United States: Employing Temp Agencies: The Hidden Risk

Co-written by Calvin W. Blackburn, III, Esq.

Ever consider employing temp agencies to supply persons needed for business? More than 90% of American businesses report using temporary employment agencies in some capacity. The conventional wisdom is that temps not only satisfy the need for inexpensive and convenient labor, but also have the added feature of reducing a company’s exposure to employee lawsuits under various civil rights statutes such as Title VII. Recent cases suggest, however, that many businesses may be operating under a faulty premise.

In the Eleventh Circuit opinion in Reynolds v. CSX Transportation, Inc., Arlene Reynolds, an employee of a temp agency, was assigned to work in the medical records department of CSX Transportation, Inc. Soon after her arrival, Reynolds was allegedly subjected to numerous instances of inappropriate behavior by a CSX supervisor. On occasion, a CSX supervisor massaged her shoulders, brushed his groin area against her body, and stated that he would like to see her nude.

After the temp agency reassigned Reynolds to another company, she filed suit against CSX for sexual harassment under Title VII. In response, CSX argued that Reynolds was technically employed by the temporary agency and not CSX. Thus, CSX argued, Reynolds could not sue under Title VII because CSX was not her employer when the alleged sexual harassment occurred.

Nonetheless, the Court determined that CSX was Reynolds’ employer because it had exercised a sufficient amount of control over the means and manner of her work production. Thus, Reynolds, a temporary employee, was allowed to maintain a Title VII sexual harassment action against CSX. The Second Circuit Court of Appeals reached a similar conclusion in Amarnare v. Merrill Lynch. In that case, a temporary agency assigned Amarnare to work at Merrill Lynch as an administrative assistant. A mere two weeks into her assignment, Merrill Lynch discharged Amarnare for poor work performance. In response Amarnare, a black woman, filed a Title VII suit against Merrill Lynch alleging that her termination was based on her sex, race, and national origin. The Court determined that Merrill Lynch had exercised complete control over Amarnare’s work assignments, the means and manner of her performance, and the hours of her employment during her two week tenure. As such the Court found that Merrill Lynch had also become an "employer" of Amarnare and was subject to her Title VII suit.

These cases suggest that companies must be mindful of their treatment of temporary workers in order to avoid potential exposure to a Title VII lawsuit. Indeed, the cost of defending even a frivolous Title VII suit brought by a temp far outweighs the savings a business normally enjoys by using temporary workers.

There are, however, safeguards that businesses may take to help prevent being deemed an employer of a temporary worker under Title VII. In general, a business should be very selective about the type of temp agencies that it uses. Businesses should prefer temp agencies who state, in writing, that their workers are solely employed by the agency. Moreover, temp agencies that set their employees’ work hours and manner and method of work production are also highly desirable. Additionally, as a practical matter, a business can further protect itself by taking the following actions:

1) insisting that temporary agencies agree to indemnify it against claims brought by temporary employees;

2) requiring temp agencies to carry employer liability insurance which protects the temp agency against employment discrimination claims. A policy limit within the range of Five Hundred Thousand to One Million dollars ($500,000 - $1,000,000) should be required.

3) ensuring that the temporary agency pay the temp’s wages and requisite social security taxes;

4) when necessary, requiring the temporary agency, and not the business to whom the temp was assigned, to terminate the temporary worker’s services; and

5) requiring the temp agencies’ employer liability insurance carrier to co-insure all businesses using the agency’s workers.

In sum, it is important that the temporary agency have most of the control over a temp’s means and method of work production. By ensuring that temp employees are controlled by their true employer, the agency, businesses may continue to enjoy the many benefits of using temporary employees without fear of becoming subject to Title VII suits from temporary workers.

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