Executive Summary
The Problem: An Enforcement Crisis
Workers’ rights enforcement in the United States faces a convergence of crises. Employers steal an estimated $15 billion annually in wages through minimum-wage violations alone, while federal enforcement has collapsed—wage-and-hour cases by the U.S. Department of Labor fell 97% during the first year of the second Trump administration. In May 2025 the DOL Wage and Hour Division had just 611 investigators for roughly 170 million workers (one per 278,000), compared with one per 73,000 in 1973. State agencies are similarly understaffed and stretched thin by other federal-related litigation and budget constraints. Meanwhile, forced arbitration—covering an estimated 80% of private-sector non-union workers—paired with class-action waivers blocks workers from holding employers accountable in court, making government enforcement the only realistic avenue for many.
The Outside Counsel Contingency-Fee Model
The white paper explores a model in which state and local government enforcement agencies contract with public-interest or private law firms to bring workers’ rights enforcement actions as outside counsel on a contingency-fee basis. Under this arrangement the government pays nothing out of pocket; outside counsel is compensated only from successful recoveries, typically at a reduced “government rate.” The government retains full control of the litigation—including strategy, settlement decisions, and veto power—while the private firm provides labor, investigative resources, and specialized expertise that resource-constrained agencies may lack.
Overall Rationale
In many cases, the alternative to government enforcement via contingency-fee outside counsel is no enforcement at all. Properly planned and implemented—with careful case selection, meaningful robust government oversight, transparent procurement, and a commitment to public purposes—this model can help reinvigorate the workers’ rights enforcement landscape by extending the reach of resource-constrained agencies and leading to greater compliance by employers that are currently underpaying workers or otherwise violating their rights on the job.
Precedent and Track Record
This model is not new. Attorneys general in at least 36 states have used contingency-fee outside counsel since 1998 in areas including tobacco, opioids, PFAS, lead paint, consumer protection, and securities litigation. In the workers’ rights context, early applications are already producing results: The D.C. Attorney General’s misclassification case against Power Design yielded significant injunctive relief and a $3.75 million settlement; the California Civil Rights Department’s sex-discrimination suit against Activision Blizzard settled for over $54 million; and the New Jersey Attorney General’s Office and Department of Labor and Workforce Development are using the model in their ongoing Amazon Flex misclassification case. Courts have almost uniformly rejected legal challenges to these arrangements—under due process, separation of powers, ethics, and appropriations theories—so long as proper safeguards (articulated in the California Supreme Court’s County of Santa Clara three-part test) are in place.
Key Safeguards
The paper emphasizes that this model must be implemented carefully, and identifies core requirements drawn from case law and best practices, including:
Government control: Retainer agreements must specify that government attorneys retain control over the litigation, make key decisions on litigation strategy and settlement, sign off on work product, and oversee the litigation throughout. In addition, this control must be exercised in practice, not only outlined in the retainer agreemet.
Transparent procurement: Agencies can benefit from open, competitive selection processes (e.g., New Jersey’s pre-qualified Approved Special Counsel Lists) to avoid even the appearance of impropriety from political contributions or personal relationships.
Injunctive relief as a priority: Settlements should secure forward-looking injunctive relief to ensure future compliance, in addition to monetary recovery. This goal should be clearly understood by all parties from the outset.
Supplement, not replace: Outside counsel should serve as a force multiplier for public enforcers, not a substitute for adequately funded government enforcement staff. Indeed, recovered penalties can fund additional government enforcement positions.
Implementation Guidance
The paper provides detailed guidance on choosing cases (prioritizing complex litigation against well-resourced defendants, industries with widespread violations, and workers blocked by forced arbitration), selecting firms (through formal RFPs or pre-qualification lists), structuring retainer agreements, managing conflicts of interest, maintaining government oversight during litigation, and navigating case resolution—including how to balance monetary recovery with injunctive relief. It also highlights the role of nonprofits and unions in flagging cases, connecting with affected workers, and supporting enforcement through common-interest agreements. Agencies are encouraged to start with a pilot case or two to test the model before broader adoption.
Source: Gerstein, Morse & Solomon, “Public Enforcement of Workers’ Rights With Contingency-Fee Outside Counsel,” NIWR & NYU Wagner Labor Initiative, April 2026.
