Business groups are vigorously opposing Julie Su, President Joe Biden’s nominee for labor secretary, and they are counting on a handful of votes from swing senators to defeat her confirmation.
Leading the charge are trade groups representing companies like McDonald’s and Uber that currently are not the employers of record for workers in fast-food franchises or drivers who are treated as independent contractors. Because of that arm’s length relationship, those corporations are often shielded from responsibility for labor law violations. They fear Su would more aggressively enforce labor laws that could expose them to penalties for infractions.
Those fears stem from Su’s record. She rose to prominence in the 1990s for representing Thai seamstresses who were enslaved in a sweatshop in El Monte, California. She brought a suit on their behalf that held retailers and manufacturers liable for using slave labor that resulted in $4 million in restitution for the garment workers.
She served as the state’s top labor-law enforcer under Gov. Jerry Brown, launching a “Wage Theft Is a Crime” campaign and aggressively pursuing claims on behalf of restaurant, car wash and garment workers. As California’s labor secretary under Gov. Gavin Newsom, she steered the department’s expanded unemployment system for those thrown out of work by the pandemic. Her opponents are also attacking her for the fraud that emerged in that program, although such fraud was common nationwide. Now serving as acting secretary of labor, she has the support of organized labor, some business leaders and the Los Angeles Chamber of Commerce.
David Weil’s 2014 book “The Fissured Workplace: Why Work Became So Bad for So Many” argued that shifts to more flexible work arrangements, including the rise of subcontracting, have led to a deterioration of working conditions.
Groups like the International Franchise Association played a leading role in torpedoing Biden’s nomination of Weil to head the Labor Department’s Wage and Hour Division, a post he held under Obama. Weil is now an economist at Brandeis University.
This interview has been edited for brevity and clarity.
Capital & Main: Business groups have lined up in opposition to Julie Su’s nomination. What do they fear?
David Weil: There’s a list of business groups that have always lined up against the appointment of people who are about enforcing the laws as they’re written. The first time I went up in the Obama administration for the position of Wage and Hour [Division administrator], many of the groups who are opposing Julie Su opposed me, like the Associated Builders and Contractors, which is a very large, aggressive, nonunion association of construction companies. They have opposed virtually anyone who looks like they’re going to be vigorous in enforcing the law.
So that’s an underlying fact, and it’s why before I was appointed in the Obama administration, there hadn’t been a confirmed head of Wage and Hour in 10 years.
Julie Su, when she worked in California, was a very effective enforcer of California’s labor laws. And I think that same group is opposing her for that same reason.
Can you give some examples?
She was a very strong advocate for the enforcement of wage theft laws generally. So there’s that. Then you had the passage of Assembly Bill 5 during the time she was commissioner. Now, that, of course, was not her action; that was the action of the California state Legislature. But what that bill did was to say, “Let’s be very clear on who is and who isn’t an independent contractor versus an employee.” And of course, the groups who really got their hackles up about that were the platform companies, and in particular Uber, Lyft and DoorDash, who then put forward their own proposition to unwind their coverage from AB5. The fact that it happened during the time she was commissioner, the fact that AB5 sets out a criterion that in some ways is stronger than what is in the Fair Labor Standards Act — I think that has fueled the flames and has brought that part of the coalition very front and center in opposing her.
“We’re seeing this explosion of child labor in places that we haven’t seen since the 1930s: in auto manufacturing or food packaging or, in the worst case, in meat processing.”
You faced a similar campaign to what Julie Su is now facing, didn’t you?
I think a lot of the same organizations — the platform companies and the International Franchise Association — are front and center in really taking a battle to the few states where you have a Democratic senator who was potentially swayable. They certainly led the campaign against me — the franchisors and the platform companies in Arizona and in West Virginia — trying to affect the votes of Sens. Kyrsten Sinema (I-Ariz.), Mark Kelly (D-Ariz.) and Joe Manchin (D-W.Va.). And unfortunately, in my case, by misrepresenting and overstating what I did, believed in. But they were successful in swaying those three. And I think that’s the game plan here. Plus, they’re adding some other senators that they think can kind of push in the same direction who are moderate Democrats or independents.
How has the distancing of workers from the companies they ultimately serve, what you call “the fissuring of work,” eroded job quality in the U.S.?
