Business groups are in an uproar over new guidelines from the Labor Department issued Wednesday.
The department issued its long awaited joint-employer guidelines, and will hold more companies responsible for labor violations committed by their business partners.
Labor officials and union bosses have long complained that companies pass the responsibility for employees onto other businesses, hiring contract rather than full-time workers. Such employees are often unsure which company is their direct employer, labor groups say.
“In a nutshell, joint employment exists when a person is employed by two or more employers,” wrote David Weil, administrator of the Labor Department’s Wage and Hour division.
“It is possible for a worker to be jointly employed by two or more employers who are both responsible, simultaneously, for compliance."
The guidance comes on the heels of similar controversial rules from the National Labor Relations Board.
The joint employer relationship is common in franchise restaurants, construction, farming, janitorial services, hospitality, and with staffing agencies, the Labor Department noted.
But business groups say it is fundamentally unfair to blame one company for the mistakes of another.
“Washington needs to understand that businesses can’t be held responsible for what they don’t control,” said David French, senior vice president at the National Retail Federation.
“Subcontractors and franchisees are independent companies who make their own decisions on how to deal with their employees."
Business groups warn the rules could encourage companies to bring more jobs in house, hurting the small businesses with which they contract.
“If you hire other firms for certain types of work, you may try to limit your exposure by discontinuing those relations and hiring direct employees to perform those services,” said Beth Milito, senior counsel for the National Federation of Independent Business.
"Obviously that hurts the subcontractors who are mostly small businesses," she added. "But it also hurts the larger firms since their payroll costs are very likely to increase.”