• Under certain laws, employer coverage and employee eligibility must include temporary workers.
• Working relationships involving interns are guided by a ruling from the Ninth Circuit Court of Appeals.

Temporary workers

Temporary staffing services provide employees to other businesses to support or supplement the workforce in special situations, such as employee absences, temporary skill shortages, and varying seasonal workloads. Temporary workers (temps) are employed and paid by the staffing agency but are contracted out to clients for either a prearranged fee or an agreed hourly wage. Some companies use temps full-time on an ongoing basis, rather than regular staff.

Essentially, the employer/employee relationship exists between the individual and the staffing agency. The host company merely leases the agency’s employees. However, the host company can be a joint employer, and can be responsible for (or held liable for) certain violations of the Fair Labor Standards Act (FLSA).

Temps must be counted in determining employer coverage and employee eligibility under certain laws. For example, an employer with 15 workers from a temp agency and 40 permanent workers may be covered by the Family Medical Leave Act (FMLA), which applies to employers with 50 or more employees in 20 or more workweeks in the current or preceding calendar year.

Temps and co-employment

Many employers have unfounded fears of “creating” a co-employment relationship with a temp who was hired through a staffing agency, even though it cannot be avoided in many cases (and doesn’t necessarily impose additional obligations on the employer). There is no single source for information on co-employment, in part because the concept applies differently depending on the relevant law. The term is often used interchangeably with the concept of “joint employment.”

In most cases where a host company uses temporary workers from a staffing agency, certain co-employment obligations will automatically exist. For example:

• A temp is protected by discrimination laws, which include protection from actions of the host company, even if the staffing agency is the employer of record. The Equal Employment Opportunity Commission (EEOC) has a guide on Application of EEO laws to contingent workers and temps.
• A temp is considered a joint employee for purposes of the FMLA, where 29 CFR 825.106, states that “joint employment will ordinarily be found to exist when a temporary placement agency supplies employees to a second employer.”

Employers cannot avoid creating a co-employment relationship under these laws because that relationship is assumed to exist.

The FLSA also recognizes joint employment where an individual works at multiple jobs for the same organization or works to benefit more than one employer. Typically, the FLSA is concerned with overtime where an individual performs duties for multiple locations of the same employer. For example, if an individual works at two grocery stores owned by the same company, all hours worked at both locations must be combined for overtime.

However, the FLSA regulation is somewhat open to interpretation, stating, “Where the employee performs work which simultaneously benefits two or more employers . . . a joint employment relationship generally will be considered to exist” (791.2, Joint employment).

As an example, a host employer could be liable for recordkeeping violations or back pay if it asks a temp to work without recording hours, denies a lunch break while still deducting 30 minutes for a meal period, or misclassifies a temp as exempt from overtime. Temps should report the problem to the staffing agency, but if a lawsuit arises, the host company could still face liability.

Interns

The U.S. Department of Labor (DOL) has issued new guidance to help employers decide whether workers can be unpaid under their internship programs. This new guidance comes after the Ninth Circuit Court of Appeals rejected previous guidance issued by the DOL.

The latest ruling from the Ninth Circuit joins similar rulings by the Second, Sixth, and Eleventh Circuits, holding that the rules were too rigid. With its new guidance, the DOL indicated it will use the “primary beneficiary” test developed by the Second Circuit to determine the status of potential interns under the FLSA.

With the precedent set by the Second Circuit’s decision, the Ninth Circuit outlined a new seven-factor test that was less rigid than the DOL’s six-factor test. Under prior guidance from the DOL, a worker could be considered an unpaid intern only when all six factors were met. The new primary beneficiary test used by the Ninth Circuit is less restrictive, leading the court to conclude that this test “is therefore the most appropriate test for deciding whether students should be regarded as employees under the FLSA.” (Benjamin v. B&H Education)

In an effort to consider the primary beneficiary and economic reality of a working arrangement, the DOL’s new test considers seven key factors to determine whether the intern or employer receives a greater benefit. Under the new guidelines, employers should consider the extent to which:

1. The intern and employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests the intern is an employee. However, clearly explaining no monetary compensation will be received suggests the intern is not an employee.
2. The internship provides training similar to that given in an educational environment, including clinical and other hands-on training provided by educational institutions.
3. The internship is tied to the intern’s formal education program by integrated coursework or receipt of academic credit.
4. The internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The intern and employer understand that the internship is conducted without entitlement to a paid job at its conclusion.

While employers were previously required to meet the criteria of all six factors, they may now evaluate each factor individually. As a result, the new test allows more flexibility when assessing the intern-employer relationship. Note that each case must be evaluated individually on its unique circumstances.