Pitfalls in Hiring Temporary Workers Caroline C. Harrison Dowell Pham Harrison, LLP

Overview Pros of hiring temporary workers Cons of hiring temporary workers Legal concerns—Joint employer status Ways to limit joint employer liability Other concerns when using temporary workers

Pros of using Temporary Workers Accommodate quick business adjustments Staffing flexibility Evaluate worker without the commitment Save time and money Don’t have the burden of the employment relationship Lead to long-term relationship with staffing agency Temporary workers allow you to easily and efficiently accommodate workload fluctuations. For example, employee absences for illness, vacation, maternity or disability leave and/or a sudden departure. It also accommodates for unexpected or temporary demands such as special projects, seasonal or peak periods. By including temporary workers, it allows company to offer flexibility to workers. This can enhance productivity. Allows the company to evaluate the worker without immediately taking on the cost of making the worker an employee. Allows company to test worker’s abilities. Allows company to continue to get work done while searching for the right candidate for a position. Cost of hiring temporary worker is cheaper than full time. Worker is the employee of the temporary agency. Agency has to handle the recruitment, screening, background testing, payroll expenses and paperwork, withholding taxes, unemployment and worker’s comp insurance, and employee benefits. Can lead to a long term relationship with staffing agency that can continue to provide good workers, and maybe even good employees.

Cons of using Temporary Workers Higher wage rates Lack of training Potential for morale issues Safety issues Reliance on agency to properly screen workers Legal issues Joint employer status Lack of control over temporary workers When a company uses temporary workers, the company should expect to pay more for their hourly salary because the staffing agency includes their fees in this rate. Each time a company uses a temporary worker, the new temporary worker will need some training in order to perform the tasks according to the company’s particular needs. Having temporary workers can create morale issues between employees and temporary workers. You have the temp workers doing the same work as full-time employees but not receiving the same benefits/perks as the employees. Temporary workers who have not worked in a particular job before that is a high-risk safety job have more of a risk of being injured. Company has to rely on agency to make sure they are properly screening employees and performing thorough background checks Legal issues is where this presentation will focus. --joint employer concerns which cause company to try to limit control over temporary worker --company has to rely on agency to screen

Legal Concerns—Joint Employer Status Joint Employer & the ADA Burton v. Freescale Semiconductor & Manpower: Company that utilized temporary workers employed by a staffing agency was an employer under the ADA. 5th Circuit used hybrid economic realities/common law control test Right to control employee’s conduct Right to hire, fire, supervise, and to set work schedule Economic realities Whether employer paid employee’s salary, withheld taxes, provided benefits, and set terms and conditions of employment Company that uses a staffing company to hire temporary workers can still be considered an employer. Burton v. Freescale Semiconductor and Manpower of Texas, LP (5th Cir. 2015). --5th Circuit found that a company that utilized temporary workers employed by a staffing agency still qualified as an employer for purposes of the ADA. -Facts: Manpower (staffing agency) hired Nicole Burton to work at Freescale as a leased employee in 2009. She received positive performance reviews until 2011. In 2011, Burton filed a worker’s comp claim. Two weeks later, Freescale decided to terminate her assignment based on performance issues. The staffing agency asked for supporting documentation of her performance issues. Freescale generated retrospective documentation of her performance issues. After a conference call between the staffing agency and Freescale, the staffing agency told Burton that Freescale was terminating her assignment and the staffing agency also terminated her employment with it. Burton filed a claim with the EEOC and sued both Freescale and the staffing agency for violations of the ADA. Freescale and Manpower moved for summary judgment, which was granted by the District Court and Burton appealed. 5th Circuit applied hybrid economic realities/common law control test to determine the existence of a joint employment relationship between Freescale and the staffing agency. Freescale argued that it did not handle payroll, withhold taxes, provide medial or worker’s comp benefits, or set terms and conditions of employment. However, 5th Circuit found that common law test pointed to Freescale as an ER because Freescale completed performance reviews, provided on the job corrections, and admonishments. Freescale had the rght to demand Burton’s termination The 5th Circuit gave little consideration to the contract between the company and the staffing agency, which said that only the staffing agency had the right to make hire and fire decisions with respect to workers assigned to work for Freescale.

