Temp Agencies: Are Their Employees Your Employees?
by Robin Foret
Employers often use staffing agencies to obtain employees with the intention that those employees will remain the responsibility of the agency for both payroll and employment liability purposes. Companies that attempt to avoid such liability may ultimately find themselves in an employment relationship with the employees obtained through those staffing agencies.
Staffing agencies that fill staffing needs for client companies are often temporary help firms (Temporary Agencies), rather than actual staff leasing agencies (Leasing Agencies). The difference is that Leasing Agencies are required to be licensed by the State of Texas and to comply with the regulations of the Texas Staff Leasing Act (Act). The Act defines “staff leasing services” as those offered by a Leasing Agency, which hires and then assigns employees to a client company on a long-term basis. Employment responsibilities are shared by the Leasing Agency and the client company under terms reflected in a written agreement.
Many unlicensed staffing agencies take the position that they provide only temporary help and are not regulated under that Act, even if workers remain at the client’s company for several years. Under the Act, “staff leasing services” does not include temporary help firms that hire their own employees and assign those employees to clients on a temporary basis.
For unemployment benefit claims, Leasing Agencies and Temporary Agencies are considered the employer of employees hired and assigned to client companies, as long as those agencies file quarterly reports with the Texas Workforce Commission (TWC) and pay taxes to the State of Texas. Under the Texas Worker’s Compensation Act (TWCA), a client company who directs the day-to-day activities of an employee will be considered an employer along with the Temporary Agency, but may defend common law negligence claims under the “exclusive remedy” provision of the TWCA if the client company purchased its own worker’s compensation insurance. Nonsubscribers to the TWCA may be liable for negligence claims filed by an employee obtained from a Temporary Agency if the employee was injured while working at the direction of the client company.
Under Title VII, the Age Discrimination in Employment Act (ADEA) and Chapter 21 of the Texas Labor Code, the identity of the employer is determined by using a “hybrid economic realities/common law control test.” Among the numerous factors considered, the most important is whether the company to whom the workers are assigned has day-to-day control over the individual’s duties and any financial control over the worker. The Department of Labor regulations governing the Family Medical Leave Act (FMLA) provide that where two or more businesses exercise some control over an individual’s working conditions, both businesses may be considered joint employers. This may occur when a Temporary Agency supplies workers to a client company who directs the day-to-day activities of the worker.
Absent an agreement that identifies the staffing agency’s obligations under the myriad of employment laws, a client company that exerts day-to-day control over an employee obtained from a staffing agency may be left with a false sense of security that liability rests solely with the Temporary Agency. Thus, companies should evaluate these risks before using staffing agencies to obtain workers.
Robin Foret is managing partner of the Foret Law Firm in Dallas, Texas. She can be reached at email@example.com.