Toward Third-Party Liability for Wage Theft

Abstract

This Article examines how best to enforce wage and hour laws in an economy no longer characterized by vertically integrated production. In recent decades, responding to the globalization of product and labor markets, major firms have extended their supply chains and subcontracted many tasks that do not require skilled labor. As a result, much production now takes place through chains or networks of independent firms, with multiple contractual intermediaries between unskilled workers and the companies who benefit from their labor. Such workers frequently experience wage-and-hour violations, or what the U.S. Government Accountability Office recently called “wage theft.” The federal Fair Labor Standards Act responded to such challenges by defining many firms as “joint employers” of their contractors’ workers, and holding them liable for their contractors’ violations. Scholars have generally endorsed that approach, even as they’ve criticized courts’ implementation efforts.In contrast, this Article argues that simply liberalizing tests for joint employer liability is unlikely to significantly enhance wage and hour compliance. Such a strategy creates few incentives for firms to exercise their power over far-flung suppliers, and is inconsistent with common social and economic conceptions of employment. The Article therefore proposes a new regime, one holding firms to a duty of reasonable care to prevent wage and hour violations within their domestic supply chains, regardless of whether they enjoy a contractual relationship with the primary wrongdoer. Drawing from recent scholarship on third-party liability, as well as related tort doctrine, the Article argues that holding firms to such a duty is justified on both instrumentalist and non-instrumentalist grounds.