staffing agency overtime laws

Staffing agencies are invaluable resources for job hunters, helping them find temporary or seasonal work. But staffing firms and their clients (the companies who hire them to recruit workers) are subject to the federal Fair Labor Standards Act, also known as the FLSA. This means staffing companies must comply with overtime rules by paying workers time and a half for hours worked over 40 in a given week. Unfortunately, companies try to use staffing agencies to sidestep their overtime obligations. If you believe either the company you work for or the staffing agency that placed you with the company is cheating you out of overtime, our firm is here to help.

What Are My Rights To Overtime?

Under the FLSA, most employees are entitled to overtime pay once they work in excess of 40 hours in a week. There are some exceptions to this law, such as for executives and highly compensated workers. If an employee meets certain criteria he or she may be exempt from overtime pay. But these exemptions are narrowly construed and don’t apply to most workers.

A non-exempt employee who works over 40 hours in a given week must be paid time and a half for those hours. That is, the worker has to be paid 1.5 times his or her regular hourly rate. Some states and local governments have different overtime rules, and those will apply if they are more beneficial to the employee than the FLSA.

How Do Businesses Use Staffing Agencies?

Staffing firms assist businesses in finding workers. This practice is common in both white-collar and blue-collar industries and is especially useful to companies when the labor market is tight and eligible job candidates are hard to find. Staffing companies also come in handy when businesses have a sudden need for short-term workers. The staffing agency and company partner together to find workers who match what the company wants. But this partnership can create some thorny legal issues, especially when a worker is not paid overtime.

How Do Companies Use Staffing Agencies To Violate Overtime Laws?

Many companies contract with staffing firms to recruit workers. But these companies would prefer to not actually hire these workers full-time, since that would require having to pay them benefits, withhold taxes, and other obligations (including paying overtime). As a result, a business may outsource workers to a staffing agency, which in turn will classify the workers as independent contractors, temporary workers, or some other title.

Here is the typical manner in which this is done. A business needs workers and retains a staffing agency to find job candidates. But the business and agency agree that, on paper at least, the workers will work for the staffing agency. The workers are told they will be considered temporary workers or independent contractors, but not employees, and therefore not entitled to overtime. The business may even use this practice to re-classify its actual employees as contractors and move them off the company payroll and into the staffing agency. The workers end up working more than 40 hours in a week, but because they aren’t considered employees, they are paid straight time (their regular hourly rates) instead of overtime.

The company and staffing firm do this to sidestep the duty to pay overtime. The company that used the staffing firm will claim that the workers work for the staffing agency, not as employees of the company. Meanwhile, the staffing agency will say that the workers are classified as independent contractors, temporary workers, or some other category – but not as actual employees of the staffing agency. The employees get caught in the middle, working overtime hours but only getting paid regular rates.

Both May Be Held Liable For Overtime Violations

Companies cannot use staffing agencies to skirt their duties under the FLSA to pay overtime. Nor can staffing agencies improperly classify employees as independent contractors, especially when they exert substantial control over the work that is performed.

Depending on the nature of the arrangement between the two businesses, as well as the services that the workers provide, a court may determine:

  • The workers are employees, not independent contractors. As a general matter, the more control a company has over its workers, the more likely those workers are employees under the law (which means, unlike independent contractors, they are entitled to overtime pay). Put another way, instead of being contractors or even subcontractors, the law views these workers as employees.
  • The “contractors” are employees of the company that used the agency. The agency may essentially act as a shell company to which human resources and other wage and labor matters are outsourced. In reality, however, the workers perform labor that lines up with what the company does, which tends to indicate an employer-employee relationship with that company.
  • Both businesses may be liable for not paying overtime. If either party is violating overtime laws, both could be held responsible. This may be the case even if the company that hired the staffing agency was unaware of what the agency was doing. A court could decide that the company and agency are “joint employers” who can be held jointly liable for failing to pay overtime.
  • Employees are owed back wages, liquidated damages, and more. The two businesses may be jointly liable for paying the affected workers back wages, liquidated damages in an equal amount, and court costs and lawyer fees.

Independent Contractor Versus Employee

Even if a staffing agency has you sign a contract that labels you an independent contractor, temporary worker, or some other title, you may actually be an employee of one or both companies if the following apply:

  • Either business directs and controls your work
  • Either business provides the tools and other resources needed for you to do your work
  • Your earnings are predetermined
  • The work you do lines up with the services provided by either company
  • You are not invested in either business, so the companies bear most risks
  • You have a traditional employer-employee relationship with either company

We’re Here To Help You Understand And Assert Your Rights

A company cannot contract with another business to evade its duty to pay overtime. If you work over 40 hours in a week through a staffing agency, you could be entitled to time and a half pay. Let The Lore Law Firm’s network of experienced overtime attorneys take a look at your case. Fill out our free and confidential online client intake form now.