Legal considerations to avoid disaster when hiring summer temps

The following tips should help minimize potential exposure from contracting with staffing agencies for temporary workers

As summer approaches, many employers bring on temporary workers to assist with seasonal business needs. Such workers can offer a number of benefits, such as increased efficiency and flexibility, including through saved money on recruiting, training and payroll. However, to the unsuspecting employer, the perceived benefits may be far outweighed by the costs of damages, fines and penalties associated with improperly using or classifying such workers. The key question in bringing on temporary workers is whether such workers are, in effect, “employees,” triggering their rights and the employers’ respective obligations under various applicable laws.

A temporary worker may be deemed to be an “employee” of both the employer and/or a temporary staffing agency if certain factors demonstrate that a “joint employer relationship” exists between the two. Where such a relationship is found to exist, the employer and the staffing agency can be held jointly liable for each other’s workplace-law violations.

Although the tests used to determine the existence of a joint employment relationship vary from court to court and case to case, factors typically considered include:

  • The nature and degree of control over the workers
  • The control over employment decisions, such as hiring, discipline and discharge
  • The day-to-day supervision of the workers
  • The determination over the terms and conditions of the workers

No single factor is controlling, and courts typically look at the totality of the circumstances of the work relationship to determine whether a joint employment relationship exists.

A joint employer relationship between an employer and its staffing agency can have a number of important consequences. For example, both the employer and the staffing agency may incur liability related to temporary workers under federal and state anti-discrimination laws, a state’s workers’ compensation statute, federal immigration laws, and minimum wage and overtime laws.

Thus, an employer should never simply assume that the responsibilities owed to temporary workers have been fulfilled by a staffing agency. Instead, prior to engaging an agency, the employer should do its due diligence and check available records to ensure that the agency is a responsible company, and also require the agency’s appropriate written assurances of compliance and indemnification for non-compliance.

If feasible for the employer’s business, the following tips should help minimize potential exposure from contracting with staffing agencies for temporary workers:

  • Do not direct or control the temporary workers; the agency should retain that exclusive right. Relatedly, consider having the agency provide its own on site supervisor to oversee the temporary employees’ work.
  • Do not directly negotiate temporary workers’ wages or time off. Rather, work through the agency.
  • Do not routinely include temporary workers in the functions, perks, or facilities intended for employees only.
  • Limit the duration of a temporary worker’s assignment.
  • Do not directly terminate a temporary worker. Request that the agency handle any disciplinary issues with the temporary staff.
  • Before entering into a contract with the agency, review the agency’s anti-discrimination and anti-harassment policy and complaint procedures.
  • Verify the agency’s compliance with laws relating to payroll taxes, income taxes, and immigration. Include a clause in the contract allowing the employer to terminate the relationship if the agency violates these or other laws.
  • Verify that the agency conducts appropriate criminal background checks before assigning its workers.
  • Include a contract clause disclaiming the employer’s control of the temporary workers and disclaiming the existence of a joint employment relationship, and impose the obligation to indemnify and defend so that the agency pays the employer’s legal costs stemming from the agency’s noncompliance.
  • Conduct periodic internal audits of agency contracts to ensure these properly define the employer’s relationships with staffing agencies.
  • Be mindful of state laws that impose additional requirements on companies utilizing staffing agency workers. In some states, companies can be held jointly responsible for an agency’s failure to pay wages to its temporary workers.

Employers also should have procedures for dealing with the temporary workers. For example, managers should know how to recognize and immediately relay any discrimination or harassment issues to the human resources department and/or directly to the agency for handling and resolution. In addition, the employee handbook should be appropriately worded to expressly apply to, or, where appropriate, to exclude the temporary workers.

By taking these and related measures, employers can help ensure that the benefits of temporary workers prevail over any potential legal risks and pitfalls.

Contributing Author

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Jason C. Kim

Jason C. Kim is a partner in the nationally recognized Labor and Employment Practice Group at Neal, Gerber & Eisenberg LLP (Chicago). He counsels companies...

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Contributing Author

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Sonya Rosenberg

Sonya Rosenberg is an attorney in Neal, Gerber & Eisenberg’s Labor & Employment Practice Group. Her experience includes counseling employers through the many...

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