This month’s expert is Tyler M. Paetkau,
Esq., a shareholder in the
Francisco
PC.
The
purposes includes “when an employer releases an employee after completion of
the specific job assignment or time duration for which the employee was hired.”
Predictably, this case has launched a wave of class actions against the
temporary staffing industry. The lawsuits’ principal claim is that staffing
companies owe substantial waiting-time penalties based on their alleged failure
to pay final wages immediately at the end of a temporary assignment.
At least one trial court has distinguished L’Oréal as not applying to temporary staffing companies, and two bills
pending in Sacramento address “the L’Oréal problem” for the temporary
staffing industry. Here we summarize these developments.
5
L’Oréal: Unintended Consequences for the Temporary Staffing Industry?
In the L’Oréal case, a “hair model” completed a one day job assignment at an
event featuring L’Oréal products but didn’t receive her paycheck for two
months. She sought and won $15,000 in waiting-time penalties (30 days
multiplied by her $500 daily wage rate). California Labor Code Section 201
requires immediate payment of wages on discharge, and Section 203 authorizes
waiting-time penalties of up to 30 days for an employer’s delay in issuing a
final paycheck.
A trial court threw out the case, ruling that the model was not
entitled to the penalties because discharge means dismissal from an ongoing
employment relationship. An appeals court agreed, but the state Supreme Court
reversed the lower decisions, finding that the common meaning of discharge does
not exclude “situations where employment is terminated upon the completion of a
specific job assignment or time duration.”1
Did the Supreme Court consider how its ruling might affect the
temporary staffing industry? L’Oréal may be an example of bad facts
making bad and unintended law. One obvious distinction is that L’Oréal is not a
staffing company, and the rule announced by the Supreme Court is practically
impossible for a staffing company to carry out. Also, the rule cannot apply to the
end of an assignment in the staffing industry because temporary employees often
move quickly from one assignment to the next, and even when an assignment ends,
they remain employed subject to the staffing
company’s efforts to find another suitable temporary position.
Temps often work at remote locations, and staffing companies may
not even know that an assignment is over until the client informs them.
Sometimes, the client doesn’t contact the staffing company until the assignment
ends, and sometimes, the temporary worker may decide to take time off to
travel. Temps often remain on the staffing company’s payroll to be called in
the event of specific work opportunities. They have ongoing employment
relationships with the staffing company, and the L’Oréal rule requiring immediate payment at the end of every temporary
assignment is unrealistic, impractical, and unworkable.
Possible Judicial Fix
In a recent ruling, a Los Angeles Superior Court judge has stated
that L’Oréal is “distinguishable and not instructive” when a temporary staffing
agency is involved. In this case, the temp was told to call in for a further assignment
and did so. Thus, the court found, the employee was not released from
employment when the prior assignment ended.2
It remains to be seen how other
to the staffing industry’s efforts to argue that L’Oréal does not apply to its businesses.
Possible Legislative Fix
Represented by the American Staffing Association (ASA) and the
California Staffing Professionals (CSP), the staffing industry has worked with
Democrats in the state Legislature to create an exemption or a clarification for
the industry. A bill being considered, S.B. 940, represents a compromise with
organized labor. The measure would clarify the difference between a “discharge”
and an “end of assignment.” It would also require staffing companies to pay
employees weekly, regardless of when an assignment ends.
The ASA and the CSP argue that S.B. 940 is needed to eliminate the
uncertainty over whether L’Oréal
applies to employees of temporary services
employers: “By clarifying that the completion of the assignment is not a
discharge, and that wages will be paid weekly, this bill will ensure that the
uncertainty of the L’Oréal decision will not hurt the industry, and that the standard industry
practice for the majority of California’s temporary services employers will be
codified.” Unfortunately, S.B. 940, even if signed into law, may not apply
retroactively because most bills don’t. A similar bill, A.B. 1902, is also pending
in
Conclusion
Until the law is changed, staffing companies should audit their
pay practices to ensure that temporary employees are paid promptly at the end
of each assignment (i.e., under California law, on the same day for an involuntary
termination and within 72 hours for a voluntary resignation), or, at a minimum,
staffing companies should consider paying their employees on a weekly basis to
limit the exposure to waiting-time penalties. The L’Oréal decision reminds all employers of the importance of a thorough and
careful review of pay practices and policies. Does the company pay some employees
per day, per week, or in another manner that would be a potential defense to
not paying final wages at the end of an assignment? Does the company train
temporary employees to check in for additional work at the end of each
assignment? Such policies or practices could be defenses in the event of claims
or could at least help to minimize the exposure.
_
1 Smith v. Superior Court (L’Oréal),
2 Marinoff v. Howroyd-Wright Employment Agency, Inc., and Appleone
Employment Services,
355901, March 19, 2008