are sum-
marised in Weil (2010). e conclusions and recommendations discussed in
this article reect the views of the author and are not meant to be an ocial
or unocial statement of the policies of the US Department of Labor or its
Wage and Hour Division.
ese estimates are based on comparisons of Osterman’s (2008) estimates 2.
of the distribution of low-wage workers with the distribution of total em-
ployment in 2006. Osterman denes low wage work based on the relation
of earnings to the federal poverty level and uses the Current Population
Survey (CPS), Outgoing Rotation Group, to make his estimates. e CPS
is based on a household survey conducted by the Bureau of the Census for
DOL’s Bureau of Labor Statistics. See Weil (2009) for a complete discussion
of these comparisons.
For example in 2009, Burger King reported an operating margin that was 3.
19.6 per cent of total revenue, whereas the operating margin of Carrols
Corporation, its main franchisee, was 4.2 per cent (United States SEC Form
Enforcing Labour Standards in Fissured Workplaces: The US Experience 51
10-K: Burger King Holdings, Inc. FY 2009 and Carrols Corporation. FY 2009,
available http://www.sec.gov [accessed February 2010].
Pub.L. 75-718, ch. 676, 52 Stat. 1060, June 25, 1938, 29 U.S.C. ch.8. e Wage
4.
and Hour Division also enforces a number of other laws pertinent to labour
standards for agricultural workers, workers employed by private contractors
to the government, and wages on federally funded construction projects. We
focus only on the FLSA here.
Numbers from 5. Budget of the U.S. Government, various years, for reported
spending for enforcement by the Wage and Hour Division of the Employ-
ment Standards Administration (ESA).
is is an annual estimate based on investigations conducted over the period
6.
2006–2008 by the Wage and Hour Division, and the number of establish-
ments in those industries for 2006 as reported by the U.S. Bureau of the
Census in its publication County Business Patterns. e detailed estimates
are available from the author.
e estimates focus exclusively on compliance with the minimum wage and 7.
overtime provisions of the FLSA. It does not include child labour violations
or ndings under other laws enforced by WHD such as the Migrant Sea-
sonal Protection Act that sets standards for farm workers. Accordingly the
estimates cover investigations that have reported FLSA ndings (including
FLSA ndings of ‘no violations.’). e cases included in the analysis are those
registered from scal year 2003 to 2008 and concluded by end of scal year
2009. ey do not include cases that are resolved over the telephone between
the employer and sta of the WHD (‘conciliations’) which almost always
involve a single worker.
For the denition of employ, see the 8. Fair Labor Standards Act of 1938, Pub.
L. No. 718, § 3(d), (e), (g), 52 Star. 1060, 1060 (1938).
See, for example, the web-site created for the major workplace regulatory
9.
agencies of the US Department of Labor: http://ogesdw.dol.gov/.
References
Abraham, K. and Tyler, S. (1996) ‘Firms’ use of outside contractors: eory and
evidence’, Journal of Labor Economics, 14(3), pp. 394–424.
Arlen, J. and MacLeod, B. (2005) ‘Beyond master-servant: A critique of vicarious
liability’, in S. Madden (ed.) Exploring Tort Law, Cambridge University Press,
New York, pp. 111–142.
Ashenfelter, O., and Smith, R. (1979) ‘Compliance with the minimum wage law’,
Journal of Political Economy, 87(2), pp. 333–350.
Bardach, E. and Kagan, R. (1982) Going by the Book: e Problem of Regulatory
Unreasonableness, Temple University Press, Philadelphia, PA.
Bernhardt, A., Boushey, H., Dresser, L. and Tilly, C. (2008) e Gloves-O Economy:
Workplace Standards at the Bottom of America’s Labor Market, Labor and Em-
ployment Relations Association, Champaign, IL.
Bernhardt, A., Milkman, R., eodore, N., Heckathorn, D., Auer, M., DeFillipis, J.,
Luz Gonzalez, A., Narro, V., Perelshteyn, J., Polson, D., and Spiller, M. (2009)
52 The Economic and Labour Relations Review
Broken Laws, Unprotected Workers: Violations of Employment in Labor Laws in
America’s Cities. Center for Urban Economic Development, University of Illi-
nois Chicago/National Employment Law Project/UCLA Institute for Research
on Labor and Employment.