Legal Concerns—Joint Employer Status Cont. Joint Employer & OSHA Jointly responsible for maintaining a safe work environment Client companies must treat temporary workers like any other worker in terms of training, safety and health protections. OSHA may cite an employer for hazards that other employers’ employees were exposed to OSHA guidance says that staffing agencies and client companies are jointly responsible for maintaining a safe work environment for leased workers and both employers an be held responsible for unsafe conditions. Client companies must treat their temporary workers likely any other workers in terms of training and safety and health protections, including the duty to provide a safe workplace and training specific to the hazards in their workplace. Staffing agencies have duty to inquire about workplace conditions at client company, verify that client company is providing a safe workplace, and provide general safety training. OSHA’s Assistant Secretary of Labor has stated “temporary staffing agencies and host employers share control over the employee and are therefore jointly responsible for temp employee’s safety and health with all relevant OSHA requirements.

Practices to Reduce Liability Weigh the benefit of using a temporary worker with risk of litigation Implement strategies to limit control over temporary workers Evaluate staffing agency compliance with employment statutes Review contracts with staffing agency to make sure obligations are clearly outlined and make sure company’s level of control is minimal Indemnity by staffing agency Require staffing agency to enter into employment agreement with employees Insurance requirements in contract with staffing agency Companies should evaluate whether core functions of their business are being outsourced to staffing agencies and weight the benefit of that compared to litigation. If you do decide to use a temporary worker, try to limit control over the temp worker by (1) limiting company’s involvement in hiring decisions by allowing staffing company to select the leased employee; (2) avoid situations were leased employees are managed by company employees by having staffing agency rep onside and directly managing their own employees, setting employee’s hours, controlling the work (3) refrain from intermingling payroll records, work comp programs, HR, and employment functions with staffing agency; and (4) refrain from participating in or contributing to labor relations activity of leased employee. Company should evaluate staffing agency’s compliance with FLSA, FMLA, OSHA, Title VII, ADA, and ADEA and focus where liability may be contingent on actions of staff agency. Company should include language in contract where staffing agency agrees to indemnify company for government fines and penalties related to leased employees. For example, allocate liability for worker’s comp claims to staffing agency. Company should require the staffing agency to enter into an employment agreement with the employee wherby the leased employee agrees to bring workers’ comp claim directly against staffing agency and waives the right to bring a claim against company.

Other Concerns with Temporary Workers Non-compete agreements Protection of confidential/trade secret information Reliability concerns Giving up control over Hiring procedures Background checks Supervision You can end up having a temporary worker come in and do the work for the company and acquire on the job knowledge and they can go work for a competitor. If you make the temporary worker sign a non-compete agreement and , later hire that temporary worker as an employee, and do not make them enter into a new non-compete and provide additional consideration, then you run into the risk of the non-compete agreement not being enforceable when employee leaves. Temp worker may get access to trade secret/confidential information and, if there is a lot of turnover, then you run the risk of having that information get out into the workplace. Companies that use staffing agencies have to give up control over hiring procedures and have to contract with staffing agency that they are using thorough background checks

Steps to Minimize Risks of Using Temporary Workers Leave disciplinary action, performance evaluations, compensation adjustments, and benefits to staffing agency Make sure worker record all hours worked and do not work “off the clock” Temporary workers will be counted when determining company headcount for FMLA Make sure all requests for accommodations and leave be directed to staffing agency Train supervisors and managers to work with staffing agency when addressing temporary worker complaints

Questions? Caroline C. Harrison Dowell Pham Harrison, LLP 505 Pecan Street, Suite 200 Fort Worth, Texas 76102 (817) 632-6311 charrison@dphllp.com