Where staffing firms can trip up in co-employment situations

Due to the unique nature of the staffing industry, both the staffing provider and the client have rights and fulfill responsibilities as “co-employers.” Staffing firms usually recruit and screen applicants, conduct background and reference checks, ensure completion of all required paperwork, pay wages, and retain at least some right to hire and fire, and determine placement, scheduling, and pay rates. The client usually supervises, directs and controls the temporary employee’s daily activity.

Here are some of the most common pitfalls associated with co-employment situations.

Placement/ hiring decisions. Do-Right Staffing, after conducting all appropriate screening, submits Tricia’s résumé to Giant Corporation for a three-month bookkeeping position. Giant refuses to interview Tricia, a Hispanic woman, and instead chooses a Caucasian man. Tricia files a gender and ethnic discrimination claim with the Equal Employment Opportunity Commission. If Giant requested only white male applicants, and if Do-Right went along with that request, then both Do-Right and Giant can be liable. But if Do-Right told Giant that such requests are illegal, documented that conversation and refused to work with Giant, Do-Right probably avoids liability; Giant likely does not.

On-site harassment. Greg, an African American temp, complains about daily barrages of racial epithets and threats of harm from his on-site supervisor. Who is legally responsible? Did he complain to the staffing agency? Did the staffing agency or Greg notify the client (i.e. the supervisor’s boss, human resources)? How did the staffing agency and client respond? If either or both parties knew and did nothing, both can be liable. If the staffing agency attempted to address the situation, it likely would have valid defense, even if the client refused.

I-9, immigration and privacy issues. While staffing agencies usually handle these matters, some clients insist on seeing or retaining copies of the I-9s and supporting documents, or require that only U.S. citizens work for them. Such insistences increase the client’s co-employment exposure in the form of either national origin discrimination charges or allegations of violations. Similarly, a client’s insistence on having copies of applications, or applicants’ Social Security numbers, are problematic in light of many states’ identity theft and privacy protection laws. Both the staffing company and the client risk liability for any damage suffered by the temporary employee(s) as a result of fraudulent or otherwise unauthorized use of such personal information.

FMLA, ADA issues. Temporary workers who need time off to address a medical issue may be eligible for leave under either the Family Medical Leave Act, similar state leave laws or even the Americans with Disabilities Act and both parties may be responsible for compliance. Similarly, if a contingent is otherwise disabled but can perform the essential functions of the job with a reasonable accommodation, both the staffing company and the client will likely be responsible under the ADA for providing the accommodation.

Damage caused by the temporary. Do-Right provides Danny as a temporary forklift operator to Incredible Industries Inc. Danny crashes a forklift, causing $50,000 in damages. Who should pay for the damage? Does the contract address such situations? Did Do-Right ensure that Danny was a qualified, safe forklift driver? Did Incredible properly instruct and supervise Danny? What if Do-Right places Chris in Incredible’s administrative office and he hacks into the computer and uses employees’ personal information to make fraudulent loan applications? Did Do-Right fail to properly screen? Did Incredible fail to adequately protect confidential information or supervise Chris? Do-Right and Incredible may both be responsible here, too.

Credit and background checks. Can clients insist that staffing firms exclude candidates whose background checks show “any felony” or who do not have “good credit?” Under EEOC guidelines and many state and local laws, the answer is “no” if the conviction or credit rating is not job-related or connected with some other business necessity. The staffing agency and the client can be liable for violations here, too.

While this list is not exhaustive, it offers staffing firms and their clients an idea of potential co-employment pitfalls. Both organizations should consult with competent in-house or local counsel to ensure that both can reap the benefits of their business relationship while avoiding, or at least minimizing, pitfalls.

Disclaimer: This article is intended for informational purposes only. Nothing herein should be construed as offering legal advice or creating an attorney-client relationship. Always consult with competent local counsel on any legal issues.