Temporary / Leased Employees

What is a temporary or leased employee?
A worker who seeks employment through a temporary agency is the most common type of leased employee. A temporary agency is a company that contracts with businesses to provide workers on a contingent basis. These temporary agencies handle all payroll, tax, and other human resources functions for the workers.

Other leased employees (other than workers from temporary agencies) are employed by employee leasing firms (also called “professional employer organizations”) that supply companies with an entire work force of employees for extended amounts of time, rather than on day-to-day basis. The leasing firm takes over all payroll, tax, and other human resources functions for the workers.

What is a contingent worker?
You may also hear the term “contingent worker” used to refer to temporary and leased employees, as well as other kinds of non-permanent work arrangements. The contingent workforce comprises many categories of workers, ranging from highly paid management consultants who are satisfied with their work arrangements to low-paid service sector workers who receive no benefits and would rather have full-time permanent jobs.

Workers take temporary and other contingent jobs for a variety of reasons, both personal and financial. These reasons include workers’ preference for a flexible schedule due to school, family, or other obligations; the need for additional income; inability to find a more permanent job; and hope that the position will lead to permanent employment.

Why do employers use temporary or leased employees?
Employers hire contingent workers for a number of legitimate reasons: to accommodate workload fluctuations, fill temporary absences, meet employees’ requests for part-time hours, screen workers for permanent positions, and save on wage and benefit costs, among other reasons.

However, some employers may use contingent workers for less praiseworthy reasons, such as to avoid paying benefits, reduce their workers’ compensation costs, and prevent workers’ attempts to unionize or allow them to lay off workers more easily. When a workplace uses contingent workers, it shifts costs traditionally borne by employers — such as health insurance, pensions, and job training — to both individual workers and taxpayers. From the employer’s viewpoint, treating workers as non-employees immediately saves payroll costs ranging from 15 to 30%.

Are temporary or leased employees covered by employment laws?
Temporary workers and other leased employees are covered by the same employment laws as regular workers. However, because of the short-term, often project-oriented nature of their work, temporary workers are sometimes misclassified as independent contractors and, as a result, denied their rights as employees. Whether or not you have been misclassified will depend on whether you perform the same duties as regular workers.

Who is considered my employer if I am a temporary or leased worker?
Workers who work for companies or businesses through a temporary agency or other employee-leasing firm are usually considered to be employees of both the temporary agency/leasing firm and the business. The application of employment laws normally depends on whether the employer using the leased employees is considered to be a “joint employer” with the leasing agency.

I work for a company that subcontracts my services to other employers. Who is considered my employer?
A subcontracted employee is a worker who is employed by a primary employer but who provides services to a secondary employer on a contract basis. As in the situation of temp/leased workers, subcontracted employees are generally considered jointly employed by both companies. Whether the company has status as the employer of the worker will depend on the employer’s right to control the employee.

Who is legally responsible if I’m not being paid correctly?
Usually, a temporary agency/employee-leasing firm will put you on its payroll and make the necessary payroll deductions on your behalf, as well as make the employer’s contribution to these taxes. However, if there is a violation of these payroll requirements, a court could determine that both the employer and the temp agency/leasing firm are legally liable for the failure to pay you correctly. Likewise, if you are not paid overtime or have other wage and hour problems (such as not getting a final paycheck or vacation pay), the temp agency/leasing firm and the employer may both be legally liable.

If I lose my job, am I eligible for unemployment insurance?
It depends. Temporary workers and other leased employees can receive unemployment insurance if they are otherwise eligible to receive it (e.g. they were not fired for misconduct, are actively seeking employment, etc.).

However, you may have difficulty qualifying for unemployment insurance because you may not have worked consistently enough to establish the requisite “base period” of wages needed to make you eligible.

If I am hurt at work, am I eligible for workers’ compensation benefits?
Yes. Temporary workers/leased employees are generally eligible to receive workers’ compensation, usually through the temp agency/leasing firm by whom the worker is employed.

I am not being sent out on temp assignments, and think that I am being discriminated against, due to my age. I’m not sure if it’s the temp agency’s fault for not placing me in jobs or the employers who don’t want older workers. If I am being discriminated against, who is liable?
A temporary agency/leasing firm can be held liable as an employer if it discriminates in providing job opportunities (e.g. job placement, advertisements, employment counseling, and job referrals) to the employee. Employers that lease employees have also been held liable for employment discrimination that occurs in the workplace.

