The use of temporary talent has risen as the economy has fallen, but organizations need to be aware of the perils of the "joint-employer agreement" among other HR pitfalls.
With the economy struggling to get past the post-recession blues, American employers are sitting it out when it comes to hiring new talent.
Instead, they are relying more on temporary workers to fill gaps. Those being the case, employment law experts caution employers that while using temporary talent can be a very effective solution, it also can cause some legal landmines if not managed properly.
In our sluggish economy, temporary talent usage continues to rise. The U.S. Bureau of Labor statistics, for example, reports that the temporary staffing industry added more than 14,000 jobs from June to July, and grew approximately 13 percent within the last year.
Meanwhile, the American Staffing Association reports in its Staffing Index Weekly Report that, during the week of July 23 - 29, temporary and contract employment increased by .54 percent and that the index is currently up 23.9 percent since the beginning of the year and is 5.8 percent higher year-over-year. Also, in its monthly report for July, the ASA reports that staffing employment in July was up 4.4 percent from July 2011, and since the beginning of 2012, temporary and contract employment has grown 22.4 percent.
Meredith Campbell, a partner and member of employment and business litigation practice groups at Shulman Rogers, a Potomac, Md., law firm, says one of the biggest concerns, if an employer is using an temporary staffing agency, is the "joint employer" agreement. Basically, that means if the employer or the agency is violating any compliance regulations ? for example, in the wage ?and-hour or discrimination areas - both parties are potentially liable.
"That should raise concerns when partnering with an agency providing temporary talent," Campbell explains. "You need to do due diligence by making sure you are entering into your contracts with agencies in ways to best limit liability."
Campbell says employers also often make the mistake of calling temporary workers "contractors" in an attempt to avoid paying benefits. But that mislabeling can backfire in the courts. For example, while being called a contractor may appear more tax advantageous for the individual, when the relationship ends, the same people might apply for unemployment benefits. Normally, that is not a major risk, but with the current economic downturn, many states are hesitant to deny unemployment benefits to anyone.
"You very often are wrong when you believe a 'contractor' is the same as a temporary employee. If he or she was classified improperly, there is potential for real liability," she says, adding that the law doesn't care how temporary employees are labeled, it cares about what they were doing in the workplace and how that relationship is conducted. In other words, simply calling someone a contractor is not enough as a defense in court.
"Employers can classify temps as contractors, but what the courts look at is the reality, or how the person was used in the workplace," she says. For example, if a person works for one company only and pretty much carries out the same job responsibilities as co-workers, they are not a contractor.
"Where the recession comes into play is that state agencies are much more eager to classify everyone as an employee," Campbell says.
In addition, a single legal case can trigger a government audit, which could expose an employer to even more financial risk if there are multiple cases of misclassified temporary workers in the workplace.
"There is a cadre of plaintiff lawyers seeking out these cases across the country," she says.
In terms of typical employment law claims such as harassment and discrimination, Campbell says her firm recommends that everyone that comes into the workplace understand relevant sections of the employee handbook and sign off on it.
"These policies should apply to anyone who walks in the door," she says.
Most of all, Campbell says, employers should be wary of contractor vs. employee status.
"Everyone is an employee unless they have a contract," she says. "If you want to treat a temporary employee as a contractor, you should speak to an attorney."
Tim Scott, a partner at Fisher & Philips, says from a practical perspective, using temporary talent is a good idea due to the flexibility and cost savings. A downside comes when the temporary agency doesn't do a good pre-screening candidates, for example, and sends someone that you may not have hired had you done your own prescreening.
"You could end up with some legal exposure," he says. "You have to work to ensure that the temporary agency clearly has those responsibilities and will indemnify employers using them should something go wrong."
Scott also notes that one of the fallacies in using temporary workers is employers don't have to worry about laws and regulations that apply to the regular workforce, areas like wage-and-hour, discrimination or harassment.
"All of the regulations and laws apply equally to temporary employees," he says. For example, provisions of the Fair Labor Standards Act (FLSA), including overtime and minimum wage, are in effect.
"The paycheck may come from the agency, but an employer will be jointly liable if those laws are not followed," he says. "The same is true for discrimination or harassment. If either of those occurs, they can sue. The same is true for OSHA regulations. They are the same as for regular employees."
Even training is included, as employers should ensure that temporary workers are up to snuff for specific job tasks on the same level as regular employees. Another area of concern is I-9 compliance, which is the federal law regulating eligibility in terms of immigration.
"Just because you are not handling initial screening, you can't turn a blind eye as the employer," Scott explains.
To Scott, using a proven, high-quality agency is the smartest path for employers looking to use temporary workers.
"Every agency may be different," he says. "Typically, the larger ones may cost more but you also may be getting more for your money."
Michelle Benjamin, founder & CEO of Benjamin Enterprises, a workforce solutions and outsourcing firm in New York City, says risk mitigation is a major concern when dealing with temporary talent, adding that the current legal system is very sensitive to employee complaints and issues, and in many cases, employees seem to have the sympathy of the court.
"I've found that even large companies are not aware of the existing risks within the employer vs. temporary talent veil," she says. For instance, she says, if an incident or accident occurs involving temporary talent and that person innocently fills out a corporate incident/accident report, that report can be utilized in a court of law to substantiate that the temporary talent believed that they were employed by the company at the time of the incident.
If the court agrees that this assumption is correct, the company will become legally liable for personal injuries or damages that occurred to the temporary talent - even though the talent was not technically a regular employee.
"It has been my experience that our courts have become more employee-sensitive since the recession," she says. "For example, employees are being awarded worker's compensation claims and unemployment benefits, even if they only worked for the company for one day in some extreme cases."
In fact, Benjamin says, legal exposure and unexpected costs for employers using temp workers have been accentuated due to the current high unemployment rate.
"With government spending stretched to the limit, local and state courts have deemed it necessary to offset these higher expenses to the state by issuing unemployment benefits even if they might not have been deemed acceptable in the past," she says.