CWS 3.0: May 30, 2012

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Is Outsourcing a Shield from Workers’ Claims?

Even as companies have become more sophisticated in their use and management of contingent labor, certain myths about using contingent workers have persisted. Sometimes, companies believe that by engaging the services of a staffing firm, they have reduced, or even completely eliminated, the risks associated with engaging contingent workers. Debunking some of these staffing myths will help contingent workforce managers better understand the potential risks and decide how to address them in their engagement agreements. This is the second in our series of articles debunking myths related to the use of contingent workers.

Myth: Outsourcing always protects the client company against claims brought by the subcontractor’s workers

Many companies outsource certain aspects of their operations. Often, the workers who perform services on behalf of a client company are at locations far removed from the company’s own place of business. Generally, the client company will not be responsible for the offsite working conditions. A good example is Lepkowski v. Telatron Mktg. Group Inc. In that case, the plaintiff was one of two hundred call center employees who worked exclusively for the same client company. The plaintiff alleged violations of the Fair Labor Standards Act (FLSA), including failure to compensate for time spent logging into computer systems. The plaintiff filed suit against the call center and its client company and sought class certification. The client company successfully argued that under the FLSA “economic realities” test it was not the worker’s joint employer. In its decision, the district court focused on the “totality of circumstances” and applied factors used in other circuits to reject the plaintiff’s joint employer theory.

Nevertheless, client companies cannot rely on the outsourcing relationship as an absolute protection against liability. A cautionary example is found in Ling Nan Zheng v. Liberty Apparel Co. In Zheng, a garment company outsourced manufacturing work to a factory that subcontracted work from several companies. The garment company regularly sent quality control representatives to the subcontractor’s factory to supervise the workforce. A jury found that the garment company was a joint employer with the subcontractor.

Eric H. Rumbaugh is a partner and Mark Lotito is an associate with the law firm Michael Best & Friedrich LLC (www.michaelbest.com). They represent employers in labor, employment and benefits law matters.

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