Most temporary workers should be treated as employees, not independent contractors, says the Department of Labor
According to the U.S. Bureau of Labor Statistics, temporary workers make up 19 percent of all new jobs in the U.S., and staffing agencies employ an average of 3 million workers daily across all industries. In South Carolina, the average number of temporary workers used each week reached approximately 65,000 in 2014.
Companies turn to staffing agencies for a variety of reasons. Most commonly, staffing agencies are used to alleviate staffing shortages, recruit qualified candidates, reduce costs and increase flexibility.
For purposes of employment and labor laws, these workers may be treated as your employees, despite the fact they are paid by the staffing agency. The risk is significant. Various laws may provide coverage for your temporary workers, even if you have assumed that they are not your employees, such as the Fair Labor Standards Act (FLSA), which governs minimum wage and overtime pay; the National Labor Relations Act (NLRA), which governs union organizing; and Title VII of the Civil Rights Act, which prohibit sex, race, and other forms of discrimination and harassment in the workplace.
In a memorandum issued on July 15, 2015, the Department of Labor announced its view that most temporary workers are improperly classified as independent contractors and should be treated instead as employees. Similarly, recent decisions have made it more difficult to argue that temporary workers are not employees – regardless of whether the worker is labeled an independent contractor or supplied by a staffing company.
In August, the NLRB announced a broad rule for employee status under the NLRA (Browning-Ferris Industries of California Inc., 362 NLRB No. 186, Aug. 27, 2015). In Browning, the NLRB held that temporary workers are “employees” if the company “indirectly” affects employees’ terms and conditions of employment. Therefore, this decision will make many temporary workers “employees” for purposes of the NLRA.
Similarly, in Butler v. Drive Automotive Industries of America Inc., the Fourth Circuit Court of Appeals (which encompasses South Carolina, North Carolina, Virginia, West Virginia and Maryland) created a new test, holding that both the client company and the staffing agency were the worker’s employers for purposes of Title VII.
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The court considered the following factors in determining that the staffing agency employee was employed by both the staffing agency and the staffing agency’s client:
-Authority to hire and fire
-Day-to-day supervision, including authority to discipline
-The furnishing of equipment and a workplace
-Possession and responsibility for employment records
-Provision of training
-Exclusivity of assignment to the company
-Assignment of duties the same or similar to those assigned to regular employees
-Duration of assignment
-Intent to enter into an employment relationship
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In short, the clear legal trend is to find that workers historically classified as independent contractors or viewed as non-employee temporary workers, are in fact employees. Companies that use independent contractors and temporary workers should review their staffing agreements and contingent workforce relationships to assess whether potential legal risks are adequately addressed for purposes of ensuring that both the company and its staffing agencies are in legal compliance with the FLSA, the NLRA, Title VII and other state and federal laws impacting the employment relationship.
