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Workers' Compensation

Temp Nation: Standing Up for the Walking Dead

Karen C. Yotis, Esq., a Feature Resident Columnist for the LexisNexis Workers’ Compensation eNewsletter, provides insights into workplace issues and the nuts and bolts of the workers’ comp world.

Temporary workers are having a decidedly permanent impact on the nation’s workforce.[fn1] This new breed of worker is making increasing inroads across a wide variety of industries, including manufacturing and logistics, IT, engineering, finance, and healthcare. Jobs involving security services, cleaning and maintenance work, and administrative tasks are also being filled more regularly via staffing agencies. Indeed, the temporary workers’ ever-deepening penetration into the U.S. labor market has become as persistent and relentless as a parade of zombies marching toward the apocalypse.

It’s no small wonder then that the conference planners for the annual National Workers’ Compensation and Disability Conference & Expo put temporary workers front and center at their recent annual Las Vegas shindig. The inclusion of hot-button topics at this event is hardly breaking news since the NWCDC has for 23 years consistently honed in on the issues that drive the most interest (and incite the most controversy) among the various segments of the workers’ compensation community. From analytics and predictive modeling to the rise of outcome based networks this is the conference venue that keeps attendees off of the Las Vegas Strip until the speakers at the last session take their final bow.

The 2014 NWCDC once again exceeded the high standard that it sets for itself, especially when it came to the panel discussion about temporary workers. In their presentation Temp Nation: Risks, Red Flags and Injury Rates, speakers Corey Berghoefer, SVP Risk Management & Insurance, Randstad, Richard M. Jacobsmeyer, Partner, Shaw, Jacobsmeyer, Crain & Claffey, PC, and moderator Brad Bleakney, Managing Partner, Bleakney & Troiani, examined the forces that have caused temporary workers to be a major factor in today’s stutter step economy. These thought leaders also analyzed ways employers can limit exposure when dealing with temp agencies and their contracts, interpreted recent statutory developments, and even touched upon the contours of the exclusive remedy doctrine in the temp/borrowed employee context.

Starting With the Numbers

As Cory Berghoefer started things off by walking the audience through the relevant statistics, it became increasingly apparent that a significant portion of any economic growth this country is experiencing is attributable to the staffing of temporary workers. According to staffing industry analysis, (which Berghoefer explained is based on figures from the US Bureau of Labor and Statistics) counties having the highest concentration of temp workers are spread across the country from Greenville County, South Carolina (8.3 percent), up to Kane County, Illinois (7.4 percent) and Kent County, Michigan (6.7 percent), across to San Bernardino, California (4.8 percent), and back around to Fayatte County, Kentucky (4.6 percent) and Fulton County, Georgia (4.2 percent). Numbers are like hips—they don’t lie. And these numbers prove that this watershed staffing of a temporary workforce is national in scope.

Here’s a little numerical picture for you. According to the SIA U.S. Staffing Industry Forecast that Berghoefer referenced, the US GDP was projected to increase by 2 percent in 2014 and by 2.8 percent in 2015. Now consider the Bureau of Labor Statistics’ projection of a nationwide rise in the number of jobs by an annual average of 1 percent from 2012 through 2022. On top of all this is the SIA U.S. Staffing Industry Forecast updated September 2014, which indicates an estimated 6 and 7 percent growth during 2014 and 2015 in US Temp Staffing Revenue. Temporary employment is obviously on the rise.

Nevertheless, the projected penetration rate of temporary staffing is a remarkably low 2.26 percent of the total employment pool in spite of the 3.39 million temporary positions that the BLS projects will exist by the year 2022. Yet when Brad Bleakney juxtaposed these projected national figures with the 10 to 40 percent temporary worker penetration rate that is taking shape in Europe, Berghoefer admitted that the BLS’s projected anticipated growth rate of 2.26 percent by 2022 might be underestimated.

Berghoefer also reviewed the numerous factors driving this growth. Specifically, he discussed: retention issues; growth within certain companies themselves; the low availability of high skills in the talent pool (especially in manufacturing and in the Greater Atlanta area); the aging workforce (875,000 machinists, welders and engineers are expected to retire by 2020); and the Affordable Care Act (which is having an incredibly positive impact on healthcare industry hiring) as significant reasons for the anticipated continued expansion of the temporary workforce.

A Crop of New Statutes

With all of this current and anticipated movement, legislative activity is never very far behind, especially when the contracting employers and temporary staffing agencies find themselves in the regulatory crosshairs b/c of temporary workers who died or were seriously injured during the initial days of new assignments after being put to work on machinery for which they had not been properly trained. During his panel introduction, Brad Bleakney referenced a number of states that recently passed laws relating to temporary labor including Massachusetts (2012); Illinois (2013); Rhode Island (2013); Texas (2013); New Mexico (2013); Georgia (2013); Arizona (2013); Florida (2013) and AB 1897, the new California provisions that Governor Jerry Brown signed into law at the end of 2014, which went into effect on January 1, 2015.

