If you own a staffing company, you may face employment law issues that traditional employers do not. Staffing companies serve as an intermediary between employees and employers and the number of new hires and terminations is generally greater for a staffing company than a traditional employer. However, this can leave staffing companies at risk for being subject to a lawsuit brought by an employee.
Employee misclassification
Employee misclassification is a hot-button issue these days, as many government entities are seeking to recuperate revenue from staffing companies that misclassifies workers. Many staffing companies classify workers as independent contractors. However, independent contractors may fail to pay their self-employment taxes, giving the government an incentive to ensure they are not misclassified as independent contractors.
Overtime pay
Under the Fair Labor Standards Act, staffing companies could be held liable for not complying with labor laws. For example, staffing companies must pay eligible workers overtime pay when appropriate. Staffing companies must also classify workers as exempt employees when appropriate to avoid violating the FLSA.
Compliance with federal laws
Many federal and state laws address discrimination in hiring and in the workplace. Staffing agencies must comply with these laws. For example, staffing agencies cannot discriminate based on a worker’s gender, age, race or disability. Staffing agencies must also follow OSHA regulations and state unemployment compensation laws.
Contract disputes
As contracts are a necessary part of doing business as a staffing agency, disputes can arise over whether the terms of these contracts have been violated. This includes contracts staffing agencies have with the employing companies. It is not unknown for employers to bypass clauses in contracts regarding hours worked before a direct hire can be made. In addition, nondisclosure agreements also need to be legally valid.
Staffing agency employment law issues
Staffing agencies are in a unique position in the employment world and thus face unique issues. Our firm’s webpage on representation of staffing companies may be of interest to those who want to learn more about this topic.