Blair, R. and Lafontaine, F. (2005) e Economics of Franchising, Cambridge Uni-
versity Press, New York.
Brown, C., Hamilton, J. and Medo, J. (1990) Employers Large and Small, Harvard
Unviersity Press, Cambridge, MA.
Carré, F., Ferber, M., Golden, L., and Herzenberg, S. (2000) Nonstandard Work: e
Nature and Challenges of Changing Employment Arrangements,Industrial Rela-
tions Research Association, Champaign, IL.
Carré, F. and Wilson, R. (2004) e social and economic costs of employee misclas-
sication in construction, Report of the Construction Policy Research Center,
Labor and Worklife Program, Harvard Law School and Harvard School of Pub-
lic Health, Boston, MA.
Estlund, C. (2008) ‘Who mops the oors at the Fortune 500? Corporate self-regula-
tion and the low-wage workplace, Lewis and Clark Law Review, 12(3), pp. 671–
693.
Fung, A., Graham, M., and Weil, D. (2007) Full Disclosure: Perils and Promise of
Transparency, Cambridge University Press, New York.
General Accounting Oce (2009) Employee Misclassication: Improved Coordi-
nation, Outreach and Targeting Could Better Ensure Detection and Prevention,
GAO-09-717, Washington, DC.
Glynn, T. (2011) ‘Taking the employer out of employment law? Accountability for
wage and hour violations in an age of enterprise disaggregation, Employee Rights
and Employment Policy Journal, 15(1), pp. 101–135.
Goldstein, B., Linder, M., Norton, L., and Ruckelshaus, C. (1999) ‘Enforcing fair la-
bor standards in the modern American sweatshop: Rediscovering the statutory
denition of employment’, UCLA Law Review, 46(4), pp. 983–1106.
Ji, M. and Weil, D. (2011) Does ownership structure inuence regulatory behavior?
the impact of franchisee free-riding on labor standards compliance, Working
paper, Boston University, Boston MA.
Jin, G., and Leslie, P. (2009) ‘Reputational incentives for restaurants hygiene’, Ameri-
can Economic Journal: Microeconomics, 1(1), pp. 237–267.
Kaufmann, P. and Lafontaine, F. (1994) ‘Costs of control: e source of economic
rents for McDonald’s francisees’, Journal of Law and Economics, 37(2), pp. 417–
453.
Keller, K. (2008) Strategic Brand Management: Building, Measuring, and Managing
Brand Equity, ird edition, Pearson/Prentice Hall, Upper Saddle River, NJ.
Leonard, J. (2000) Hot goods temporary restraining orders under the Fair Labor
Standards Act in the agricultural sector of the economy: A manual for legal as-
sistance programs, Manuscript. Washington, DC.
Manning, A. (2003) Monopsony in Motion: Imperfect Competition in Labor Markets,
Princeton University Press, Princeton, NJ.
Enforcing Labour Standards in Fissured Workplaces: The US Experience 53
Oce of Management and Budget (2010) Open Government Directive, available:
http://www.whitehouse.gov/omb/assets/memoranda_2010/m10-06.pdf [access -
ed 6 June 2011].
Osterman, P. (2008) ‘Improving the quality of low-wage work: e current Ameri-
can experience’, International Labor Review, 147(2–3), pp. 115–134.
Pizza Hut, Inc. (2009) Pizza Hut Franchise Disclosure Document, 25 March.
Filed and accessed through the California franchising database, available:
http://134.186.208.228/caleasi/Pub/Exsearch.htm [accessed 28 April 2010].
Rebitzer, J. (1995) ‘Job safety and contract workers in the petrochemical industry’,
Industrial Relations, 34(1), pp. 40–57.
Rogers, B. (2010) ‘Toward third-party liability for wage the’, Berkeley Journal of
Employment and Labor Law, 30(1), pp. 1–64.
Ruckelshaus, C. (2008) ‘Labor’s wage war’, Fordham Urban Law Journal, 35(2),
pp. 373–404.
Shulman, B. (2003) e Betrayal of Work: How Low-Wage Jobs Fail 30 Million Amer-
icans, New Press, New York, NY.
Stark, O. and Hyll, W. (2011) ‘On the economic architecture of the workplace: Re-
percussions of social comparisons among heterogeneous workers’, Journal of
Labor Economics, 29(2), pp. 349–375.