Positioned as he is as a workers’ compensation thought leader in the Golden State, Richard M. Jacobsmeyer was able to provide some interesting background information about AB1897. While admitting that it is difficult to be an expert on something that is brand spanking new, Jacobsmeyer has been following this initiative since its time as a hatchling in the legislative nest and revealed that it was not an open and shut case whether Governor Brown was actually going to sign the bill.

Clearly versed in the political and economic controversies that pitted organized labor against employers throughout the legislative process, Jacobsmeyer also explained that labor was especially interested in getting the bill passed because it would blur the perceived advantage of using cheap temporary employees versus more expensive union employees by making both resource options closer to the same cost. Labor also favored the bill as a way to prevent employers from diluting the permanent workforce with temporary workers to avoid unionization activities.

More Crazy in California

One of the most far-reaching temporary worker laws in the nation, AB1897 requires the client employer and labor contractor/staffing agency to jointly share responsibility for payment of wages, provision of workers’ compensation benefits, and compliance with safety obligations under OSHA. Both entities are very broadly defined, so the law applies across the board subject to a few narrowly drawn exclusions. In particular, the bill excludes motion picture payroll services, which are already covered by a substantial amount of law that applies specifically to the highly skilled contract laborers such as cameramen, grips, assistant producers, sound people, and technical experts, who work on almost all of the movies and television shows that you see and earn well into the six figures.

The panel raised some grey areas of concern at this early juncture, such as whether a contracting employer will be obligated to cover the penalties that go along with a labor contractor’s failure to give a temporary worker a paycheck, and whether it’s safe to say that the statute’s attorney fee provisions won’t be triggered during the 30-day notice period during which a payment failure may be cured. In addition, the statute does not provide any limits on a contracting employer’s potential exposure.

The panel spent a good deal of attention on the risk issues created by the dual liabilities that the California statute imposes. The panelists cautioned employers to avoid running with a Joe Fly-By-Night without an 800 number or the wherewithal to pay workers’ comp liabilities just as assiduously as they should avoid plans with high deductibles. Bleakney instructed attendees to write down the term “alternate employer endorsement,” to hammer home the critical importance of protecting a contracting employer’s status as an additional insured (and rigging the game in the contracting employer’s favor by pinning down favorable provisions early on).

The panelists also warned about the catch-all provision in AB1897 that permits a plethora of governmental agencies (including the Department of Labor, the Department of Industrial Relations, and others) to create enforcement rules that allow them to come in and conduct audits to monitor compliance with wage payment, workers’ compensation coverage, and safety training obligations. Although these enforcement regs are not yet in place, Jacobsmeyer suggested that we look to similar provisions for garment workers and the movie industry to predict how the California temporary worker law will be enforced. Jacobsmeyer also predicted that OSHA will be a big player in this enforcement activity to supervise and ensure responsibility for training and safety.

The panel also talked about Cal. Labor Code § 201.3 (2014) that defines temporary services employment. This statute outlines all of the indicators for temporary services employment status. Based on AB1897 and the labor code provision, the panelists surmised that nothing in either law does anything to change exclusive remedy provisions or existing exclusive remedy case law, at least as far as they could tell.

Double the Pleasure, Double the Fun

Given the dramatic inclusion of OSHA in the California Assembly Bill, the panelists also spent some time discussing OSHA’s clear position on the shared safety responsibilities that must exist between a host employer and a temporary agency in a dual employer relationship. This hard-line point of view was strengthened in 2012 and 2013 when a slew of fatalities and catastrophic injuries that had a lack of training and safety supervision as a primary cause occurred to temporary workers across the country, eventually resulting in OSHA’s Temporary Worker Initiative. What started with what Berghoefer referred to as a few quiet announcements on the OSHA.gov website has grown into a nation-wide surprise party that begins when compliance officers come knocking on the door to ask for copies of contracts, training records, and temporary worker lists. Coming out along with this stepped-up OSHA compliance is a trend toward higher fines for violations.

Berghoefer also cautioned about an important area where there is a lot of misunderstanding. Trouble may occur when a temp worker takes direction from a supervisor at the staffing agency, but that supervisor does not control the means, methods or processes of production onsite. In this type of situation, OSHA has been imposing liability for safety training and recordkeeping on the borrowing employer that is controlling that temp worker onsite.

Packing for the Flight Home

To wind down the discussion, the panelists emphasized these takeaways:

1. Understand your contractual obligations and know your contractual roles and responsibilities for your company and/or your staffing agency, especially with respect to safety and training.

2. Learn to negotiate the full value that your staffing agency can bring by leveraging the range of services that the staffing agency offers. For example, use agency personnel to administer some of that site specific training that temporary workers are required to receive.

3. Look for evidence of a commitment to workplace safety when evaluating a potential contracting employer, staffing agency, or temporary employee.

4. Be certain that your company has additional insured endorsements on all generally liability, workers’ compensation, auto, crime, and other kinds of coverage.

5. If you take one thing back to your company, it’s this: you need to train the temps!

Footnote:

1. Yotis, Karen C., Temporary Workers and Their Unique Risks: Shining a Risk Manager’s Analytical Light on an Evolving Shadow Industry, Workers’ Compensation Emerging Issues Analysis, 2014 Edition, pp. 4-22 (LexisNexis).

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