Hiring Temps Raises Long-Term Legal Threats

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

By Lisa M. Bee and

Gerald L. Maatman Jr.

The human resource manager of an Ohio-based manufacturingfacility recently called the Employment Practices Liability Hotlineseeking advice on the companys obligations when dealing withtemporary workers and vendors.

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

The employer's operations are decentralized and day-to-daypersonnel issues are dealt with at a local facility level. Localcompany managers have exercised discretion in controllingactivities of their temporary workers.

Over the past several days, the HR manager said, complaints havefiltered back to headquarters regarding alleged harassment anddiscrimination of several temporary workers as well as similarconduct experienced by the company's employees as a result of theirinteractions with temporary workers.

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

The temp vendor in California has been non-responsive inattempting to work through the issues relative to complaints aboutits personnel.

From a legal standpoint, this EPL hotline call brings into sharpfocus the legal concept of co-employment. For purposes offederal and state employment discrimination laws (as well asvarious other workplace laws), a company may be considered the“co-employer” of temporary staff even though such personnel are noton its payroll.

This can occur even in situations where the temporary staffingworker is on the company's job site for only a day or two. The keyissue is whether the company controls or has the right to controlthe temporary employee's work. If the company has or exercises thatright, a temporary worker has “co-employee” status, and this drivesthe company's legal obligations with respect to handling workplaceproblems.

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

In this instance, the company's managers have been exercisingcontrol over the activities of the temporary workers. Aco-employment relationship is therefore likely.

Practically speaking, however, a purchaser of temporary staffingservices is probably best served in these situations to assume thata co-employment relationship exists and to make personnel decisionon a pro-active basis.

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

For this reason, the company is best served to investigateharassment and discrimination complaints pursuant to its standingprotocol: immediately investigate the issues and institute promptremedial measures where and if necessary and reassure that thebehavior does not continue or re-occur.

The U.S. Equal Employment Opportunity Commission promulgatedregulatory guidance in December 1997, known as EEOC Notice No.915.002, Dec. 3, 1997. This addressed the obligations of companiesand temporary staffing service providers in dealing with harassmentand discrimination problems, but it has yet to be tested in courtrulings.

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

If the customer company does not take the necessary steps toinvestigate or remedy the situation, the temporary staffingservices provider has an obligation to protect its staff bywithdrawing them from the workplace. Whether the practicalities ofthe business world anticipate such a response is an issue courtswill surely address when the EEOC's regulatory guidance istested.

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

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

In a typical temporary staffing services scenario, a customercompany can easily request that the temp provider remove thetemporary employee from the worksite. Whether such a solution isadvisable, however, will depend on the results of the workplaceinvestigation.

Strict adherence to a standard operating protocol oninvestigating and resolving internal employee complaints,therefore, is the best defense to reducing or eliminating legalexposures.

Lisa Bee is director of EPL risk management for LexingtonInsurance Company in Boston. Gerald L. Maatman is a partner withSeyfarth Shaw in Chicago.

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