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How the New Rules of Co-Employment Affect Temp Jobs

Last September, the National Labor Relations Board (NLRB) overturned a 30-year precedent on joint employment as it relates to employers who use staffing partners. For an overview on the new labor standard, see our initial coverage here and further guidance from the U.S. Department of Labor here. In short, as Austin Employment Attorney Amy Beckstead, explains, “Companies found to be joint employers under the law not only face potential shared liability with respect to wage-and-hour violations, but also face liability with respect to other employment laws, including Title VII, FMLA, ADA and OSHA.”


State of the Temporary Staffing Industry

Is temporary staffing going to suffer from this uncertainty? Will it be better to hire independent contractors directly for roles that are traditionally temp jobs? The answer is a resounding “No!”

Rest assured the future of the staffing industry in serving the needs of employers is as secure as ever. In fact, research from CareerBuilder and Emsi shows an increase of temporary staffing at 5.9 percent through 2018. In a separate Harris Poll study (commissioned by CareerBuilder), 47 percent of employers say they plan to hire temporary or contract workers in 2016, up slightly from 46 percent last year.

“Temporary employment benefits both sides of the labor market,” says Kyle Braun, president of CareerBuilder’s Staffing and Recruiting Group. “Hiring temporary and contract workers helps companies stay flexible and adapt quickly to changing market demands.”


What’s Really at Stake?

So if other employers aren’t curtailing their temp staffing momentum, what do they know that you don’t? Stephen C. Dwyer, general counsel of the American Staffing Association (ASA), chalks it up to a case of “fear mongering” among legal pundits when it comes to the use of contingent labor.

“Staffing clients have long been held to be joint employers under various labor and employment laws,” Dwyer told us in an exclusive interview. “Therefore, joint employment is nothing new for the industry and should not be feared by clients. It presents no greater legal risk than with respect to a client’s own employees and, in some cases, such as with respect to workers’ compensation presents less risk.”

He explains, in an Association of Corporate Counsel Docket, the legal issues of using independent contractor arrangements as an alternative for temporary employment.

“…Various federal and state agencies, including the Internal Revenue Service and Department of Labor, have cracked down on worker misclassification, the penalties for which can be severe. These penalties may include, among other things, income tax, social security, minimum wage, overtime and unemployment insurance liability.

In contrast, most workers assigned through a staffing arrangement can only be classified as employees. Both the staffing firm and the client exercise control over the employee. Staffing firms generally recruit and screen the workers and verify their work status under immigration laws; are the employer of record for wages and benefits; withhold and remit all payroll taxes (e.g., Social Security, Medicare and unemployment insurance); provide workers’ compensation insurance coverage; have the right to hire, fire and reassign the worker; and hear and act on complaints from employees regarding working conditions and other work-related matters. Clients generally supervise and direct the activities of the employee at the worksite. Given the employee status of most staffing firm workers, the potential liability clients face with respect to independent contractors is largely avoided.”

The ASA states, in most staffing arrangements, a staffing firm and its client share a co-employment relationship in the following ways:

Staffing firms

  • Verify employee work status under immigration laws
  • Are the employers of record for wages and benefits
  • Withhold and remit all payroll taxes (e.g., Social Security and Medicare)
  • Provide workers’ compensation insurance coverage
  • Have the right to hire and fire
  • Hear and act on complaints from employees on working conditions and other work-related matters

Clients (Employers)

  • Generally supervise and direct employees’ day-to-day work
  • Control working conditions at the work site
  • Determine the length of employees’ assignments

The bottom line: A staffing firm can share—and even take on most—of the employment responsibility, but cannot completely erase liability for the employer. Both parties should be confident the other is taking its responsibility very seriously. Dwyer concludes employers can best “mitigate risk by thoroughly vetting staffing firms to ensure they are knowledgeable about, and comply with, their legal responsibilities.”

Ask questions. Set your standards high. And expect staffing firms to be more selective in choosing clients and strict on co-employment arrangements with clients as well—especially as it relates to handling employee benefits, collective bargaining, workplace safety and workers’ compensation.  To insure that your staffing firm is following applicable laws and operating to the highest industry standards, check to make sure that they are members of the ASA and their state association such as the Texas Association of Staffing.

Are you still apprehensive? Do you worry about co-employment issues? Let us know! We’re here as a resource for you.


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