U.S. Senators Sherrod Brown (D-OH) and Mark R. Warner (D-VA) are calling on the Securities and Exchange Commission (SEC) to require companies to report on how many workers they employ who are not classified as full-time employees, including independent and subcontracted workers.
“We believe that the disclosure of this data is critical to fully capture companies’ human capital management. We applaud the SEC for focusing on strengthening human capital disclosures as part of its regulatory agenda,” wrote the senators in a letter to SEC Chairman Gary Gensler.
“It is clear that investors need more information to understand how companies treat people, the most critical asset of any company. We agree that investors need disclosures that include quantifiable and comparable datasets that clearly articulate a company’s human capital management, such as metrics on turnover, skills and development training, compensation, benefits, workforce demographic, and health and safety… That picture would be wholly incomplete, however, if companies are not required to disclose information about the number of independent contractors they use on a regular basis and the entire workforce that is material to their business strategy,” wrote the senators.
Brown is chairman of the Senate Committee on Banking, Housing, and Urban Affairs.
Warner, a former entrepreneur, and venture capitalist, has long stressed the importance of updating human capital disclosure requirements to reflect the priorities of modern companies.
Examples of subcontracted out workers considered part of the material workforce include security personnel, janitors, food service workers, housekeepers for hotels and lodging real estate investment trusts (REIT), and custodial workers.
“In recent decades, companies have replaced in-house operations with contracting, on-demand work, or other forms of independent and contracted work that lower short-term costs for the business but come at the expense of workers, who receive fewer benefits, lower wages, and have less upward mobility within the organization. This is one of the defining tensions that has emerged as companies have prioritized short-term profits at the expense of investments in their workforce and long-term productivity. As you know, these decisions have material effects on a business’ financial performance,” the senators noted.
The senators concluded, “We appreciate the SEC is working towards the shared goal of ensuring that investors and shareholders have the information they need to understand companies’ human capital management, a critical piece of understanding a company’s performance as well as potential long-term, systemic risks to the U.S. economy. We urge you to ensure that future SEC rulemaking captures this long-term trend of companies’ increasing use of outsourcing, independent contractors, and subcontracting, which will be a critical data point in understanding companies’ human capital management.”
In May, Warner introduced the Workforce Investment Disclosure Act, which would require public companies to disclose basic human capital metrics, including workforce turnover rates, skills and development training, workforce health and safety, workforce engagement, and compensation statistics.
An employee’s classification as full-time or part-time has an impact on benefits since employers generally use this status to determine eligibility.
An ongoing structural shift toward more intensive use of part-time employment by many employers is driving the elevated rate of involuntary part-time work, which has various adverse consequences.
Research from Penn State economics professor Lonnie Golden found that part-time workers face an adjusted hourly wage penalty of 29.3% compared with employees with similar demographic characteristics, and education levels who work full time. Even after fully adjusting, for their industry and occupation, part-time workers are paid 19.8% less than their full-time counterparts.
“While some workers prefer the time flexibility that part-time working provides, more than 4 million U.S. part-time workers still would prefer to work a full-time job and likely many others who are working part time for non-economic reasons would also prefer full-time work if they did not have constraints like the lack of support for family caretaking and pursuing education,” said Golden. “Whatever the motivation for working part-time, all such workers face a pay inequity that should be directly addressed through policy action.”
Corporations often use underemployment, giving part-time workers fewer hours than they want and spreading work among many part-time employees rather than hiring full-time employees, as an intentional strategy to avoid providing benefits and paying higher wages in order to boost short-term profits.
A recent, groundbreaking study found that unpredictable schedules – which often mean lack of access to enough working hours – are associated with financial insecurity, housing insecurity, high stress, poor health outcomes, and, for parents, less time spent with children, which, in turn, leads to worse outcomes for children.
Another study found that 65% of respondents with part-time jobs had dealt with “at least one serious material hardship” in the past year. Workers facing these challenges are disproportionately women and workers of color as exposure to schedule instability is 16% higher among workers of color compared to white workers.
A full copy of the letter is available here and below.
Dear Chairman Gensler:
We are writing to urge the Securities and Exchange Commission (SEC) to ensure that, as part of its agenda to improve human capital disclosure, companies report on the numbers of their workers who are not classified as full-time employees, including independent contractors, as well as the entire workforce that is material to the company and its investors (the “material workforce”) such as subcontracted workers. We believe that the disclosure of this data is critical to fully capture companies’ human capital management.
We applaud the SEC for focusing on strengthening human capital disclosures as part of its regulatory agenda. It is clear that investors need more information to understand how companies treat people, the most critical asset of any company. We agree that investors need disclosures that include quantifiable and comparable datasets that clearly articulate a company’s human capital management, such as metrics on turnover, skills and development training, compensation, benefits, workforce demographic, and health and safety. As you have indicated in prior remarks, “Large and small investors, representing literally tens of trillions of dollars, are looking for consistent, comparable, and decision-useful disclosures in these areas to determine whether to invest, sell, or make a voting decision one way or another.”
That picture would be wholly incomplete, however, if companies are not required to disclose information about the number of independent contractors they use on a regular basis and the entire workforce that is material to their business strategy. Examples of subcontracted out workers that should be considered part of the material workforce include security personnel, janitors, food service workers, housekeepers for hotels and lodging real estate investment trusts (REIT), and custodial workers. In recent decades, companies have replaced in-house operations with contracting, on-demand work, or other forms of independent and contracted work that lower short-term costs for the business but come at the expense of workers, who receive fewer benefits, lower wages, and have less upward mobility within the organization. This is one of the defining tensions that has emerged as companies have prioritized short-term profits at the expense of investments in their workforce and long-term productivity. As you know, these decisions have material effects on a business’ financial performance.
We appreciate the SEC is working towards the shared goal of ensuring that investors and shareholders have the information they need to understand companies’ human capital management, a critical piece of understanding a company’s performance as well as potential long-term, systemic risks to the U.S. economy. We urge you to ensure that future SEC rulemaking captures this long-term trend of companies’ increasing use of outsourcing, independent contractors, and subcontracting, which will be a critical data point in understanding companies’ human capital management.
Thank you for your attention to this important matter.
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