Legal Considerations When Hiring Temporary Workers

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Companies must be alert to the legal issues surrounding this class of workers, particularly the liability that companies may face if a temporary worker brings a lawsuit.

A version of this article was originally published in the February 2016 issue of The HR Specialist. It is reprinted here with permission.

Employers hire temporary workers for a myriad of reasons — to fill in for employees’ absences, such as maternity leaves, illness or other departures from employment, or for assistance during times of increased demand or special projects. Whatever the reason, the use of temporary or contingent workers continues to grow. Given this trend, companies must be alert to the legal issues surrounding this class of workers, particularly the liability that companies may face if a temporary worker brings a lawsuit. In many circumstances, employees of a temporary agency who are assigned to work at a company may also be viewed as employees of the company. If the temporary agency and the company are viewed as joint employers, the temporary worker will have many of the same legal rights as a company employee, including the right to sue the company (as well as the temporary agency) for discrimination and other claims.

Last year, the National Labor Relations Board (NLRB) created a new standard for evaluating joint-employer relationships; a standard that leans heavily in favor of finding a joint-employer relationship exists. In Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015), the NLRB held that, for a joint-employer relationship to exist, there must only be a showing that (1) the two separate employers are both employers within the meaning of common law and (2) they share or co-determine matters governing the essential terms and conditions of employment, which include a variety of factors, such as hiring, firing, discipline, supervision, direction of work, wages, hours of work, scheduling the number of workers, seniority, overtime and work assignments. Notably, the exercise of control does not have to be direct; rather, the unused right to exercise control can be enough to find that an employment relationship exists.

This new standard is very broad and will likely make almost every company a joint employer of its temporary workers so long as the company has a written agreement with the temporary employment agency. Applying its new standard, the NLRB recently ruled that companies unlawfully refused to bargain with a union and ordered them to bargain with the union and, if an agreement is reached, to embody the understanding in a signed agreement. This ruling might result in an appeal, in which event, a federal circuit court could review the NLRB’s new joint-employer standard.

Also last year, the U.S. Court of Appeals for the Third Circuit took on the issue of temporary workers’ rights in the discrimination arena and held that a reasonable jury could conclude that a temporary employee assigned by a staffing agency to Tuesday Morning, Inc. was an employee of both Tuesday Morning and the staffing agency for purposes of bringing a race discrimination claim. In reaching this decision, the court looked at a variety of factors, including the terms of the agreement, payment of wages and control over the temporary employee’s daily activities, among other things. The Third Circuit applied the test enunciated by the U.S. Supreme Court in Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992), which evaluates a list of nonexhaustive factors to determine whether an employment relationship exists. The Darden test focuses on the “hiring party’s right to control the manner and means by which the product is accomplished.” As a result of this decision, employers may see more discrimination lawsuits brought by their temporary workforces.

With this legal landscape in mind, how can employers limit potential liability with respect to the employment of temporary workers? First, employers should thoroughly review all agreements with temporary staffing agencies with an eye towards carving out boilerplate language that suggests a greater level of control than what actually exists between the temporary employee and the company. Companies can look to the Darden factors to guide the analysis of the level of control between the company and the temporary employees.1 Employers should then analyze their temporary employment relationships to determine whether changes can or should be made to allow for less control.

Because of the risk that temporary agency employees could be deemed to be employees of the company to which they are assigned, those companies should be vigilant in prohibiting harassment and discrimination against temporary employees, just as they do with their own employees. Companies should also make sure that their agreements with temporary staffing agencies provide that the staffing agencies will pay the temporary workers and that the staffing agencies will withhold and pay taxes for the workers, as well addressing any other Darden factors that negate a joint-employer relationship.

 

Endnote

1 The nonexhaustive list of Darden factors includes “the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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