HR Management & Compliance

Temps And Contingent Workers: Fallout From Microsoft Ruling Continues-New Lawsuits And Legislation May Force Employers To Pay Benefits

When a federal appeals court ruled recently that software giant Microsoft Corp. will have to pay retroactive employee benefits, including stock options, to temporary employees hired through staffing agencies, it sent a shudder through the growing number of employers who use temps in addition to regular workers. Since the court’s ruling, employees and lawmakers have wasted no time jumping on the bandwagon, with new lawsuits and proposed legislation all seeking to increase your responsibilities to so-called “permatemps,” long-term workers who are hired and paid by outside agencies. Here’s a roundup of the latest important developments.

Microsoft Sparks New Debate

The Ninth Circuit Court of Appeal covering California held that temporary employees, as well as workers improperly classified as independent contractors, could be considered Microsoft’s “common law employees,” entitled to receive valuable employee benefits. (See CEA June 1999.) Determining whether someone is a common law employee involves factors such as how much control you retain over your temps’ work, who provides their equipment, and how much discretion they have over hours and time of work. In most cases, long-term temps are employees under this test, even though a staffing agency hires and pays them, because you and the agency are legally con- sidered “joint employers.”

Arco Faces New Lawsuit

The same attorneys who represented the victorious Microsoft workers have filed a class action lawsuit against Los Angeles-based Atlantic Richfield Co., accusing the oil company of misclassifying employees to avoid paying benefits. In the suit, temp workers claim that even though they were paid by employee-leasing agencies, they should be considered regular Arco employees entitled to receive benefits. Many of the so-called temporary workers had been working onsite at Arco facilities for several years.According to the workers, Arco trained and supervised them and provided their work equipment and supplies. They said they often worked side-by-side with regular Arco employees performing identical tasks. All these factors, the workers claim, entitle them to be treated as common law employees – and to receive regular employee benefits.Arco has denied the allegations, arguing that the workers were supervised and employed only by the independent oil field service companies who hired them and issued their paychecks.

Maternity Leave And Discrimination

Entitlement to benefits isn’t the only issue that can arise if you use leased workers or long-term temps. In what may signal a new twist in this trend, one company was recently forced to pay damages for refusing to reinstate a temp after she returned from maternity leave.The case was brought by Delisa Atchley, a document clerk who worked for three years at The Nordam Group, Inc., a Tulsa, Okla., aviation company. A staffing agency hired her, paid her salary and provided vacation and holiday benefits. An agreement between Nordam and the agency specified that the agency’s workers would not be considered Nordam employees.While Atchley was out on maternity leave, Nordam acquired a new company and the project she had been assigned to ended. When she informed Nordam she was ready to return to work, the company told her that her services weren’t needed. Atchley then sued Nordam – not the staffing agency-for pregnancy discrimination, and a jury awarded her $91,000 in damages.Nordam appealed, arguing that it wasn’t Atchley’s employer. But a federal appellate court disagreed and upheld the jury’s award. The court ruled that even though Atchley was paid by an agency, Nordam could still be considered her employer under the federal pregnancy discrimination laws because it actually supervised her work, determined her schedule and approved her maternity leave.

Mandatory Benefits Coming?

New legislation just introduced in Washington would require you to offer temporary workers the same benefits you provide to your full-time regular workforce. The Equity for Temporary Workers Act of 1999 (H.R. 2298) would subject employers to liability for discriminating against temporary employees in wages, benefits or other terms of employment. Temps who have worked for an employer for 1,000 hours during a 12-month period would also become eligible for all benefits offered regular full-time employees-even if the temps are hired and paid by a staffing agency.Another proposal, H.R. 2299, would amend the Employee Retirement Income Security Act (ERISA) to require that pension coverage be extended to any worker who meets the common law definition of an employee-including workers on the payroll of temporary help agencies.

Use Caution With Long-Term Temps

Lawsuits by permatemps are shaping up to be the next big wave of employment litigation – and many employers aren’t adequately prepared. If you use long-term temps, carefully evaluate the eligibility language in your benefit plans and leave policies, especially the definition of “employee.” More workers than you might expect could be covered. 

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