Stone, K. (2004) From Widgets to Digits: Employment Regulation for the Changing
Workplace, Cambridge University Press, New York, NY.
Taco Bell Corp.(2009) Taco Bell franchise disclosure document, 24 March.
Filed and accessed through the California franchising database, available:
http://134.186.208.228/caleasi/Pub/Exsearch.htm [accessed 15 May 2010].
US Department of Commerce, Bureau of the Census (2008) County Business Pat-
terns: USA, Government Printing Oce, Washington, DC.
US Department of Labor (2010a) Strategic Plan 2011–2016, available: http://www.
dol.gov/_sec/stratplan/StrategicPlan.pdf [accessed 10 June 2011].
US Department of Labor (2010b) A new approach to measuring the performance
of U.S. Department of Labor worker protection agencies, available: http://www.
dol.gov/_sec/stratplan/newapproach.pdf [accessed 10 June 2011].
US Department of Labor, Wage and Hour Division (2011) FY 2012 Congressional
Budget Justication, available: http://www.dol.gov/dol/budget/2012/PDF/CBJ-
2012-V2-03.pdf [accessed 8 June 2011].
US Securities and Exchange Commission (2009) Form 10-K: Burger King Holdings,
Inc. FY 2009, available: http://www.sec.gov. [accessed February 2010].
US Securities and Exchange Commission (2009) Form 10-K: Burger King Holdings,
Inc. FY 2009, available: http://www.sec.gov [accessed February 2010].
Webb, S. and Webb, B. (1897) Industrial Democracy, Macmillan, London.
Weil, D. (2005) ‘Public enforcement/private monitoring: Evaluating a new approach
to regulating the minimum wage’, Industrial and Labor Relations Review, 52(2),
pp. 238–257.
Weil, D. (2008) ‘A strategic approach to labor inspection’, International Labor Re-
view, 147(4), pp. 349–375.
54 The Economic and Labour Relations Review
Weil, D. (2009) ‘Rethinking the regulation of vulnerable work in the USA: A sector-
based approach, Journal of Industrial Relations, 51(3), pp. 411–430.
Weil, D. (2010) Improving Workplace Conditions through Strategic Enforcement, Re-
port to the Wage and Hour Division, U.S. Department of Labor, Washington,
DC.
Weil, D. and Mallo, C. (2007) ‘Regulating labor standards via supply chains: Com-
bining public/private interventions to improve workplace compliance’, British
Journal of Industrial Relations, 45(4), pp. 805–828.
Woods, R. (2009) ‘Industry output and employment projections to 2018’, Monthly
Labor Review, 132(11), pp. 52–81.
Zatz, N. (2008) ‘Working beyond the reach or grasp of employment law’ in A. Bern-
hardt, H. Boushey, L.Dresser, and C.Tilly (eds) e Gloves-O Economy: Work-
place Standards at the Bottom of America’s Labor Market, Labor and Employ-
ment Relations Association, Champaign IL, pp. 31–64.
About the Author
D av i d We i l
»
is Professor of Economics and Everett W. Lord Distinguished
Faculty Scholar at the Boston University School of Management and Co-
Director of the Transparency Policy Project at the Harvard Kennedy School
of Government. He is an expert on regulation and governance of the work-
place and an advisor to government on these issues. He can be contacted at
davweil@bu.edu.
... At first sight, there are no genuine work-related limits to organising work in and through multiemployer work arrangements with regard to industries, occupational labour market segments or professions. Such work arrangements can be found at the lower end of the pay scale (Weil, 2011(Weil, , 2014, but also in high-paying elite jobs (Haunschild, 2003). They may include manual jobs in agriculture, as well as technologically mediated varieties of jobs, such as crowdwork in digitally networked organisations, also including (bogus or not) self-employed workers, as in the online auction platforms associated with 'hyper-specialization' (Malone et al., 2011; and with more differentiation, Bearson et al., 2020). ...
Article
Full-text available
We develop a practice-based framework of inter-organisational human resource management that puts multi-employer work arrangements in inter-firm networks at its centre. By reinterpreting existing knowledge on multi-employer work arrangements and how they are managed, we delineate four processes in the assemblage of inter-organisational HR management. To illustrate the usefulness of our framework, we explore the question of whether and how an inter-organisational HR management develops in four exemplary cases of multi-employer work arrangements. These cases reveal that the quality and degree of inter-organisational HR management varies considerably, also depending on whether worker representatives show network awareness and orient their activities towards inter-organisational relations.
