This Week's Feature
Excerpted from Nebraska Employment Law Letter, written by attorneys at the law firm Erickson & Sederstrom, P.C.
Across the country, the use of temporary
workers has been dramatically increasing over the past several years. Estimates
show that in 1982 there were 417,000 temporary workers nationwide; by 2004 that
number had leaped to more than 2.5 million. That increase raises several
issues about the benefits and risks of relying heavily on temps and how to best
put them to work for you.
Benefits
The
dramatic increase in the use of temporary workers is attributable in large part
to the numerous benefits they afford. Engaging temps allows you to:
- protect your core workforce;
- prevent layoffs;
- avoid the perpetual hiring/firing process;
- incorporate a trial period into your hiring process;
- save costs on labor and employment benefits;
- avoid certain taxes and administrative expenses; and
- avoid liability under workers' compensation, unemployment, and other state
and federal statutes.
Risks
Even though the
benefits are numerous, serious risks also exist mostly because companies often
treat their temporary workers just like their regular employees. When that
happens and a lawsuit occurs, administrative agencies and courts apply a
"co-employment" or "joint employment" test to decide whether the temp can be
considered an "employee" of the company using his services.
Under the joint
employment test, a court evaluates the facts and circumstances of the case to
determine which employer has the right to control in addition to actual control
over the employee. In many instances, both companies will be found to have
enough authority over the employee to be deemed an "employer," making them
"joint" employers.
The key test typically used under
federal law is the "right to control" test, which focuses on an employer's right
to control the manner and means of someone's job responsibilities. In evaluating
a company's right to control, typically courts look at several criteria,
including:
- daily supervision;
- power to hire and fire;
- ability to discipline;
- designation and formulation of work rules and conditions;
- the right to refuse or engage the worker; and
- the manner and method of compensation.
The reality is, if you have
enough control over a worker, he may be considered your employee and an
employee of the staffing agency. If that occurs, you (rather than the staffing
agency) could face significant liability for things like unpaid payroll taxes
and unemployment, workers' comp benefits, wage and hour violations, employment
discrimination, unpaid or underpaid benefits and wages, and violations of the
right to organize or belong to a union.
Getting smart
How can you avoid those risks? While there's no perfect answer to that
question, there are several steps you can take to minimize your liability when
you use temporary workers.
- Get indemnification. Execute a written agreement that provides for
indemnification (including proof of insurance) from the staffing agency if
you're held accountable under a joint employment theory for things that
shouldn't be your responsibility.
- Perform due diligence. Find out whether the staffing agency has
encountered problems with joint employer liability in the past and what was done
to prevent that from happening again. Ask for references from other companies
that have used the agency. Those types of questions and the resulting
information can go a long way toward helping you decide whether to contract with
the company.
- Avoid establishing terms of employment. Don't set temporary workers'
hours, pay rates, or method of compensation that signifies an
employer-employee relationship. Instead, work with the staffing agency to
address those issues. Similarly, ensure that the temp requests time off from the
staffing firm, and make certain it, rather than you, addresses any disciplinary
issues.
- Vary the conditions of employment. Don't require temps to comply with
the same application process, drug testing, credit checks, or background checks
you require for regular employees. The staffing agency should be responsible for
those things.
- Ask for periodic visits. Insist on periodic visits from staffing
agency representatives to reaffirm who the employer is and who has the ultimate
authority to hire, fire, and discipline the temps.
- Limit tenure. Limit the duration of each temporary worker's
relationship with your company. That way, you avoid the conclusion that a temp
is really an employee simply because she has been working at your company for so
long. If you're planning to use someone for more than 90 days, classify her as a
"long-term temporary worker."
- Be careful what you say. Be cognizant of your word choice. Don't
refer to temps as "employees" who are "hired." Rather, they are "workers" who
are "assigned" to your company on a "temporary basis." The fact is, sloppy
language can be used against you in court.
- Avoid engaging illegal aliens. Obtain a written agreement from the
staffing agency certifying that all workers are in the United States legally. At
a minimum, get written assurances from the agency that to the best of its
knowledge, workers have completed the required employment eligibility
verification paperwork (an I-9 form) and were able to supply proper
documentation.
- Consult your attorneys. Last, but not least, have your attorneys look
at your agreement with the agency and your indemnification clause and generally
review how you're using temporary workers to ensure that you're complying with
the law and avoiding joint-employer status.
Bottom line
Temporary workers can be useful if you need seasonal or
"once-in-a-while" help. Although there are significant risks involved, you need
not fret if you've taken certain simple steps to insulate yourself from
liability. The bottom line is, the benefits of using temps can far outweigh the
risks.
Note: Several state legislatures have passed or are trying to pass employment laws specific to temporary employees, so be sure to check your state's laws on this topic from time to time.
Copyright © 2005 M. Lee Smith Publishers LLC. This article is an excerpt from NEBRASKA EMPLOYMENT LAW LETTER. Nebraska Employment Law Letter should not be construed as legal advice or legal opinion as to any specific facts or circumstances. The contents are intended for general information purposes only. Anyone needing specific legal advice should consult an attorney.
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