An Article in Sunday’s Des Moines Register pointed to an increase in the hiring of temps as an early sign of economic recovery.    One of the benefits to employers of temporary workers, the article noted, is that they provide a company with flexibility when market conditions are uncertain. “Companies feel more comfortable using temporary work forces” in these conditions; they can better ramp up-or down-to meet production needs.  

While not disputing the benefits of leased workers, employers should also be aware of the potential downside of using temporary employees—particularly those who are employed for longer term assignments of one year or more.

First, it is critical to do due diligence on the staffing agency that is used.   Make sure the agency is financially sound and meeting its obligations for payroll withholding, workers’ compensation, and benefits. If the agency goes out of business and did not handle those issues, the employer may be responsible.   One client had a leased worker injured on the job, and it turned out the staffing agency had not procured workers’ compensation coverage for the state in which the employee worked. The employer ended up being responsible for the injury, and had no workers’ compensation coverage available to cover the costs.

A second important issue relates to employee benefits.   If a leased employee works for an employer for more than one year, that employee may have to be included in non-discrimination testing for employee benefit plans.  In addition, there are some circumstances where a long term leased employee could become eligible for benefits under the employer’s benefit plans.

Finally, using a staffing agency for hiring will not necessarily protect a company from liability under the anti-discrimination laws.    This post at the Wisconsin Labor & Employment Blog discusses certain staffing agency practices deliberately designed to avoid the anti-discrimination laws.   See paragraph above about due diligence.