... At first sight, there are no genuine work-related limits to organising work in and through multiemployer work arrangements with regard to industries, occupational labour market segments or professions. Such work arrangements can be found at the lower end of the pay scale (Weil, 2011(Weil, , 2014, but also in high-paying elite jobs (Haunschild, 2003). They may include manual jobs in agriculture, as well as technologically mediated varieties of jobs, such as crowdwork in digitally networked organisations, also including (bogus or not) self-employed workers, as in the online auction platforms associated with 'hyper-specialization' (Malone et al., 2011; and with more differentiation, Bearson et al., 2020). ...
... Co-Enforcement beruht zudem auf strategischer Planung, Ausrichtung der Kontrolle und Durchsetzung von Arbeitsstandards (Weil 2011(Weil , 2018: Diskutiert werden in diesem Zusammenhang so genannte reflexive Strate-gien, um auf Basis von Analysen der Arbeitsbedingungen in unterschiedlichen Branchen, Regionen und Unternehmenstypen Prioritäten für neue Ansatzpunkte von Kontrollen zu formulieren. Sanktionen an der Spitze der Wertschöpfungskette, wie beispielsweise eine Generalunternehmerhaftung, die eine Einhaltung von Mindestlöhnen auch in Subunternehmen nach sich ziehen, wird dabei besondere Wirksamkeit zugeschrieben. ...
Article
Full-text available
Der Bausektor ist einer der am stärksten dem Lohn- und Sozialdumping ausgesetzten Wirtschaftszweige, nicht nur in Österreich, sondern in vielen Ländern Europas. Hohe Arbeitsintensität und hoher Kostendruck auf den Löhnen, lange Subvertragsketten, sowie fragmentierte Beschäftigung inklusive Entsendungen und Solo-Selbständige, tragen dazu bei, dass die Durchsetzung von Arbeitsstandards in dieser Branche eine große Herausforderung darstellt. Vor diesem Hintergrund beschreibt der Beitrag koordinierte oder gemeinsame Maßnahmen von Arbeitsaufsichtsbehörden und Sozialpartnern (Co-Enforcement Actions), die zur besseren Kontrolle und zu einem besseren Schutz von Arbeits- und Sozialstandards und fairen Arbeitsbedingungen in der Bauwirtschaft in Österreich, Spanien und Polen entwickelt wurden. Der Beitrag basiert auf Ergebnissen des europäischen Forschungsprojekts „Fair working conditions: exploring the contribution of cooperation initiatives between Social Partners and Labour Inspection authorities“ (SPLIN).
Article
Full-text available
This manuscript introduces a novel approach to labor law designed to address the challenges of its application. This framework combines proactive and reactive measures to create a more effective regulatory system. Proactive measures, often referred to as “ex-ante” actions, focus on preventing violations before they occur. On the other hand, reactive measures, known as “ex-post” actions, are geared towards identifying violations and applying penalties after they have taken place. The proactive approach emphasizes the importance of compliance through preventive measures. In contrast, the reactive approach targets enforcement when proactive compliance fails. The methodology is primarily based on the systematic study of legal doctrine, which encompasses both preventive (ex-ante) and deterrent (ex-post) methods and applies legal concepts, rules, and principles to address labor law challenges.
Article
This study addresses how violence is mobilized through wage theft in feminized workplaces thriving within the global value chain. Guided by Judith Butler’s concept of derealization, this longitudinal case study on the Bangladesh garment industry advances the current debate on violence in Organization Studies. First, it re-conceptualizes the notion of an “ideal worker.” Empirical evidence reveals that, unlike in Western societies, young and childless women in the Global South and their vulnerabilities woven into poverty, inequality, climate change, patriarchy, social stratification, and limited employment opportunities make them “ideal workers.” This status remains valid as long as they remain vulnerable and demonstrate no agency in resisting the discourse on dehumanization, dispossession, and displacement. Second, this study illuminates the practice of wage theft, which has emerged as a dominant form of violence in feminized workplaces. Organizations also deploy secrecy to continue theft, thereby inflicting further physical and psychological violence. This study highlights the fact that socioeconomic vulnerabilities and unresisted violence oppress a docile workforce to become “ideal workers.” It is a neoliberal myth that helps powerful actors shore up their power and privileges through derealization.
