Companies That Use Staffing Agencies Must Be Careful to Avoid Joint Employer Liability



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Hiring a staffing agency to provide additional manpower? Staffing agencies can devote the time, expertise and resources necessary to manage the employment process and relationship, freeing companies to focus on their core missions with more flexibility. Today, companies are using agencies more than ever, and it is not unusual to visit a workplace and see staff directly employed by a company working alongside a worker assigned by a staffing agency. However, several recent court cases and government agency rulings demonstrate that these increasingly common arrangements pose liability risks to companies who do not take measures to ensure that all staff members, regular and temporary, are paid appropriately and treated fairly.

For example, on October 27, 2015, the U.S. Department of Labor announced a $2.1 million settlement with J&J Snack Foods. J&J hired a staffing agency to fill positions at the company. The Department of Labor alleged that workers assigned by the staffing agency to work at J&J worked more than 40 hours a week, but were not paid overtime as required by the Fair Labor Standards Act. The Department of Labor alleged that J&J was a joint employer of the staffing agency’s workers and demanded that J&J pay the workers for the unpaid overtime. To the Department of Labor, it made no difference that J&J had no know knowledge of how the staffing agency paid its employees or that they were being paid improperly. Obviously, J&J believed it was better served by paying the settlement than continuing to fight the Department of Labor.

Then, on November 18, 2015, the federal court of appeals with jurisdiction over Pennsylvania, New Jersey and Delaware, decided that a company could be held liable under federal and Pennsylvania state laws for racial discrimination against a black temporary worker who was supplied by a staffing agency. In the case filed against Tuesday Morning, Inc., the temporary worker claimed that he was subjected to racial slurs and eventually terminated from his job while working through a staffing agency on-site at Tuesday Morning. In part relying on provisions of the written staffing agreement between Tuesday Morning and the staffing agency, the court decided that several factors suggested that Tuesday Morning, in fact, had a direct employment relationship with the staffing agency worker. Specifically, the court found that the way that Tuesday Morning paid the staffing agency was akin to establishing and paying direct employee compensation. In addition, Tuesday Morning determined who could work at its store; Tuesday Morning employees gave the temporary worker assignments and directly supervised him; and Tuesday Morning provided him with training, equipment, and materials and kept track of his hours. According to the court, all this meant that Tuesday Morning could be held liable as the “employer” of the temporary worker.

The J&J and Tuesday Morning cases are not unique and appear to be part of a broader trend in which employees and government agencies are looking to hold companies liable for the transgressions of related entities. For yet more proof, just look to the National Labor Relations Board which recently determined that franchisors are responsible, as joint employers, for unfair treatment of employees hired and employed by their franchisees.

Companies that use temporary staffing agencies can and should take steps to mitigate the risk of joint employer liability. At a minimum, those companies should reevaluate current staffing arrangements and review their written agreements with the staffing agencies and consider negotiating to include provisions that allocate responsibility for complying with applicable employment laws, provide mechanisms for the company to periodically audit the compliance of the staffing firm, require appropriate insurance, and provide for indemnification or reimbursement related to government audits, fines and employee claims.

For more information on how to protect your organization from potential joint employer liability, please contact Jacob Sitman or the other Employment attorneys at Fitzpatrick Lentz & Bubba, P.C.

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