I’m being harassed at my current job placement by one of the employer’s permanent employees. Who should I complain to, the agency or the employer?
Using a “Right to Control” test (similar to the test used in determining independent contractor status), employers that lease employees have also been held liable for employment discrimination, including harassment, that occurs in the workplace. If you are being harassed by an employee of the employer, you should complain to both the employer (following any published rules or policies) and also to the agency (again following any rules or policies of the agency).

A staffing firm is required to inform its client (the employer) of any harassment complaints and ensure that the client investigates promptly and takes corrective measures. Additionally, it is against the law for the staffing firm to replace you because you complained of harassment, even at the client’s request, but the agency may also be able to offer you the opportunity to take a different assignment at the same rate of pay/benefits if you would prefer that to remaining at your current job placement.

I am disabled and may need accommodation in order to work through a temp agency. Who is responsible to make sure I get the accommodation that I need?
Typically, a staffing firm is considered your prospective employer during the application process because it has not yet identified the client for whom you will work. In such cases, only the staffing firm is obligated to provide reasonable accommodation through the application process. If a staffing firm and a client are joint employers, both are responsible for providing reasonable accommodation, absent undue hardship, if there is notice of the need for accommodation or if the need for accommodation is obvious.

The conditions where I work are unsafe. Am I protected by health and safety laws?
Yes. The Occupational Safety and Health Act (OSHAct) requires employers to maintain a safe and healthy workplace for their employees. The act does not distinguish contingent workers from other employees and covers contingent workers except for independent contractors and other self-employed workers. The party (whether the recipient employer or temp agency/leasing firm) responsible for unsafe conditions in a workplace will be liable for OSHAct violations.

I have a sick family member and need to take family leave. Am I eligible for protection under the Family and Medical Leave Act (FMLA)?
Yes, as long as you meet the other requirements for coverage, discussed in more detail at our site’s family/medical leave page. Under FMLA, temp/leased employees are considered to be jointly employed by the leasing firm and the recipient employer and must be counted by both the leasing firm and the recipient employer in determining employee coverage and employer liability.

As the primary employer of the worker, the temp agency/leasing firm is responsible for giving the required notice to the employees, providing FMLA leave, and maintaining health benefits. In addition, the temp/leasing agency is primarily responsible for restoring the employee to the same or an equivalent job.

However, the recipient employer is also responsible if it replaces the employee with another leased employee from the same leasing agency. The recipient employer is also prohibited from interfering with the temp/leased employee’s rights under the act or retaliating against an employee for asserting those rights.

The temp agency I’m working for has very minimal retirement benefits, while the company where I’m working has an excellent package of retirement benefits. As a temp employee, am I eligible for coverage under the employer’s retirement plan?
You are legally entitled to be treated like a regular employee by the recipient employer for retirement plan purposes if you are a “common law employee” of the recipient employer, regardless of any pension plan of the leasing organization. A “common law employee” is defined as a worker who performs services for an employer who has the right to control the result of the work and the way in which it is done.

If you are not a common law employee but have worked for the recipient employer on a full-time basis for at least one year, you must also be treated as a regular employee for retirement plan purposes. However, in that case, the recipient employer does not have to cover you under its plan if you are covered by a suitable plan through the leasing organization.

Please note that you are still subject to any requirements that regular employees must meet, such as job tenure and minimum hours requirements.

Who can unions representing temporary/leased workers negotiate with?
In August 2015, the National Labor Relations Board issued a ruling expanding the liability of companies who utilize temporary or leased workers to staff their facilities. Now these parent companies may be considered a joint-employer of the workers at their facilities/franchises. This has significant implications for unions negotiating on behalf of temporary/leased employees. For instance, if temporary or leased employees working at a franchise are able to successfully unionize, the union will have the power to negotiate on their behalf, not only with the owner of the individual franchise but also with the franchise’s corporate headquarters. However, any concessions made by the corporate headquarters will only apply to those employees specifically represented by the union in the negotiations, not all similarly situated employees of the corporation.

What restrictions apply to temporary/leased workers who want to unionize?

The case of Miller & Anderson makes it easier for unions to organize temporary workers along with permanent workers. The ruling in Miller overturned the case of Oakwood Care that barred a union from petitioning the board to allow temporary workers and permanent workers in a single bargaining unit. Now, unions may be “mixed.”

More Information About Temporary/Leased Employees and/or Contingent Workers

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