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Four Common Myths About Temporary Workers and Contractors

August 3, 2012
Related Topics: Temporary Staffing, Contingent Staffing, Employee Engagement, Workforce Planning, Staffing Management

In July 2010, the Equal Employment Opportunity Commission settled a race and sex discrimination case against a Cleveland-area temporary agency.

The EEOC alleged that the agency used code words to identify the race, color, and sex of candidates it placed with employers. For example, hockey player equals white male, small hands equals female, basketball player equals African-American men, and chocolate cupcake equals young African American women. The temporary agency, according to the EEOC, would attach note cards containing the coded phrases to job applications submitted to employers.

The temporary agency paid $650,000 to a nationwide class of 11,000 people. Despite the settlement, two of the employers who the EEOC alleged used the coded phrases to make job decisions could face private lawsuits.

Myth 1: This story illustrates the biggest myth businesses have about the use of temporary employees. Contrary to common belief, employers are often jointly responsible with temporary agencies for acts of discrimination.

Reality: In dealing with temporary agencies, businesses should be careful not to perpetuate discrimination fostered by the agency. Also, to the extent that you are able, businesses should negotiate indemnification clauses in staffing agreements with temporary agencies, so that if your business is sued for the discriminatory act of the agency, it will defend you (pay your attorneys' fees) and hold you harmless (pay your portion of any settlement of or judgment on the claims).

The following are three additional myths that businesses commonly hold about temporary or contract employees:

Myth 2: Temporary employees are not entitled to benefits.

Reality: For many companies, temp workers are in fact not entitled to benefits. In other organizations, however, temporary employees may be entitled to the same benefits as full-time, permanent employees. It all depends on the terms of your plans and other factors including the length of time a temporary worker is in your service.

Myth 3: Wage and hour laws do not protect temporary workers.

Reality: Temporary employees are entitled to the same minimum wage and overtime rights as full-time, permanent employees.

Myth 4: It is legal to flip an employee to contractor status.

Reality: Labels are not definitive when dealing with the difference between an employee and a contractor. What is key is who has the right to control the worker's performance. Using the services of an ex-employee under the guise of a contractor relationship could raise a red flag with the Internal Revenue Service and could open your business to liabilities for unpaid payroll and other employment taxes, in addition to unpaid overtime if the employee works more than 40 hours in any week.

Jon Hyman is a partner in the Labor & Employment group of Kohrman Jackson & Krantz. Comment below or email

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