Hiring Temps Raises Long-Term Legal Threats

Co-employment status can put risk managers on the hook if EPL claims arise

By Lisa M. Bee and

Gerald L. Maatman Jr.

The human resource manager of an Ohio-based manufacturing facility recently called the Employment Practices Liability Hotline seeking advice on the companys obligations when dealing with temporary workers and vendors.

The company, which has seen a recent jump in orders, has procured temporary staffing solutions from vendors in Ohio, West Virginia and California, where it has manufacturing facilities.

The employer's operations are decentralized and day-to-day personnel issues are dealt with at a local facility level. Local company managers have exercised discretion in controlling activities of their temporary workers.

Over the past several days, the HR manager said, complaints have filtered back to headquarters regarding alleged harassment and discrimination of several temporary workers as well as similar conduct experienced by the company's employees as a result of their interactions with temporary workers.

The staffing firms have differed in their approaches to the problems. The temporary staffing service provider in West Virginia, for instance, has threatened to pull its workers off the job site unless the company remedies the incidents of alleged harassment and discrimination experienced by the temporary staff.

The temp vendor in California has been non-responsive in attempting to work through the issues relative to complaints about its personnel.

From a legal standpoint, this EPL hotline call brings into sharp focus the legal concept of co-employment. For purposes of federal and state employment discrimination laws (as well as various other workplace laws), a company may be considered the “co-employer” of temporary staff even though such personnel are not on its payroll.

This can occur even in situations where the temporary staffing worker is on the company's job site for only a day or two. The key issue is whether the company controls or has the right to control the temporary employee's work. If the company has or exercises that right, a temporary worker has “co-employee” status, and this drives the company's legal obligations with respect to handling workplace problems.

Temporary staffing service companies are wide and varied in their approach to managing their temporary workforces. Customer companies also differ on how to manage or let their staffing vendors manage a temporary workforce. It is for this reason that it is generally a factual question as to the existence of a co-employment relationship.

In this instance, the company's managers have been exercising control over the activities of the temporary workers. A co-employment relationship is therefore likely.

Practically speaking, however, a purchaser of temporary staffing services is probably best served in these situations to assume that a co-employment relationship exists and to make personnel decision on a pro-active basis.

If the company declines to undertake personnel decisions and intends to defend itself from future legal claims on the basis that it is not a co-employer, it may worsen legal problems and miss an opportunity to resolve workplace problems.

For this reason, the company is best served to investigate harassment and discrimination complaints pursuant to its standing protocol: immediately investigate the issues and institute prompt remedial measures where and if necessary and reassure that the behavior does not continue or re-occur.

The U.S. Equal Employment Opportunity Commission promulgated regulatory guidance in December 1997, known as EEOC Notice No. 915.002, Dec. 3, 1997. This addressed the obligations of companies and temporary staffing service providers in dealing with harassment and discrimination problems, but it has yet to be tested in court rulings.

The EEOC regulatory guidance suggests that when a temporary employee is the victim of alleged harassment or discrimination, the temporary staffing service provider must notify the customer company as soon as practical about the problem. It also must assert its commitment to protect its workers from unlawful harassment and insist that the customer company investigate and resolve the problem.

If the customer company does not take the necessary steps to investigate or remedy the situation, the temporary staffing services provider has an obligation to protect its staff by withdrawing them from the workplace. Whether the practicalities of the business world anticipate such a response is an issue courts will surely address when the EEOC's regulatory guidance is tested.

Conversely, where the alleged harasser or discriminator is a temporary employee and the alleged victim is employed by the customer company, the customer company still has an obligation to investigate and remediate, even when the problems are caused by a third-party such as an employee of a temporary staffing services company, a vendor or a member of the public.

Likewise, in California the site of one of the company's facilities employers are subject to a new law effective Jan. 1, 2004. This law imposes liability on an employer failing to remedy harassment of an employee by a non-employee such as a vendor, customer or client.

In a typical temporary staffing services scenario, a customer company can easily request that the temp provider remove the temporary employee from the worksite. Whether such a solution is advisable, however, will depend on the results of the workplace investigation.

Strict adherence to a standard operating protocol on investigating and resolving internal employee complaints, therefore, is the best defense to reducing or eliminating legal exposures.

Lisa Bee is director of EPL risk management for Lexington Insurance Company in Boston. Gerald L. Maatman is a partner with Seyfarth Shaw in Chicago.

Reproduced from National Underwriter Edition, May 21, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Hiring Temps Raises Long-Term Legal Threats

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