Law 360: Fair Labor Standards Act at 80: It’s More Important than Ever

Commentary June 26, 2018

Eighty years ago, on June 25, 1938, President Franklin Roosevelt signed the Fair Labor Standards Act (FLSA) into law. Passed at a time when wages were low, wage theft was prevalent, and homework and sweatshops were common, the FLSA was intended to set a minimum wage floor, prevent child labor, and to provide for overtime premium pay to curtail excessive hours.

Today, wages are stagnating while CEO and executive pay continue to skyrocket, many workers in low-wage industries struggle to bring home minimum wage due to weakly enforced wage theft laws, and some employers are finding more ways to outsource work and evade responsibility for their workers. We need the FLSA more than ever.

Congress enacted the FLSA to eliminate “labor standards detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers,” and to prevent these substandard labor conditions from being used as an “unfair method of competition” against reputable employers.[1] The FLSA was meant to ensure “[a] fair day’s pay for a fair day’s work”, according to the President’s Message to Congress on May 24, 1934, and to protect workers “from the evil of ‘overwork’ as well as ‘underpay,’” said the U.S. Supreme Court in Barrentine v. Arkansas Best Freight System, Inc., 450 U.S. 728, 739 (1981).

As the Supreme Court noted early on, the expansive coverage of the Act was key to accomplishing these purposes:

Th[e] [Act’s] purpose will fail of realization unless the Act has sufficiently broad coverage to eliminate . . . the competitive advantage accruing from savings in cost based upon substandard labor conditions. Otherwise the Act will be ineffective, and will penalize those who practice fair labor standards as against those who do not.[2]

To achieve this goal, Congress adopted strikingly broad terms designed to go beyond traditional common-law agency principles to reach all those accountable for upholding the minimum labor standards required by the Act. Its definition of “employ,” which includes “to suffer or permit to work”, derives from well-established state child labor laws that held businesses using middleman that illegally hired and supervised children liable for violations of these laws.[3]

The term “employee” under the Act “ha[s] been given ‘the broadest definition that has ever been included in any one act.’” United States v. Rosenwasser, 323 U.S. 360, 363 n.3, 65 S.Ct. 295 (1945). As the Supreme Court recognized, in enacting these expansive terms, Congress sought to make business owners responsible for minimum labor standards for workers for whom they could easily disclaim responsibility at common law.[4]

These broad definitions were aimed at covering the garment sweatshops of the time, where manufacturers sweated work out of pressers and sewers hired by subcontractors, and at workers engaged in making deliveries or working from home whom employers dubbed “independent contractors.”

Today, too many workers in subcontracted jobs, like agriculture, garment, janitorial, and home care, are in an unfortunate “Catch-22” if their wages are stolen: they are often left with no recourse against either the cash-strapped labor brokers who deliver them to their jobs or the businesses that control the production process of the work.

And, construction and delivery companies, including those in the so-called “gig” economy, call their workers independent contractors, even though the workers are rarely running their own separate business.

Use of contractors is not new, and the Fair Labor Standards Act was enacted with these very business practices in mind. The FLSA is intended to ensure that workers are not abused, and to cut through any labor broker structures where the workers were recruited, hired, paid, and directly supervised by one entity who delivered the workers to another legally accountable business who needed the labor.

Employers like Amazon, FedEx, and Uber are in a position to know about the work performed in their business, and have the ability to assure compliance with the fundamental child labor, minimum wage, and overtime protections in the FLSA. It is important to hold them responsible for the alleged wage and hour violations suffered by their workers, because these companies have the power to ensure that the workers are paid and treated fairly.

Wage theft is unfortunately a common reality in too many lower-wage jobs, including high-growth jobs like home care, hospitality, delivery, and retail.[5] Many of those jobs are contracted out, and companies sometimes claim they have no responsibility for the pay or long hours.[6] And, companies’ use of forced arbitration clauses with class waivers in more than 60 million jobs has now been blessed by the U.S. Supreme Court, making it nearly impossible for workers to recover stolen wages.[7]

These development fly in the face of previous Supreme Court pronouncements that workers cannot be forced by their employers to waive their rights to legal protections.[8] And they ignore decades of Supreme Court rulings finding that private contracts between companies and their workers or other businesses cannot skirt the basics of FLSA. The FLSA was “designed to defeat rather than implement contractual arrangements,” Secy’ of Labor v. Lauritzen, 835 F.2d 1529, 1545 (7^th Cir. 1987), including contracts that may have interfered with the goal of a standard wage floor. And Judge Learned Hand wrote that statutes regulating employment are meant to “upset the freedom of contract.”[9]

We cannot uphold our most basic workplace protections, such as the minimum wage, overtime premium pay, and child labor protections, if companies are permitted to skirt basic laws by imposing take-it-or-leave-it contract jobs with forced arbitration clauses.

On FLSA’s 80^th anniversary, we should honor it by enforcing it and rewarding those who comply with it.

[1] 29 U.S.C. § 202(a).

[2] Roland Elec. Co. v. Walling, 326 U.S. 657, 669-70 (1946).

[3] See Rutherford Food Corp. v. McComb, 331 U.S. 722, 728, n.7, 67 S.Ct. 1473, 1476 (1947); Bruce Goldstein, Marc Linder, Laurence E. Norton II & Catherine Ruckelshaus, Enforcing Fair Labor Standards in the Modern American Sweatshop: Rediscovering the Statutory Definition of Employment, 46 UCLA Law Review 983 (April 1999).

[4] See Walling v. Portland Terminal Co., 330 U.S. 148, 152 (1947) (“This Act contains its own definitions, comprehensive to require its application to many persons and working relationships which, prior to this Act, were not deemed to fall within an employer-employee category”); Nationwide Mut. Ins. Co v. Darden, 503 U.S. 318, 323, 112 S.Ct. 1344 (1992) (FLSA’s definition of “employ” is a standard of “striking breadth” that “stretches the meaning of ‘employee’ to cover some parties who might not qualify as such under a strict application of traditional agency law principles.’”).

[5] See, e.g., Daniel Galvin: Deterring Wage Theft, (June 2016) Cambridge University Press, https://www.cambridge.org/core/journals/perspectives-on-politics/article/deterring-wage-theft-altlabor-state-politics-and-the-policy-determinants-of-minimum-wage-compliance/1A366C3B5FBD35A4CDAEC8EC453FA353.

[6] See, e.g., Integrity Staffing Solutions, Inc. v. Busk, 574 U.S. ___ (2014)(Amazon warehouses); In re FedEx Ground Package System Inc Employment Practices Litigation, U.S. District Court for the Northern District of Indiana, No. 3:05-MD-00527

[7] See, e.g., Ceilidh Gao, What’s Next for Forced Arbitration, National Employment Law Project, https://www.nelp.org/blog/whats-next-forced-arbitration-go-scotus-decision-epic-systems/.

[8] Brooklyn Savings Bank v. O’Neil, 324 U.S. 697 (1945).

[9] Lehigh Valley Coal Co. v. Yensavage, 218 F.547, 553 (2d Cir. 1914)