Benefits and Compensation

The Five Laws that Cause Contingent Worker Challenges

Cooper chairs the labor and employment practice group at law firm Garvey Schubert Barer in Portland, Oregon. Her tips came at a recent BLR-sponsored webinar.

Here’s Cooper’s quick rundown of the five legal arenas where you may be exposed to “joint employer” liabilities with contingent workers:

1. Wage and hour laws. While the temp agency is usually held responsible for wage and hour issues, FLSA imposes joint obligations if the employee works for two employers in one week.

2. Employment taxes. The agency is responsible for deducting taxes from employees’ pay. Companies that fail to withhold from contingent workers who are actually employees may encounter problems with the Internal Revenue Service. If the agency or leasing company doesn’t deduct, the feds will say you’re responsible, says Cooper.

3. FMLA. The FMLA specifically applies to temporary or leased employees, stating that joint employment will typically exist in those relationships. Employees in joint employment relationships must be counted by both entities for purposes of coverage under the FMLA. Generally, however, temporary agencies and leasing firms will be regarded as the primary employers and are responsible for notifying the employee, providing leave, maintaining health benefits during leave, and restoring employment following the leave.

However, there may be situations in which the FMLA doesn’t cover the temp agency but does cover your company. Sort this out ahead of time.

4. The Americans with Disabilities Act (ADA). Both the agency and user-employer are required to reasonably accommodate a worker with a disability. The interactive process gets complicated—both joint employers need to be able to show that they engaged in the interactive process. What if one says yes and the other says undue hardship? You say, take the employee back then if you can make the accommodation. Guess what? You’ve just bought yourself a discrimination suit.

Are class action lawyers peering at your pay practices? It’s likely, but you can keep them at bay by finding and eliminating any wage and hour violations yourself. Our editors recommend BLR’s easy-to-use FLSA Wage & Hour Self-Audit Guide. Try it for 30 days … on us.

5. Workers’ compensation. Whether a contingent worker will be considered an employee for workers’ compensation purposes, and is, therefore, eligible for workers’ compensation, depends on state law. In a very general sense, the agency is usually the primary employer of a contingent worker and pays for and receives the benefits of workers’ compensation.

However, the user-employer may also be immune from civil lawsuits resulting from accidents, and thus the employee’s remedy may be limited to workers’ compensation.

Many workers’ compensation insurance policies have an “alternate employer” endorsement that provides coverage for contingent workers, among others. Employers who make sure they are added to the agency’s policy will avoid lawsuits from leased or temporary employees injured on the job.

When an employee gets hurt in another state, it’s easy to “step in it,” Cooper says. If you have workers in multiple states, make sure you have the workers’ comp thing worked out.

How can you be sure your operations will pass muster when inspected? Only one way—audit before ”they” do.

“They,” in this case, might be the feds, your employees’ lawyers, or even bankers deciding you don’t get that loan because improperly classified workers represent a huge potential liability.

Experts say that it’s always better to do your own audit, and fix what needs fixing, before authorities do their audit. Most employers agree, but they get bogged down in how to start, and in the end, they do nothing. There are, however, aids to making FLSA self-auditing relatively easy.

What our editors strongly recommend is BLR’s FLSA Wage & Hour Self-Audit Guide. It is both effective and easy to use, and even won an award for those features. Here’s what customers like about it:

  • Plain English. Drawing on 30 years of experience in creating plain-English compliance guides, our editors have translated the FLSA’s endless legalese into understandable terms.
  • Step-by-step. The book begins with a clear narrative of what the FLSA is all about. That’s followed by a series of checklists that utilize a simple question-and-answer pattern about employee duties to find the appropriate classification.

All you need to avoid exempt/nonexempt classification and overtime errors, now in BLR’s award-winning FLSA Wage & Hour Self-Audit Guide. Find out more.

  • Complete. Many self-audit programs focus on determining exempt/nonexempt status. BLR’s also adds checklists on your policies and procedures and includes questioning such practices as whether your break time and travel time are properly accounted for. Nothing falls through the cracks because the cracks are covered.
  • Convenient. Our personal favorite feature: A list of common job titles marked “E” or “NE” for exempt/nonexempt status. It’s a huge work saver.
  • Up to Date. If you are using an old self-auditing program, you could be in for trouble. Substantial revisions in the FLSA went into effect in 2004. Anything written before that date is hopelessly—and expensively—obsolete. BLR‘s FLSA Wage & Hour Self-Audit Guide includes all the changes.

You can examine BLR’s FLSA Wage & Hour Self-Audit Guide for up to 30 days at no cost or obligation. Go here and we’ll be glad to arrange it.