CWS 3.0: June 27, 2012


Risk: Who Pays Contingents’ Overtime?

U.S. contingent workers who are hired through a staffing firm (and classified non-exempt) are entitled to overtime pay just as are your own non-exempt workers. As temporary employees come in and out of assignments, remember who the employer is (the staffing firm) and what the temporary staffing firms are responsible for (their employees). In general, your temporary staffing provider, as the payroll employer, must pay overtime for any hours worked over 40 hours per week by a non-exempt worker; beyond this obligation, California imposes additional rates and occasions for overtime.

How many clients the worker was assigned to during the week is not important. The temporary staffing firm is responsible for tracking its employees’ total hours and making sure the overtime is paid.  There are several approaches to billing clients for overtime, but the staffing firm’s right to bill any of its clients for this extra cost — or lack thereof — has no effect on the staffing firm’s obligation to pay overtime to its employees.

On the other hand, if the temporary worker is working on separate jobs for two or more staffing firms or other employers, because the jobs and employers of record are separate, the hours worked are not combined for overtime purposes. However, if all of a temporary employee’s work is for the same client in the same work week, it doesn’t matter how many employers (client and staffing firms) divide up that payroll; overtime will be payable by someone if the total hours exceed the legal thresholds. Buyers could become liable for overtime if they were to unilaterally arrange for such a division of work among staffing firms, so it makes sense as a buyer to avoid elaborate workarounds where overtime is concerned.

The Fair Labor Standards Act as a general rule requires non-exempt employees to be compensated for all hours of overtime in a work week that a manager knows of, even if the employer did not request or authorize the time or type of work performed. Additionally, some states may provide workers with greater overtime protections than those offered by FLSA, and if there is a question of jurisdiction employers are well advised to comply with the state or federal law with the higher standard. Companies that try to avoid paying overtime by promising non-exempt workers later compensatory (comp) time off also open themselves up to risk — in most cases, only public sector employees are permitted to receive comp time off lieu of overtime compensation.

Just to make it even more interesting, in some states, like New York, the written wage notification for an exempt employee must explicitly state his or her specific exemption from overtime. The staffing firm as the employer must determine whether their employees are exempt from overtime and give the employee the basis for the exemption in written form. Many other states also have exacting requirements when it comes to overtime and exemptions from overtime. While it’s the responsibility of your staffing provider to meet these obligations, it’s good business practice to make sure that you and your staffing firms know what is relevant for the geographies you do business in. You don’t want your contingents coming at you later for unpaid overtime.

So it makes sense, especially when it comes to overtime, to know who pays.


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