Key Legal and Legislative Topics
Temporary and contract staffing is one of America’s largest service industries, employing more than 16 million people each year and playing a major role in the nation’s job growth. The association’s legal and legislative activities focus on promoting the ability of staffing agencies to create jobs and serve their clients.
Like all employers, staffing agencies are subject to many labor and employment laws that protect workers, including equal employment opportunity, workplace safety, wage and hour workers’ compensation, and unemployment insurance. ASA promotes rigorous compliance with those laws and has developed certification and other education programs to help staffing professionals understand their obligations.
Because of the unique attributes of staffing, a major focus of the association’s advocacy is to ensure that labor and employment laws do not impede staffing agency operations or unnecessarily increase costs, which could reduce labor market flexibility, stifle job creation, and increase unemployment.
Employee safety is a top priority of staffing agencies. ASA maintains an alliance with the U.S. Occupational Safety and Health Administration to help raise staffing firm and client awareness of their respective responsibilities for temporary and contract workers. At the same time, ASA works to make OSH regulators at all levels aware of the practical constraints staffing agencies face in monitoring and controlling third-party work sites.
OSHA has developed, with the association’s input, recommended practices delineating staffing agency and client obligations. These practices have been incorporated into the association’s model staffing agreement, a version of which is intended especially for construction, industrial, and other safety-sensitive industry sectors.
The model agreement addresses clients’ obligation to provide site-specific safety training and protective equipment, keep records of work-related injuries and illnesses, and obtain the staffing agency’s consent before changing a worker’s job duties. Staffing agency obligations include inquiring about work site conditions and confirming that employees received the proper training and equipment; the agreement also gives staffing agencies the right to inspect the client’s work site and conduct post-incident inquiries.
Nurse Staffing Regulation
Squeezed by the rising cost of nursing services and the limits on their government reimbursement, hospitals, nursing homes, and assisted living facilities have launched regulatory initiatives at the federal and state level aimed at reining in the cost of nurse staffing services and regulating how staffing agencies providing those services operate.
ASA supports reasonable regulation to ensure that health care personnel are properly screened and credentialed but opposes price controls that would arbitrarily limit what agencies can charge for their services without regard to the dramatic increase in nurse wages and other labor-related costs they’ve incurred during Covid that had to be recovered in their bill rates.
Rate caps would preclude agencies from paying market wage rates—forcing nurses to seek higher wages in other states or leave the profession entirely, to the detriment of patients. Instead of across-the-board caps, ASA is advocating that regulators address specific complaints of pricing abuses on a case-by-case basis.
ASA supports efforts to alleviate the nursing supply shortage by increasing investment in nursing schools and teachers; removing state licensing barriers to allow nurses to work across state lines; and allowing more foreign nurses to work in the U.S.
Employer Role of Staffing Agencies and Clients
Staffing agency employer role
A central tenet of the staffing industry is that staffing agencies are employers of the workers assigned to clients for purposes of labor, employment, and benefits laws. Staffing agencies pay the employees’ wages and benefits and withhold and pay employment taxes; recruit, screen, and hire the employees; establish policies governing employees’ job performance; have the right to terminate or reassign employees; and retain the right to control employees’ conduct at the work site. For a comprehensive analysis of the legal treatment of staffing agencies as employers see Alden J. Bianchi and Edward A. Lenz, “The Final Code §4980H Regulations; Common Law Employees; and Offers of Coverage by Unrelated Employers,” Bloomberg BNA Tax Management Memorandum (Sept. 8, 2014).
Staffing agencies and clients generally share employer obligations. Staffing agencies pay the wages, benefits, and employment taxes, along with unemployment and workers’ compensation insurance. Clients supervise the employee’s work and provide a safe work site, including information, training, and equipment as required. Clients have easily managed those responsibilities and even enjoy protection from certain kinds of liability because of their co-employer status. See Stephen C. Dwyer, “Less Than Meets the Eye: Potential Liability When Using Temporary Workers,” ACC Docket (American Corporate Counsel Association, December 2013). For a comprehensive overview of the issues, see Co-Employment: Employer Liability Issues in Third-Party Staffing Arrangements (9th Edition, 2019), published by the American Staffing Association.
In the labor relations context, the NLRB has offered various legal standards over the years regarding when a staffing firm and its client may be deemed joint employers. Regardless of the applicable legal standard, joint employment has been an inherent aspect of staffing agency/client relationships for decades with no ill effects and has actually benefited clients in certain areas such as workers’ compensation; nor has the broader legal standard for joint employment resulted in any discernible increase in unionization of temporary workers or unfair labor practice claims against staffing agency clients.
