CWS 3.0: June 6, 2012

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Employment Law Liability: Who’s Responsible?

In this third article in a series meant to debunk legal myths that persist with regard to contingent workforce usage, attorneys Eric H. Rumbaugh and Mark Lotito explore whether employment law liability resides solely with the staffing provider.

Sometimes, client companies may think that because staffing firms provide contingent workers, only the staffing firm has responsibility for overtime liability, or, at the very least, the staffing firm shares responsibility with the client company. A recent case demonstrates that this is not always true. In fact, in Johnson v. Manpower Professional Servicess. only the client company was found to have potential liability for overtime. Under an agreement between the companies, the staffing firm would recruit employees for its client company and would handle the administrative and payroll issues. The client company would decide which of the staffing firm’s recruits to hire and would manage and supervise them once hired. As part of the staffing firm’s application process, the plaintiff, an African-American man, submitted to a background check and a drug test. The client company hired the plaintiff for a recruiter position. For his first five weeks, the plaintiff received overtime pay, but then he stopped receiving it. The plaintiff’s supervisor at the client company received negative feedback about the plaintiff’s job performance. The client company then asked the staffing firm to replace the plaintiff. The plaintiff was terminated and replaced by a Caucasian woman who received overtime pay and did not have to take a drug test or undergo a background check.

The plaintiff filed claims for denial of overtime because of his race, being subject to a background check and drug test because of his race, and alleged retaliatory termination under the FLSA. The court found that the client company and not the staffing firm was the plaintiff’s “employer” for purposes of the overtime denial claim, even though the staffing firm paid the employee, provided benefits, and withheld taxes and workers’ compensation and unemployment compensation. The staffing firm was found not to have any real control over the worker’s actions, so it was deemed not to be an employer for the purposes of the lawsuit.

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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