New California Law Increases Potential Legal Risks of Obtaining Temporary Employees from Staffing Agencies

January 8, 2015

Employment Law BookCompanies may need help long before they are able to set up a formal procedure for recruiting permanent employees. One way to handle immediate needs, and perhaps find good candidates for permanent positions, is to use temporary agencies and staffing services. This alternative has a variety of advantages and disadvantages.

Temporary employees should be considered when the company does not have enough work to keep a full-time permanent employee busy for the time being. Temporary staffing agencies can reduce the administrative costs associated with a worker by taking over things like payroll costs and benefits. Staffing services can also save time for the company by carefully recruiting and screening people for a particular position. In some cases, staffing agencies will take on responsibility for training their candidates. Some companies prefer workers from temporary agencies as opposed to independent contractors because the workers are subject to supervision by the agencies, thereby increasing the chances that the workers will conform to the rules established for the position. In many cases, companies find that workers from temporary agencies and staffing services become good candidates for permanent positions once the founders are familiar with the skills of the worker and the business has the financial resources to commit to a full- or part-time employee.

On the other hand, there are a few potential problems with using temporary employees. Just because a worker comes from a temporary agency does not mean the company is freed from its obligations to comply with applicable labor and employment laws (§§ 172:95 et seq.).  For example, a new California law applicable to most companies in that state with 25 or more employees and going into effect as of January 1, 2015—the “Temp Worker Protection Bill”– explicitly makes companies jointly liable with staffing agencies for violations of wage, safety and workers’ compensation laws.  Specifically, California employers who are clients of staffing agencies must be prepared to share with the agency all civil legal responsibility and civil liability for all workers supplied by that agency for the payment of wages and the failure to obtain valid workers’ compensation coverage.  In addition, using temporary employees may cause morale problems to the extent that they are not as committed to the goals and objectives of the business as permanent employees who may be eligible for additional compensation and bonuses if certain performance milestones are achieved. Temporary employees may also not be a viable option for positions that require extensive training in a specialized area or company-specific knowledge. Finally, if the company has a collective bargaining arrangement, it may be precluded from using temporary workers.