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Temporary Employees: Louisiana Employment Law Letter -- Joint employer? How to reduce your liability for contract employees, temps
     


H. Mark Adams, Editor; Jennifer L. Anderson and Jennifer Faroldi Kogos, Associate Editors
Jones Walker

Vol. 16, No. 7
October 2007

LEASED EMPLOYEES

Joint employer? How to reduce your liability for contract employees, temps

In today's workplace, many Louisiana employers are reducing overhead by cutting payroll. In some cases, they're outsourcing traditional functions like HR, payroll and accounting, mail delivery, information systems management, maintenance, and security to independent contractors. Other employers are filling what previously were regular full-time positions with temporary employees supplied by staffing agencies.

Some outsourcing initiatives are motivated primarily by the desire to cut costs, but others are driven by the belief that outsourcing also will reduce exposure to employment-related lawsuits. Employers believe incorrectly that they can avoid liability because contract and temporary employees are employed directly by an unrelated, independent entity. In reality, however, employers have the same liability for contract and temporary employees that they have for their direct employees. Why? They've established a joint-employer relationship with the staffing agency.

First, some definitions

"Joint employer" is a term of art that's finding its way into discrimination, harassment, and wage and hour lawsuits. By definition, it refers to two or more unrelated entities that exercise enough control over an individual to be considered his employer. Thus, a contract or temporary employee likely will be considered an employee of both the staffing company that hired him and pays his salary and the company for which he provides services and that directs his day- to-day employment activities.

Contract and temporary employees enjoy the same rights as regular full-time employees and therefore are entitled to protection under the myriad of federal and state employment laws, including Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, and the Fair Labor Standards Act. For example, if a contract employee is sexually harassed by a direct employee of the contracting employer, the contract employee would have the same rights to pursue legal remedies as would any direct employee of the contracting employer.

Difficult scenario

The more difficult situation arises when a contract or temporary employee is subjected to unlawful conduct by a direct employee of the independent contractor (or employment or staffing agency) who also is working at the employer's facility as a contract or temporary employee. Who is responsible in that scenario?

As explained above, both entities may be responsible, but it depends on the resolution of one overriding question: Which entity made the final decisions regarding employment matters relating to the person claiming unlawful conduct? To answer that question, you must first answer a number of other questions:

  • Who hired the employee?
  • Who could fire her?
  • Who owned the property or facility where she worked?
  • If the job required training, who provided it?
  • Who assigned her tasks?
  • Who made her schedule?
  • Who approved leave for her?
  • Who paid her?
  • Who determined her pay rate or method of payment?
  • If applicable, who provided benefits ― e.g., health or retirement benefits ― to the employee?
  • Who provided her with equipment and materials to perform the job?
  • Who supervised her?
  • Who disciplined her?
  • Who reviewed or conducted an evaluation of her performance?
No single answer will determine whether a contracting employer will be responsible for allegations of unlawful conduct against or by a contract or temporary employee. If, however, a majority of the answers indicate that the contracting employer exercised sufficient HR or supervisory control over the employee, then it may be considered that individual's employer for liability purposes. For example, in a 1999 Puerto Rico case, the First U.S. Circuit Court of Appeals concluded that the contracting employer's participation in discipline and scheduling decisions, directly or indirectly, constituted enough control to establish a joint-employer relationship.

How to avoid liability

Without question, those of you who use contract and temporary employees often exercise supervisory responsibility for their day-to-day work activities ― e.g., directing them to perform certain tasks. To avoid joint-employer liability, you essentially have two options: (1) Avoid hiring contract or temporary employees, which may be unrealistic, or (2) avoid exercising any HR or supervisory functions over them, which also may be unrealistic.

Nevertheless, there are steps you can take to limit or reduce your exposure. With the advice of employment counsel, you should consider incorporating some or all of the following provisions into your contracts with staffing agencies:

  • a clear explanation of the relationship between the contracting parties;
  • identification of the party that employs the leased employees;
  • identification of the party responsible for HR, payroll, and supervisory functions regarding the leased employees;
  • identification of the party that will be responsible for any unlawful conduct committed by or against those workers; and
  • an indemnification clause under which the employment or staffing agency or independent contractor agrees to defend you against and take responsibility for any employment claims arising from its actions.
In addition, you should provide all contract and temporary employees with copies of your employee handbook and/or policies and procedures and make it clear that workers assigned by a staffing agency are subject to your policies and procedures just like your direct employees.

Bottom line

Establishing a clear set of guidelines that will govern your relationship with an employment or staffing agency is instrumental in limiting your exposure in case of a lawsuit.
Copyright 2007 M. Lee Smith Publishers LLC

LOUISIANA EMPLOYMENT LAW LETTER does not attempt to offer solutions to individual problems but rather to provide information about current developments in Louisiana employment law. Questions about individual problems should be addressed to the employment law attorney of your choice. The State Bar of Louisiana does not designate attorneys as board certified in labor law.

M Lee Smith Publishers