Chapter
Democracy and Empire theorizes the material basis of popular sovereignty via the Black radical tradition. Popular sovereignty contains an affective attachment to wealth, secured through collective agreements to dominate others, i.e., self-and-other-determination. Inés Valdez expands on racial capitalism by theorizing its Anglo-European-based popular politics, which authorize capital accumulation enabled by empire and legitimated by racial ideologies. This stunts political projects in the Global South. Valdez masterfully outlines how social reproduction is provided by racialized others who sacrifice families and communities, and how the political alienation from nature in wealthy polities is mediated by technology and enabled by a joint devaluation of nature and manual labor performed by racialized others. The book concludes with a theorization of anti-imperial popular sovereignty based on political relations that encompass nature. This title is part of the Flip it Open Programme and may also be available Open Access. Check our website Cambridge Core for details.
Article
This paper presents the first nationwide analysis detailing the scope and scale of labor-intensive forestry contracts performed on National Forest System lands and examines the businesses contracted, location and types of work performed, and distance traveled by businesses between 2001 and 2020. During the study period, 61,698 contracts were awarded to 7,896 businesses, totaling $12.9 million, to perform labor-intensive forestry work, with most work being contracted for wildfire-related activities. Businesses were typically located in western states and non-minority owned businesses received the majority of contracts. Of minority-owned businesses, Hispanic American–owned businesses received the most contracts. The median distance that businesses traveled to accomplish work increased significantly through time but differed by business type. Understanding the scope and work of businesses awarded contracts provides insight into the workforce and its relationship to marginalized populations. Strategic investment in this workforce may have widespread impacts on federal, state, and local economies and the livelihoods of forest workers. Study Implications Between 2001–2020, the USDA Forest Service spent billions of dollars on contracts with thousands of businesses to conduct labor-intensive forestry projects; however, project locations and awarded businesses were not evenly distributed through space and time. Emerging and minority businesses represented a small proportion of contracts awarded. Advancing understanding of the businesses conducting labor-intensive forestry work lays the foundation for inquiry into the working conditions forest workers experience as well as disparities in contract capture. Some regions may have benefitted more from contract capture than others. Understanding factors enabling places and businesses to capture these contract dollars may help identify others that may benefit from investment.
Article
The two-pronged crisis of climate change and increasingly precarious work force us to explore how an energy transition that mitigates the worst impacts of climate change can simultaneously uplift workers and communities. As the body of literature concerning itself with various aspects of the energy transition expands, a smaller, but growing subset of research explores work quality affiliated with low-carbon, renewable energy technologies. Recognizing this, I ask two interrelated questions. First, what do we know about labor rights and standards across value chains for low-carbon, renewable energy technologies? Related to the first question, what stages of the value chain, geographies, and critical dimensions (i.e., gender and migration) need greater attention? To address this gap, this study systematically collects and organizes the emergent academic and grey literatures that investigate labor rights and standards in the renewable energy transition. This review uses a global value chain framework to organize existing knowledge and identify gaps. It subsequently summarizes these findings before proceeding to synthesize the assembled corpus of literature. In so doing, the paper identifies several themes within the literature, as well as future avenues of exploration. First, labour rights and standards and questions of work quality remain marginal to the broader energy transitions discourse, despite their recognized importance. Many studies provide macro-level assessments of labour rights and standards in the renewable energy industry. Several also cover labour rights and standards for renewables in specific value chain stages and workplace contexts. Fewer, however, seek to understand the labour rights and standards of workers across value chain stages. Second, two major spheres of literature concerning labour rights and standards in renewables appear to be operating in parallel, but distinct tracks. One concerns itself with attention to workers in the Global South and those working in the peripheries of global political economy. The other covers workers in the Global North and what the prospects of the energy transition might portend for the labour movement. Recognizing these two overarching findings, we have a need for future research that bridges value chain stages to understand the differentiated impacts on worker's labour rights and standards across geographies and national contexts.
Article
Full-text available
This article discusses one of the major challenges of US workplace policy: protecting roughly 35m workers who are vulnerable to a variety of major risks in the workplace. After laying out the dimensions of this problem, I show that the vulnerable workforce is concentrated in a subset of sectors with distinctive industry characteristics. Examining how employer organizations relate to one another in these sectors provides insight into some of the causes as well as possible solutions for redressing workforce vulnerability in the US as well as other countries facing similar problems.
