CWS 3.0: November 30, 2011 - Vol. 3.34

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Legal Eagle: Client Ruled Employer in Overtime Dispute

The U.S. Fifth Circuit Court of Appeals found that the end user of contingent labor was the employer of a temporary worker in a question regarding nonpayment of overtime to the contingent in a discrimination lawsuit.

According to court filings, Air Liquide USA brought in Willie Johnson, an African American, as a contract recruiter through Manpower Professional Services in April 2007 after undergoing a drug test and a background check. Johnson received overtime hours for his first five weeks on the job but stopped receiving them in May 2007 after Air Liquide changed his position to exempt, court documents said

Although Johnson received a good performance review and two extra days of holiday pay for good work, Air Liquide claimed that various staff members express dissatisfaction with his pace of filling positions, according to court filings. Johnson was terminated on April 29, 2008, and replaced with a white woman who was paid overtime and did not have to undergo a drug test or background check.

In its review of a claim of overtime denial in this case, the court ruled that Air Liquide was the employer.

“To be sure, almost all of the factors under the economic realities test point to Manpower being Johnson’s employer, as Manpower paid Johnson and withheld taxes on his behalf,” according to the court opinion filed in October. “Nonetheless, because the majority of the more important right to control factors point to Air Liquide as Johnson’s employer, we conclude that Air Liquide and not Manpower is Johnson’s employer for the purposes of his overtime claim.”

This case brings up an age-old question. When utilizing a temp, who is the employer? In the contingent arena, Under the Fair Labor Standards Act, in almost all cases, contingent labor suppliers and their clients are jointly liable for violations.  And while there is no obligation under the FLSA to pay an exempt employee overtime, overtime eligibility and exemption status are complex issues and have many ramifications.

In this particular instance, the courts deemed Air Liquide responsible. Courts and agencies don’t always agree on joint employer status, though. Companies should be sure to work together with their staffing providers to achieve compliance, because, as seen from the Air Liquide case, parties could and will face liability for a violation. “For users of contingent labor, the compliance attitude should be: We won’t ask or permit our suppliers to do something that we couldn’t or wouldn’t do ourselves’ says attorney Eric Rumbaugh, partner with Milwaukee based Michael Best & Friedrich LLP.

“There is generally a presumption in contingent labor settings that both the staffing supplier and the end-user are co-employers. This is often true, but end users sometimes close their eyes to the fact that, in some cases, the end user is more an ‘employer’ than is the staffing supplier. This is a mistake for end users, and can lead them to make bad decisions,” Rumbaugh says. He goes on to explain that in some cases, staffing suppliers are not ‘employers’ of contingent labor at all, for the purposes of some laws, even if they are ‘employers’ for IRS purposes or for the purposes of other laws. "This is because, in some cases, the staffing supplier is simply payrolling, and is exercising basically no control over the contingent workers in question.  There are multiple different state and federal tests for ‘employee’ status, and courts often disagree in applying those tests. This leaves a lot of ‘grey’ over who is an ‘employee’ and for what purpose.” The take away for end-users is to act reasonably vis-à-vis contingent workers, whether they are ‘employees’ or not.

Or else, as Air Liquide learned, courts will make you pay.

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