Liability for Unpaid Wages in a Fissured Economy

1. Liability for Unpaid Wages in a Fissured Economy PROFESSOR KEVIN BANKS CRIMT/ INSTITUTIONAL INNOVATION FOR BETTER WORK PARTNERSHIP CONFERENCE – OCTOBER 27, 2018

2. Approaches found in the literature and in legislation • Expand the concept on employer along axes of control. • Third party liability.

3. Expanding concept of employer along axes of control • Joint employer – indirect and shared forms of control (e.g. Browning Ferris) • Complete reconceptualization of the concept of the employer (Prassl)

4. Third party liability models • Misrepresentation • Accessorial liability (Australia) • Duties of care • Occupational health and safety models • Enabling tort model (Rogers) • “Cause or permit” liability (Mildren)

5. Third party liability models Strict liability (with or without due diligence defense) based on: • control of premises • knowledge or constructive knowledge of violations • knowledge or constructive knowledge of insufficiency of funds • problematic sector • problematic form of relationship (e.g. agency employment) • generalized, subject perhaps to carve outs (Glynn)

6. Principles grounding third party liability Instrumental • Capacity to prevent • Capacity to pay Issue – why should a business be obligated ensure payment under an obligation of another party just because it has a contract with that party, or is linked to that party through a chain of contracts? For example, why should a supplier of groceries be responsible for the wage violations of a corner store that it supplies? Is this not the role of the state? Further justification of responsibility is needed to distinguish relationships giving rise to third party liability from those that should not.

7. Principles grounding third party liability Normative principles of responsibility • Causation • Foreseeability • Capacity to prevent • Unjust benefit • Obligations to members of one’s community

8. Models of Legal Responsibility 1. Negligent enablement model: nexus of foreseeability and capacity to prevent Ordinary requirements for liability in negligence:  • harm would not have occurred but for an act failing to meet a standard of care • the harm was a foreseeable consequence of the act • foreseeability gives rise to a duty of care • responsibility for omissions depends on prior existence of a special relationship (eg physician-patient, employer-employee) Application of but/for causation argument limits liability for such acts, since the immediate owner is the intervening but/for cause. (Davidov)

9. Negligent enablement Enabling tort doctrine: Defendant strategically placed to take precautions and primary defendant is judgment proof • Eg. social hosts or tavern owners responsible for driving by impaired guest Courts have found sufficient proximate cause when the harm, the plaintiff and the defendant were all foreseeable

10. “Cause or permit” liability “Cause or permit” liability model: foreseeability and capacity to prevent a publicly recognized harm • Used to define acts or omissions constituting regulatory offenses • Permitting is failure to prevent an occurrence which defendant ought to have foreseen and has sufficient control to prevent. • Control means ability to supervise or inspect, improves one’s business methods, or exhort those whom one may be expected to influence or control – extends to capacity to negotiate and ensure compliance with contractual requirements • Due diligence defense: requires showing a proper system to prevent and taking reasonable steps to ensure the effective operation of the system.

11. Strict Liability Strict Liability (legislative notice of foreseeability and capacity to prevent a publicly recognized harm) • Legislature can essentially take notice of situations in which harms are foreseeable and actors have the capacity to prevent them, and impose liability on that basis. • Dispenses with need for individualized findings of foreseeability and control. • Due diligence defenses would be presumptively available.

12. Supporting principles Unjust benefit Potentially reinforces, but depends upon other justifications for liability: • findings of unjust enrichment depend upon the absence of a juristic reason for the enrichment • contract or ownership can supply the juristic reason unless some other legal rule intervenes. Benefit principle can serve as a limiting principle on the extent of liability

13. Supporting principles Obligations to members of workplace communities • May reinforce other justifications where workers performing outsourced work are integrated into the operations of an employer but not legally employees.

14. Pragmatic considerations Difficulties of proof: • Causation • Foreseeability • Capacity to prevent / control • Extent of Benefit.

15. Pragmatic considerations Risk of Substitution: Risk of substituting formal “due diligence” for reductions in incentives not to comply. Are there effective diligence measures (e.g. bonding?) that should just be required in certain situations? Should the extent of diligence be left to markets for insurance? Precision: Can obligations be defined with sufficient precision so that parties know what is requied and uncertainty of liability does not impact jobs and investment so as to outweigh the potential benefits? Efficiency: Can externalities of supply chains be internalized without imposing greater costs on in terms of lost ability to pursue core competencies?

16. Towards a principled pragmatism? Two potential approaches requiring further evaluation 1. Application through employment standards legislation: • Strict liability (possibly with standardized strict liability defenses) in high risk sectors and relationships • Cause or permit offenses • Cause or permit liability? 2. Application through private rights of action (most likely class action) on the basis of statutory causes of action: • Enabling negligence • ESA obligations.