Chapter
Independent of criminal or contract law, Tort law provides individuals and groups with redress for injury to every dimension of life from physical injury, to property damage, to personal insult. Over past decades no body of law within the civil justice system has experienced greater ferment than the law of Torts. In the US, state courts, federal courts, and the Supreme Court have all been active in the development of Tort policy. This edited collection comprises scholarship from many of today's most influential contributors regarding Torts and Compensation Systems scholarship. Topics include an investigation of the original stimuli for tort-type norms from ancient times onwards, a provocative analysis of five tort landmarks from MacPherson v. Buick Motor Co. to United States v. Carroll Towing Co, and a frank assessment of the limitations of torts within broader compensation systems goals.
Article
Which SUVs are most likely to rollover? What cities have the unhealthiest drinking water? Which factories are the most dangerous polluters? What cereals are the most nutritious? In recent decades, governments have sought to provide answers to such critical questions through public disclosure to force manufacturers, water authorities, and others to improve their products and practices. Corporate financial disclosure, nutritional labels, and school report cards are examples of such targeted transparency policies. At best, they create a light-handed approach to governance that improves markets, enriches public discourse, and empowers citizens. But such policies are frequently ineffective or counterproductive. Based on an analysis of eighteen U.S. and international policies, Full Disclosure shows that information is often incomplete, incomprehensible, or irrelevant to consumers, investors, workers, and community residents. To be successful, transparency policies must be accurate, keep ahead of disclosers' efforts to find loopholes, and, above all, focus on the needs of ordinary citizens. © Archon Fung, Mary Graham, and David Weil 2007 and Cambridge University Press, 2009.
Article
What happens if an employer cuts wages by one cent? Much of labor economics is built on the assumption that all the workers will quit immediately. Here, Alan Manning mounts a systematic challenge to the standard model of perfect competition. Monopsony in Motion stands apart by analyzing labor markets from the real-world perspective that employers have significant market (or monopsony) power over their workers. Arguing that this power derives from frictions in the labor market that make it time-consuming and costly for workers to change jobs, Manning re-examines much of labor economics based on this alternative and equally plausible assumption. The book addresses the theoretical implications of monopsony and presents a wealth of empirical evidence. Our understanding of the distribution of wages, unemployment, and human capital can all be improved by recognizing that employers have some monopsony power over their workers. Also considered are policy issues including the minimum wage, equal pay legislation, and caps on working hours. In a monopsonistic labor market, concludes Manning, the "free" market can no longer be sustained as an ideal and labor economists need to be more open-minded in their evaluation of labor market policies. Monopsony in Motion will represent for some a new fundamental text in the advanced study of labor economics, and for others, an invaluable alternative perspective that henceforth must be taken into account in any serious consideration of the subject.
Article
Professional and business services and the health care and social assistance sectors account for more than haff of the projected new jobs from 2006 to 2016; construction also is expected to add jobs, while employment in agriculture and manufacturing is expected to decline over the period.
Article
Employers’ treatment of workers as nonemployees to avoid compliance with labor standards is epidemic. This Article offers a statutory interpretation to put an end to this sham under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act by reexamining the approach to determining coverage where a firm’s contractor hires, supervises, and pays workers.When larger companies use judgment-proof contractors to lower their labor costs by evading these acts, courts deciding whether to hold them liable as “employers” of contractor-hired workers almost invariably ignore the statutory definition of “employ” (“includes suffer or permit to work”), applying, instead, a test based on the common law’s restrictive definition of employment, under which the engaging party had the right to control how the work was performed.To permit to work was broader: it did not require the affirmative act of engaging someone to work, but only a decision to allow the work to take place. To suffer to work was broader still: encompassing to tolerate or acquiesce in, it required only that the business owner have the reasonable ability to know the work was being performed and the power to prevent it. Thus, work performed as a necessary step in the production of a product was almost always suffered or permitted by the business owner. When such work is part of the owner’s production process, it makes no difference that the workers were hired, paid, and supervised by another. Consequently, the business owner may avoid accountability only if his contractor has such a high level of expertise and capital investment that the business operates autonomously from the business owner.This Article argues for a return to the statutory “employ” language, which was intended to deny a competitive advantage to employers who maintained substandard labor conditions through abusive subcontractors.