When Hiring Temps, Watch Legal Pitfalls

(Originally published in The Business Journal)

The nontraditional workforce, which includes holders of multiple jobs, contingent and part-time workers and people in alternative work arrangements, is common in today’s business environment.

As far back as 2000, the Department of Labor’s Bureau of Labor Statistics was reporting that nearly four of five employers, in establishments of all sizes and industries, use some form of nontraditional staffing. The contingent workforce includes freelancers, independent professionals, temporary contract workers, independent contractors and consultants.

There are legal considerations businesses should keep in mind before they take the contingent or nontraditional workforce approach.

In short, a temporary employee is one who is employed for a limited time only or for the performance of a particular piece of work. A common example of a temporary employee is a person hired by a retail store to work during the busy holiday season.

Simply because an employee is considered “temporary” does not mean that an employer can treat that employee any differently than its “permanent” employees. In fact, federal law does not make such a distinction.

For example, the Fair Labor Standards Act, the federal wage and hour law, requires employers to pay all non-exempt employees overtime for work they perform over 40 hours in one workweek. So if a temporary employee works more than 40 hours in a workweek for an employer, that employer must pay that employee overtime pay for those hours.

For positions that fall under one of the FLSA exemptions (executive, administrative, or professional), any employee — whether temporary or permanent — is exempt from the overtime and minimum-wage provisions.

Individuals can also work multiple jobs. In such cases, an employer generally needs to be concerned only with those hours for which it employs that employee. For example, if Tim Temp works 40 hours for Company A and 15 additional hours during the same workweek for Company B, each company can disregard work that Temp performed for the other company.

In this example, Temp would not be eligible for overtime from either A or B, even though he worked more than 40 hours in a workweek.

However, that outcome changes if A and B are considered “joint employers.” In such a case, the companies could owe overtime pay to Temp, and may be sued if they fail to do so. Joint employers are also responsible for all FLSA requirements, including recordkeeping, for the workweek.

Whether two businesses are considered joint employers depends on the economic reality of the situation. There is no one set of accepted factors that are used to make this determination.

A common joint employer situation occurs when a company uses a temporary service agency to fill its labor needs.

When using a temp agency, a business needs to make sure the agency complies with all FLSA recordkeeping and overtime requirements. Make sure your agreement with the agency outlines each party’s responsibilities and that you accurately report the temporary employee’s overtime to the agency.

A business also needs to be concerned that it is following federal and state anti-discrimination laws. These apply to temporary employees, too.

Another potential pitfall arises when businesses hire independent contractors to perform particular jobs. In certain circumstances where a company exerts too much control over the contractor’s employees, the company and the contractor may be considered joint employers for FLSA purposes, and will be responsible for applicable overtime pay and minimum wage.

In short, if you hire an independent contractor to do a job, let them do the job and do not try to direct the details of the job yourself.

Vansuch can be reached at mvansuch@hhmlaw.com or at (330) 392-1541