Corporate America has many tactics for increasing its profitability at the expense of the people who do much of the work that produces that profitability. One of those tactics is to employ significant numbers of people without putting them on the company payroll. Instead, they hire people from temp firms whom they have no intention of employing only temporarily, but they pay them much less than the workers on their payroll and don’t offer any benefits, insisting that the true employer is the temp firm and benefits are the responsibility of the temp firm.
Earlier this year the magazine Washington Monthly took a look at this practice in an article called “Benefits for the Rest of Us” (which you can find here), and The Curmudgeon would like to share some of the examples the magazine unearthed:
Consider Chris Young, an assembly-line worker at Nissan’s manufacturing plant in Smyrna, Tennessee. Chris works alongside dozens of other employees, with everybody doing more or less the same job. But Chris doesn’t get to wear the coveted Nissan jersey that many of his fellow workers wear—because he doesn’t work for Nissan. He works for Yates Services, a private contractor that now provides a majority of Nissan’s workers. Chris told the Washington Post, “I build the same Infiniti SUV” as the Nissan workers, but he and other Yates employees receive half the salary, less job security, and way fewer safety net benefits.
Auto manufacturers increasingly rely on a two-tiered system, using both regular and temporary employees. While Chris is covered by workers’ comp and Social Security Disability Insurance, being in the temp tier means he can’t say no to overtime, doesn’t get paid sick leave, doesn’t receive long-term disability, and sometimes has to work seven days a week, with ten-hour shifts on Saturdays and Sundays. Nationwide, the temp sector has provided nearly a fifth of the total job growth since the recession ended. With the economy continuing to drag along unevenly, temp work has galloped back ten times faster than private-sector employment. And, increasingly, the temps aren’t very temporary. Some have been employed at the same company for as long as eleven years, resulting in the term “permatemps.” (Chris Young is a permatemp.)
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In 2000, Microsoft had to pay $97 million to settle a lawsuit for improperly denying benefits to more than 8,000 permatemps.
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One federal study concluded that employers illegally “disguised” 3.4 million regular workers as contractors, while the U.S. Department of Labor estimates that up to 30 percent of companies misclassify employees. The incentive for employers to engage in this illegal activity is clear: a huge savings in labor costs.
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After Merck sold its factory in Philadelphia in 2008, the new owner fired all 400 Merck employees and rehired them as independent contractors, then contracted with the factory to continue making the same antibiotic for them.
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In June 2015, FedEx was slammed with a $288 million settlement after a federal appeals court ruled that the company had shortchanged 2,300 California delivery drivers on pay and benefits by improperly labeling them independent contractors. The next month, FedEx lost another case in a federal appeals court over misclassifying 500 delivery drivers in Kansas. Uber is being sued by thousands of drivers and ex-drivers who insist they are employees of the company, not contractors. As reported by Caroline Fredrickson for Washington Monthly, trucking firms operating in Los Angeles and Long Beach lost two major court battles with drivers claiming that they also had been robbed of wages by being misclassified as independent contractors.
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…because Walmart pays so poorly and provides such a sparse safety net for its employees, the rest of society—that is, taxpayers—have to foot the bill for benefits like food stamps, Medicaid, subsidized housing, and expensive hospital emergency room visits (instead of doctor’s office visits) for those employees. Forbes reports that Walmart costs U.S. taxpayers an estimated $6.2 billion annually in public assistance for its workers. (McDonald’s employees reportedly cost taxpayers $1.2 billion per year.) Either way, we pay.
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Microsoft – fined $97 million. Federal Express – fined $288 million. Think how much they must be profiting through such practices to make it worthwhile to pay such enormous fines and then write them off as the cost of doing business.
One common thread here is pretty obvious: all of the companies involved in these despicable practices are wildly successful and wildly profitable. They’ve gotten there in part because of the labors of their workers but as their actions make clear, they don’t want to share any of their success with those workers. In fact, it’s as if those workers don’t even exist – because in these and many other similar cases, those workers aren’t even on the payroll.
And why would a company share its success with someone who isn’t even on the payroll?