ASA supports immigration reform that addresses the needs of both employers and employees.
ASA believes the H-1B visa program should be reformed to meet the growing need for highly skilled workers by professional, technical, and information technology firms that cannot find enough domestic talent. Reform efforts should focus on ensuring that the program is used as intended by combatting wage violations, unfair competition, and other abuses; promoting a “U.S. worker first” approach; and promoting the use of higher-skilled and educated H-1B workers by raising applicable wage floors and revising the lottery system to focus on merit.
To ensure that workers are lawfully permitted to work in the U.S., ASA supports a national employee electronic verification program that does not charge employers fees to use the system, allows voluntary retroactive verification of current employees, ensures that penalties are appropriate to the violation, and pre-empts state laws to ensure a uniform verification process.
Mandated Leave Benefits
ASA supports policies that promote workplace flexibility. Mandated benefits, such as paid sick leave laws, can impede flexible approaches to meeting employees’ needs and increase the cost of doing business—resulting in higher prices, less demand for products and services, and fewer jobs. Paid leave mandates impose an especially onerous burden on staffing agencies because of the need to track the hours of large numbers of employees on short-term, intermittent job assignments for purposes of leave accrual and utilization. For that reason, any such legislation should require employees to satisfy a minimum work requirement (e.g., 30 days) before benefits start to accrue, and at least 90 days of employment before accrued benefits can be used.
The legal and policy debate surrounding the gig economy has mainly focused on workers who are classified (or misclassified) as independent contractors and therefore do not enjoy the legal protection afforded to employees. Although their jobs have certain “gig” attributes (i.e., flexibility and short tenure), the great majority of temporary and contract workers employed by staffing agencies are classified as W-2 employees and therefore are protected by labor, employment, and benefits laws.
ASA supports enforcement of laws aimed at misclassification. Enforcement poses challenges, however, because the traditional legal tests for distinguishing between employees and independent contractors are far from clear or uniform. Without clear and objective rules for determining how workers should be classified, compliance and enforcement issues will persist. To the extent new rules applicable to independent workers are proposed by policy makers, they should apply evenhandedly to allow all businesses—including staffing agencies—to use such workers.
Wage and Hour
State wage notices
Federal and state wage and hour laws require employers to pay employees in a timely manner the wages promised for all hours worked. Some states have adopted so-called “wage theft” or “right to know” laws designed to ensure that employees get the wages promised. Those laws generally require employers to notify individuals of pay rates and other job-related information at the time of “hire.”
Except for completing the federal employment verification (I-9) form, however, temporary job applicants are not considered hired until an actual job offer is made. Until that time, staffing agencies cannot provide applicants with specific wage rates or other job particulars. Special provisions must therefore be made to accommodate these operational constraints. Several states have done so.
California allows staffing agencies to provide the notice in an itemized wage statement or other notice within seven days after the wage rate becomes known. New York allows employers to initially provide a reasonable range of rates individuals are likely to earn based on their qualifications and other criteria, followed by more specific information when the actual wage becomes known or is later changed. Massachusetts allows agencies to initially provide the information electronically, or verbally in person or by telephone—provided it is confirmed in writing before the end of the first pay period.
ASA opposes sales taxes on temporary and contract services because of the adverse impact on jobs, wages, and the economy. Studies show that such taxes increase the cost of staffing and reduce the demand for temporary and contract labor, thus increasing the labor supply and causing average wage rates to decline. Fewer jobs and less spending have negative ripple effects throughout the economy. Consumers suffer because of the “pyramiding” effect of taxing services at various stages of production, resulting in multiple taxes on the same product or service.
Sales tax revenue, moreover, tends to be illusory because the loss of jobs causes income and other tax revenue to decline and unemployment insurance and other social welfare costs tend to rise—largely negating the anticipated revenue. Finally, the dampening effect of the tax on jobs and overall economic activity puts sales tax states at a competitive disadvantage with neighboring nontax states.
As employers, staffing agencies pay federal and state unemployment insurance taxes (FUTA, SUTA) to help fund a temporary source of income for individuals out of work. Because of how employer contributions are calculated, staffing agency unemployment taxes tend to be higher than those of most other service businesses because of the extremely high turnover among temporary employees.
To ensure that benefits go only to those in need, and to manage costs, state rules require individuals to seek suitable work as a condition of eligibility. Currently, 31 states have policies requiring temporary employees to contact their staffing agency for a new assignment as part of their obligation to seek work. ASA encourages all states to adopt such policies because it increases workers’ chances of finding work and gaining experience, which could lead to a permanent job.