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Tips on Reducing Co-Employment Problems When Utilizing a Staffing Service

May 7, 2008
Related Topics: Contingent Staffing, Miscellaneous Legal Issues, Policies and Procedures, Featured Article, Recruitment
Having practiced in the staffing industry for a number of years, I was surprised that many customers, including large companies utilizing a big temporary workforce, hadn’t developed any policy to protect against co-employment problems arising from their interaction with staffing services and their temporary employees.

    Unfortunately, many of the problems come from situations in which the customer unnecessarily assumes employment responsibilities over the temporary workforce. By following some simple guidelines, the customer should be able to limit the possibility of co-employment problems and associated liability.

    Here are some practical tips:

  • Let the staffing service do its job. When you pay the staffing service an hourly rate for the services of a temporary employee, you are paying not only for the services of that employee, but also for the services of the staffing service in recruiting and selecting those employees. You should allow the staffing service to perform that function by interviewing, testing and selecting those individuals. If you perform any of those functions, you are telling the temporary employee that you are the hiring employer, rather than the staffing service. Although you may have reservations about delegating those duties to a staffing service, you may find that the testing and selection procedures of the staffing service are effective. Ask the staffing service for a demonstration of their selection and testing functions.

  • If there is a large temporary workforce, ask that the staffing service provide on-site representation. If you have a large temporary workforce, the staffing service may be willing to provide on-site representatives to perform the administrative functions and handle all performance counseling and disciplinary action. In addition to being more effective than communicating with the local staffing office, the presence and involvement of a staffing service representative will also have the effect of emphasizing the staffing service’s role as the employer. Ideally, these representatives should have their own separate office. These benefits usually far outweigh the costs charged by the staffing service.

  • Avoid taking unilateral disciplinary action. One of the biggest mistakes a customer can make is to "fire" a temporary employee. The words "fire," "termination" or "discharge" should not be part of your vocabulary in dealing with temporary employees. Although you should be willing to provide information regarding a temporary employee’s performance to the staffing service, it should be responsible for performance counseling or other forms of discipline. If the staffing service does not have an on-site representative, the temporary employee should be required to report back to the staffing service office to discuss any disciplinary action with the employee. Although your supervisors may prefer the temporary employee be removed from the assignment, their reasons and their preference for removal should be discussed with the staffing service and the decision of what form the discipline should take should be mutually agreed upon. Even better, if the staffing service is familiar with your standards of performance, it should be making the decision on what form of discipline is appropriate.

  • Be willing to provide information on the temporary employee’s performance problems. Although it is an employer-related function to evaluate performance, the reality of utilizing a staffing service is that in most cases, supervisors are in a better position to evaluate performance than staffing service representatives. Informing the staffing service of the specific performance problems is necessary and should actually work in your favor. Otherwise, when the temporary employee is subjected to disciplinary action, such as removal from the assignment, the staffing service will be unable to provide the employee with the reason for the removal. In the absence of any explanation, the employee may assume there is something to hide, such as discrimination. If a discrimination charge is filed, the staffing service will be forced to report that it has no knowledge of what happened, and although the staffing service may then be off the hook, it is likely the investigation will be directed toward the customer. In comparison, an employee who is given the performance-related reasons for a disciplinary action is far less likely to consider the action to be discriminatory or to file a charge. It also gives the staffing service the opportunity to emphasize its role as the employer by counseling the employee and handing out disciplinary action.

  • Generally, do not include temporary employees in company employee functions. Obviously, if a temporary employee is included in the customer’s employee functions, it sends a signal to the employee that the customer is an employer. There may, however, be situations where the benefit of including the temporary employees as a morale booster outweighs the potential disadvantages of treating the temporary employee in the same way as a customer employee. If temporary employees are included, the staffing service should handle the invitations.

  • If a discrimination charge is filed by a temporary employee against your company, coordinate your response with the staffing service. If your company had any involvement in the factual situation that forms the basis for the discrimination charge, it will not be effective to simply argue your company is not the employer. In most cases, the Equal Employment Opportunity Commission and state agencies will ignore arguments of that nature and require that you submit a response telling the agency what you know. If you have followed these guidelines, you will be able to demonstrate that your company did not make any employment-related decisions. The worst situation that can develop is when the customer and the staffing service start pointing fingers at each other. When versions of what occurred as related by two respondents are contradictory, it’s likely that regardless of what happened, the investigating agency will find reasonable cause to believe both respondents discriminated against the complainant. It’s important that the respective responses to the charge include no inadvertent contradictions, and that can only be accomplished by coordinating your response with the staffing service.

  • Your experts should review your benefit plan descriptions to make certain that temporary employees are effectively excluded from participation. As you may know, lawsuits have been filed by groups of temporary employees claiming they have a right to participate in customer benefit plans—most notably Vizcaino v. Microsoft Corp. Several such lawsuits have been decided in favor of the customer based at least in part on the clear wording in the benefit plan description, which both defines and specifically excludes temporary employees from participation. However, even that safeguard can be meaningless if the temporary employees can demonstrate that they should be legally regarded as customer employees. Although your legal advisors should be consulted, it is possible to draft exclusionary language that makes benefit entitlement dependent on your employment classifications regardless of their actual status under a common law definition. Of course, not treating temporary employees as your employees is also extremely important.

    Ideally, your only connection with the temporary employees should be supervising their work and by necessity evaluating their performance. However, during the past few years, a concept known as "managed services" has been gaining popularity. In a managed services situation, the staffing service would agree to provide direct supervision over the work and take full responsibility for performing a particular work function on an ongoing basis. While the customer may continue to assume responsibility for reviewing and approving the final work product, the customer would have absolutely no contact with the temporary employees and therefore would not be considered a co-employer. If your company presently has an isolated function of that nature that’s only peripheral to your core business, you may wish to consider this approach. To be effective, establishing a managed services project will take time and require the sophisticated expertise of both the staffing service and the customer.

    Finally, form a partnership with your staffing service to establish an effective procedure from both a legal and an operational standpoint in managing the temporary workforce. Some important policies and procedures should be implemented before the relationship with the staffing service begins and it is important to consult with your legal advisors during that process. The goal of avoiding co-employment problems can only be achieved by a concerted and cooperative effort.

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