“Leasing” Employees: No Legal Shield

In this era of increasing employment litigation, many businesses are looking for ways to reduce their risk. For instance, you may have heard that hiring employees through a temp agency can potentially “insulate” your business from employment law claims. After all, the workers are employed by the temp agency, not by you — so if there are any employement law violations, any penalties or fines would be assessed against the temp agency, not you. Right?

Sadly, in most cases this is wrong.

temporary workers in an office

Tripped Up By “Joint Employment”

To start, let’s consider the issue of “joint employment”:

Usually, when a company hires temps the company’s own supervisors will direct and control the workers. They supervise: deciding work hours, assigning tasks, directing the employees’ work and evaluating the results. (Basically the same as they would with a regular employee.)

The problem is, there’s an aspect of employment law that many businesses don’t know about — but which all plaintiffs’ lawyers know very well. It’s called “joint employment.”

In a nutshell, if you control the jobs of temp workers the same as you would control the work of regular employees, you will likely be considered to also be an employer of those temps, along with the temp agency.

What this means to you: if the temp agency messes up and doesn’t pay people the proper overtime, you could find your company on the hook to make up the difference. On the other hand, if one of your managers harasses one of your temps, the temp agency could find themselves sharing liability with you.

The bottom line is that the both of you could be considered “employers” under the law. Meaning the both of you would be liable together for any violations that might occur.

Another Potential Problem: Long Term “Temps”

Another “advantage” that temp agencies sometimes tout is that you don’t have to include these workers in your benefit programs and perks. Normally, that’s true — and in fact, some agencies actually offer their workers better benefits than they might receive working for many other employers.

A possible problem arises, though, when you staff your business with what I like to call “permanent temps.”

I remember one company I worked for where one temp in the dispatch department had worked there for years. They regularly offered her a permanent position, and she regularly turned them down. She said she liked the “flexibility” of being a temp… which I thought was a little weird, because she was at work every single day and never seemed to take advantage of this alleged flexibility.

The thing is, had there been some kind of issue, the courts would likely have ruled that she really wasn’t a temp, because she’d been working there for so long. It has happened that workers companies were calling (and treating) as “temps” have sued — successfully — arguing that they should be offered the same benefits as permanent employees. The courts decided that the length of their “temporary” assignments had converted them to de-facto employees.

What To Do?

As it turns out, there are several things you can do to protect yourself:

  • Have your employment law attorney review any temp agency contracts or agreements before you sign on the dotted line. Ensure the agreement guarantees an indemnification clause and/or other provisions to guarantee any legal protections you have been promised.
  • Make sure you treat any complaints from a temp worker with the same respect you would give a complaint from a standard employee. For instance, if the worker is complaining they have not been paid properly by their agency, consult with your attorney and make sure the agency handles the issue correctly. If they are complaining of harassment by one of your managers, investgate and (if necessary) initiate disciplinary action. (And don’t retaliate against the temp. This could backfire in a big way.)
  • Be sure to accurately record the time worked by all your temporary employees. If any question comes up about overtime hours or their pay in general, your time records could prove invaluable.

Temporary employees can be a wonderful resource to help your company deal with special projects or short-term work overflows. But hiring temps will not insulate you from all wage and hour liability. You still have the responsibility to ensure a safe work environment and legal pay for everyone who works for you, whether full-time, part-time or temporary.

Does your company employ temps? Have you ever worked as a temp? What were your experiences?

4 Comments

  1. VC says:

    As more companies move to lower expenses, issues like this will only occur more often, I’m afraid. My brother ran into a similar issue with a temp agency/employer relationship very recently. Fortunately, they were able to resolve the issue quickly.

  2. Here the main points are targeted for employees leasing where they offer the advantages to small business owners like:
    1. Directly hiring workers,
    2. Leasing agency oversees from recruitment to HR administration,
    3. Save on payroll management and tax management.

    • Diane A says:

      Yes, leasing employees can save money and administrative headaches. But the same caveats apply for “leased” employees as for traditional temps: the leasing company and the employer are likely to be seen as joint employers, so any wage and hour issues will become liabilities for both. Businesses need to remain vigilant, even if they have outsourced some (or all) of their HR function to a leasing company.

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