It does that by shifting responsibility from the party that defines how work is done and how workers are compensated and protected to parties that often have fewer incentives to provide good, safe working conditions and wages and levels.
Every time you create a new layer — say, a staffing agency that contracts with the main company that then hires workers through a labor broker — each company must make some kind of profit margin, which means there’s less and less for the workers who are engaged to do the work.
And that’s the whole problem of fissuring. It creates the pressures to run around payment of minimum wage or overtime and engage in wage theft. It means you might be cutting corners on the health and safety of those workers or engaging in other violations of the law.
If you’re trying to organize unions, it makes the whole way our National Labor Relations Act work very difficult to implement because you’re no longer talking about workers who are working for one main company. They’re working for some small subcontractor or some small staffing agency.
What I’ve just described is why we’re seeing this explosion of child labor in places that we haven’t seen since the 1930s: in auto manufacturing or food packaging or, in the worst case, in meat processing.
How can the Labor Department address the problem?
The tools are the enforcement agencies and how they undertake their work. In the Obama administration, we thought a lot about how we bring to bear the appropriate laws and enforcement to make people understand that you can’t get around complying with the law by fissuring.
That means saying that it’s not just the subcontractor at the bottom of a chain that’s responsible for obeying the law, but in many cases it’s people up the chain that also are responsible for seeing that happen — and we did that through the way we enforced the law. Former Secretary of Labor Tom Perez spoke very directly about it in terms of the responsibilities of the overall agencies.
“If you don’t have a confirmed secretary, it’s very hard to accomplish the regulatory work, the enforcement and the other work of the Department of Labor.”
How do you view fast-food franchising in terms of your analysis of fissured work? Are they contributing to the problem that you described above?
Look, and this applies to Acting Secretary Su: As the head of Wage and Hour, the head of the Labor Department, you have to operate within the laws. The Fair Labor Standards Act is the one that’s most pertinent here about who is and who isn’t a joint employer. The International Franchise Association’s concern is that franchisors, the mother ships, are going to be held to be a joint employer and therefore jointly responsible for things like wage theft by their franchisees. At the federal level, the Fair Labor Standards Act defines under what circumstances two companies are considered joint employers.
Franchising is based on this idea that as a franchisee, you’re buying a brand. You don’t want to start your own business with your own name. What you want to do is own a brand that someone else has developed and that you will carry out as a smaller business operation, and that’s absolutely legitimate.
Franchise law says a franchisor has a right to make sure that the franchisee administers that brand in a way that’s consistent with the franchisor’s interest. There’s nothing wrong with that, and that’s part of the franchise law. And it says that yes, a franchisor can tell a franchisee that you’ve got to comply with the kind of burger we’re selling and the kind of branding we’re requiring and so on.
The more you get involved in telling the franchisee how to operate in minute detail, the more you start drifting into the land of joint employment. It’s all about how the franchisor carries out its activities. So that means in some cases, a franchisor could be under the law considered a joint employer. In the fast-food industry, there are a whole range of franchise relationships that are spelled out in franchise agreements.
When is franchising harmful?
You have many examples of franchise janitorial companies that sell a franchise to a small company or individual usually. The franchisor essentially sells a list of customers; dictates the price; owns, in a sense, the contract with the customer; gets the money first and then takes its cut. The franchisor often provides a loan to the franchisee to purchase the franchise, and then takes money out from the loan to repay both the principal and interest on the loan. The franchisor requires the franchisee to buy all the cleaning products from them, and doesn’t allow the franchisee to acquire new business on their own.
On the other hand, if the franchisee loses a cleaning job, the franchisor has no obligation to find a new contract for that person. It’s an extreme case of franchising where it’s almost a bogus form of business. You’re often getting immigrant workers who are trying to get a leg up and trying to start a business essentially paying for work rather than really owning a true franchise.
What are the consequences if Su’s nomination doesn’t succeed?
There’s a lot of work that is underway by this Labor Department. There are high profile cases like in child labor. That work needs to be done. I’m sure it is being done by the men and women of the Wage and Hour Division and the Solicitor General’s Office who are the career people. They’re the ones who must continue to do this work on a daily basis. But there’s an overall articulation of what you’re trying to do — that’s very much part of what the secretary does. If you don’t have a confirmed secretary, it’s very hard to accomplish the regulatory work, the enforcement and the other work of the Department of Labor in apprenticeship and unemployment insurance. It makes it very difficult.
