Your Legal Obligation to Temporary Agency Workers

When you use temporary workers hired and paid by a staffing agency, you need to know if you are considered to be their actual employer for legal purposes. Depending upon the arrangement, your organization may be held responsible for employment discrimination, the same as if the worker were on your payroll.

The number of workers and employers using temporary agencies is growing at a high rate. Employers enjoy the flexibility of using workers who do not have to be on their regular payroll, while workers like the ability to use short-term assignments to accommodate both career and nonbusiness goals. However, employers need to understand that they still may have legal obligations to their temporary or contingent workers, particularly in the area of discrimination.

The term “contingent worker” covers a broad spectrum of temporary worker arrangements and flexible working conditions. It includes temporary workers on your payroll, independent contractors, temporary workers from agencies, and leased employee arrangements. The Equal Employment Opportunity Commission (EEOC) has published a directive, Enforcement Guidance: Application of EEO Laws to Contingent Workers Placed by Temporary Employment Agencies and Other Staffing Firms (Guidance), to address how discrimination laws affect temporary employees and their employers. The EEOC Guidance describes contingent workers as those who are generally outside an employer’s core workforce and includes workers whose jobs are irregular or will only last a short time. The Guidance deals with a specific type of temporary worker: those who are hired and paid by a staffing agency, but whose working conditions are totally or partially controlled by clients (or employer organizations) who use the agency. The main type of staffing agency described in the EEOC Guidance is the temporary employment agency.

The EEOC Guidance establishes that a temporary employment agency normally provides its clients with a staffing arrangement in which the agency is nominally an employer. It recruits, screens, hires, and may even train its employees. When it places a worker in an assignment, it sets and pays the wages and then bills the client who uses its services. The client usually controls the working conditions, supervises the individual, and determines how long the job will last.

In order to determine when and how the federal discrimination laws apply to temporary agency workers, you must be able to answer the following questions.

1. Who is the employer? The first question that both the agency and the client have to answer is whether the worker is an employee or an independent contractor. If the individual is an employee, that is, if the agency and/or the client controls the when, where, and how of the individual’s job performance, the worker may be covered by the discrimination laws. Most workers obtained through a temporary agency are considered to be employees, and not independent contractors, because normally both the agency and the client exercise control over their work.

A temporary agency usually has an employer/employee relationship because, among other things, it does the hiring, finds the job, provides workers’ compensation, pays the worker, and, if necessary, terminates him. During the job assignment, the client typically also is considered the temporary worker’s legal employer if it does such things as supervise the worker, provide work space, and furnish equipment for the job. The EEOC Guidance gives the following example of “joint employers”:

A temporary employment agency hires a worker and assigns him to serve as a computer programmer for one of its clients. The agency pays the worker’s salary based on the number of hours worked as reported by the client. The agency also withholds social security and taxes and provides workers’ compensation coverage. The client establishes the hours of work and oversees the individual’s work. The individual uses the client’s equipment and supplies and works on the client’s premises. The agency reviews the individual’s work based on reports by the client. The agency can terminate the worker if his or her services are unacceptable to the client. Moreover, the worker also can terminate the relationship without incurring a penalty. In these circumstances, the worker is an “employee” … and the temporary employment agency and its client qualify as joint employers because both have the right to exercise control over the worker’s employment.

2. Who is liable for discrimination? Both the agency and the client may be liable for discrimination if they qualify as joint employers and each meets the employee size threshold for coverage under the various laws. The threshold levels under the federal laws are: Title VII of the Civil Rights Act applies to employers with 15 or more employees; the Age Discrimination in Employment Act applies to employers with 20 or more; the Americans with Disabilities Act applies to employers with 15 or more; and the Equal Pay Act applies to employers who have more than one employee. To determine coverage, both the agency and the client must count every temporary worker who qualifies as an employee, along with their regular staff.

3. What if the temporary agency or the client is not the employer? There are times when, even if the agency or the client is not the employer, it may be liable under the antidiscrimination laws. The reason for this is that the laws “prohibit an employer from interfering with an individual’s employment opportunities with another employer.” The EEOC Guidance uses an example where a staffing agency provides an independent computer repair technician to a client, and then the client asks for a replacement:

The client does not qualify as a joint employer of the worker because it had no ongoing relationship with the worker, did not pay the worker or firm based on the hours worked, and had no authority over hours, assignments, or other aspects of the means or manner by which the work was achieved. However, if the client’s request to replace the worker was due to racial bias, and if the client had 15 or more employees [i.e., Title VII coverage], it would be liable for interfering in the worker’s employment opportunities with the staffing firm.

The EEOC Guidance describes some situations where agencies and clients may be liable:

1. Discrimination in assignment practices. A staffing agency can be liable if it follows a client’s discriminatory assignment request or preference. It can also be liable if it administers a test which is not job-related and which disproportionately excludes members of a protected class. The discrimination laws in these situations may cover the client if it has the minimum number of employees for legal coverage under the applicable laws.

2. Discrimination at the work site. If a client fails to treat the workers assigned to it in a nondiscriminatory manner, it may be liable. In addition, if the agency knows about the discrimination, it must take whatever means of corrective action is in its control, or it also may be found liable for discrimination.

3. Discrimination in the payment of wages. The Equal Pay Act (EPA) requires that men and women receive equal pay for equal work. Thus, if a temporary worker receives less pay than a temporary worker of the opposite gender who performs the same job, both the agency and the client may be liable under the EPA. Also, if both have the required number of workers for legal coverage, they may also be liable under Title VII for wage discrimination. However, if there is a wage difference based on the classification of workers, such as temporary and regular, this disparity generally is not a violation under the EPA because it is based on a distinction other than sex.

The use of temporary employment agencies answers the need of many employers for greater flexibility. It allows them to maintain a core workforce and to add workers on a temporary basis. However, some employers, in using temporary employment agencies, do not realize that even though their agreements expressly state they are not employers, they may be so in the eyes of the law. They may be even less aware that they can have joint liability with the agency for a temporary worker’s discrimination claim.

If your organization uses temporary agency workers, you can help protect yourself against possible discrimination issues by using the following guidelines to monitor your relationship with the agency:

-- Know whether the temporary worker meets the statutory test to be considered an independent contractor.

-- Assume that you are probably a joint employer if you control the working conditions of the temporary worker, supervise the job, and control the length of the assignment.

-- Determine whether you are covered under the antidiscrimination laws. Be sure that you count all temporary workers with whom you have a legal employer/employee relationship.

-- Be aware that you may not avoid discrimination charges by using temporary agency workers. Therefore, do not ask an agency to provide workers who meet requirements that may be viewed as discriminatory, such as requesting only “young” workers. Both you and the agency, if it complies with your request, can be liable.

-- Include coverage for temporary workers under the administration of your antidiscrimination policies.

The Guidance is used by the EEOC’s personnel in their investigations and is given deference by the courts. Therefore, you should not allow yourself to fall into the trap of thinking you can avoid discrimination issues by using temporary agency employees.