Treat Temps Casually? Danger—Laws Still Apply

Defining Contingent Workers

Contingent workers are generally those who are hired through staffing firms or leasing companies and whose jobs are structured to last only a certain length of time.

If a company does not clearly define a “contingent worker,” who is an employee, and who is not an employee, managers may start using contingent workers to fill regular positions. For example, if there is a hiring freeze on regular employees but not on contingent workers, those workers may end up as long-term employees.

Employers using contingent workers have potential advantages in both flexibility and cost savings:

• Workforces can be expanded and contracted as needed.
• Employers may achieve reduced labor costs through lower hourly wages and the absence of benefit payments.
• Employers may find that the use of contingent workers allows them scheduling flexibility, alleviates overloads, accommodates onetime projects, and prevents a succession of expensive hires.

However …

However, all is not roses. The staffing vendor’s markup of 25 percent to 30 percent must be included when calculating whether the cost of contingent workers is indeed lower than the cost of hiring permanent employees.

Also, cost effectiveness doesn’t depend just on savings in salary and benefits; it also depends on output. A contingent worker whose productivity is lower than a similarly situated permanent worker may not be a bargain. It may be worth considering outsourcing the job instead.

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Danger—Contingent Workers Have Rights

Employers should be aware of the legal issues of employing contingent workers and not assume that they are immune from issues of employment law; most laws that apply to “regular” workers also apply to contingent or leased workers, including laws relating to:

• Discrimination
• Immigration
• Wage and hour
• Health, pension, and other benefits
• Family and medical leave
• Safety
• Union rights

Joint Employers

Under some circumstances, the agency and the user-employer may be considered joint employers and both could be held liable for an employee’s claims.

Choosing an Agency

Employers should interview several agencies before negotiating any contract(s) using these points to consider:

• Make sure that the agency is reputable. Ask around, or call the state Department of Labor.
• Make sure that the agency follows EEOC guidelines.
• Compare fees among agencies and ask about discounted fees for high-volume business.
• Find out what kind of training the agency provides or what tests they administer to guarantee competency.
• Find out if the agency will pretrain workers to company specifications.
• Find out if the agency does background checks. If background checks are not conducted on contingent workers, the company could be liable for negligent hiring.
• Ask about the termination process if the employee turns out to be unsatisfactory.
• Ask if there are any restrictions or fees associated with hiring the employee on a permanent basis.
• Ask about the size of the agency’s pool of applicants, their availability, and the time frame associated with having them begin work.

Orientation for Contingent Workers

Contingent employees should receive the same orientation as regular full-time employees, where applicable. There should be clear communication channels to convey company policies and performance standards to contingent staff and designated contact persons for them to go to with questions in both the worker’s department and in Human Resources.

Managing and paying temps—just one more basic challenge for compensation managers. Wage and hour should be simple, but it’s just not. Complying with the Fair Labor Standards Act (FLSA) is one of the most confusing and challenging things comp pros have to do.

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• Why are aggressive attorneys so eager to file claims on behalf of employees? Because there’s so much money to be made! Some examples are:

• $4.75 million: Hospital in Thousand Oaks, California, settles wage and hour lawsuit over miscalculated overtime pay and failing to compensate workers for missed meal and rest periods.
• $1.15 million: Las Vegas construction company to pay back wages to 1,060 current and former employees.
• $976,327: New Mexico aerospace company settles with 900 employees who were routinely required to work through lunch breaks without compensation.
• $340,400: New Jersey convenience store agrees to pay back wages and damages for violations of overtime and recordkeeping.
• $84,541: New York physical therapist agrees to pay 22 employees for minimum wage violations.
• $30,000: Texas chain of four gas stations agrees to pay their six hourly employees, again, for recordkeeping and overtime violations.

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