Hiring temp employees

[austin3515]

Trying to figure out how to handle a situation where a temp employee is hired full time by the recipient. You are required to recognized service while working for a "leasing organization" if you become hired by the recipient if the SOLE reason you are not a leased employee is because you have not been working on a substantially full-time basis for at least a year.

However, one of the requirements for being considered a leased employee is that:

(A) such services are provided pursuant to an agreement between the recipient and any other person (in this subsection referred to as the “leasing organization”),

Most temp services do not require a written agreement. They simply send out temps, and bill their clients. So are these services provided pursuant to an agreement? I would argue no, because if there was no requirement for a formal written agreement than there would be no need for this (A). There is an "agreement" whenever any two unrelated parties exchange goods or services for money, even when I go to the drug-store to buy a pack of gum. You agree to give me a pack of gum, if I agree to give you a dollar. In the absence of a written agreement, the relationship of a temp agency to its clients is analagous to the drug-store's relationship to me, the patron.

Therefore, no agreement, no recognition of service as a temp once hired on a full-time basis because now the lack of full-time employment for at least a year is not the SOLE reason.

Thoughts?

[GMK]

Does "agreement" mean "contract" in legal terms?

Suppose the temp agency sued the Company, because the Company did not pay for a temp's services. Is the Company remotely likely to win in court by using the argument that it didn't have to pay the temp agency because there was no written agreement? I doubt it, but I'm not a lawyer.

[austin3515]

I don't think that is related. Your scenario is analagous to my stealing gum from the drug store which is clearly not defensible. Do I have an "agreement" with a drug-store?

[QDROphile]

An agreement does not have to be in writing. Services through a temporary employment agency are pursuant to an agreement.

[GMK]

But I didn't call the drug store, ask them what their terms and pay rates were on gum, and then tell them OK, I'd like that gum. I just walked in and took it (...I didn't really, just an example).

I'm suggesting that an agreement exists when I ask for a temp under the temp agency's terms and at the agency's rates, and they say OK and send one over.

[austin3515]

And I'm suggesting that every transaction that takes place in this world involves an agreement on some level. Therefore, to place such a requirement in the Code seems to suggest that it has some meaning beyond the obvious requirement of two people agreeing to work together (again, absent that there would be no transaction in the first place).

[QDROphile]

Perhaps the use of agreement in that context distinguishes between the agreement of an individual to work for an employer (an employee or an independent contractor) and the agreement between the employer and the agency for someone to work for the employer (a leased employee).

[masteff]

I'm sending you part of my reply by PM so as to keep it slightly more off the record.

This question always sent shivers down my spine. We once had a window retirement program that gave a one-time benefit based on number of years of vesting credit service. We had supervisors and leasing agencies digging thru records to help substantiate who had prior leased employee service, sometimes a decade or more earlier.

As to your question on agreement... How did the agency know how much to charge you and how did you know it was the right amount to pay if an agreement didn't exist (even if not expressly negotiated, "standard going rate" would have been implied)? Unless you can find a Code section that defines "agreement" and it requires writing, then business law 101 would say it's a valid and binding verbal agreement.

As to the drug store example... The store has made an offer to you by placing the goods on its shelves (generally w/ a price indicated but not always). You either accept the offer or reject it by leaving the store. Once you either accept the gum (perhaps by opening it in the store and chewing a piece) or tender your money to a store clerk, then you have become party to a transaction agreement.

[GMK]

QDROphile has it.

When a temp works for the employer, the agreement is between the employer and the agency (the "leasing organization"), not between the employer and the temp.

[austin3515]

I knew that... My question from the beginning was what does "agreement." Again, I keep coming back to why place this requirement in the Code if it is a completely moot point.

[QDROphile]

Assume the rule is what we understand it to be. How would you write the rule without using the word "agreement"? It can be done, but the way is it written now is pretty efficient straightforward English construction, and some other word choices are more awkward.

In first year contracts classes in law school, one of the first lessons is the silent exchange of goods for money in a store to illustrate that agreements come in many forms, and a writing is not necessary for the agreement nor for the agreement to be enforceable. It is a good practice to drill down in words to find the intent of the expression, but I think you are trying to find too much nuance of meaning in the word choice.

[austin3515]

In a concession of defeat, I found the following in the Whose the Employer benefitslink Q&A columns, none of which explore my question, which is indeed telling:

http://benefitslink.com/modperl/qa.cgi?db=...loyer&id=11

http://benefitslink.com/modperl/qa.cgi?db=...oyer&id=135

QDRO - I see your point quite clearly - I was putting too much emphasis on the word "agreement" - I agree that that word is a very small portion of what the rest of the sentence is implying (i.e., which is a general description of the arrangement).

It may surprise you to learn that I agreed with you both from the start, but I have a client who would prefer an "escape clause." Although he certainly does not know super-top secret alter-ego, I will certainly let him know I tried

[PLAN MAN]

I found this in Notice 84-11:

A-5. A leased employee is any person who performs services for a recipient if:

(1) such services are provided pursuant to an agreement between the recipient and any other person (the "leasing organization"), ...

Q-6. Must the agreement referred to in paragraph (1) of A-5 between the recipient an the leasing organization be in writing?

A-6. No, an oral contract between the recipient and the leasing organization will satisfy the "agreement" requirement.

[masteff]

I'll just add that sometimes you can exclude based on two other elements of the criteria.

First, it has to be a legitimate 3rd party acting as the leasing agency (the "any other person" in Planman cite). I went two or three rounds w/ an HR guy about whether an independent contractor could argue that he was being leased to our company by his 100% self-owned electical company.

Second, the services provided by the temp have to be "performed under primary direction or control" of the recipient. I had to interview a few supervisors to find out just how much the workers were autonomous versus company-directed. It becomes the age old contractor vs employee test.

[Steelerfan]

there's one other thing that can't be overlooked, and that is that the person can't already be the common law employee of the service recipient; the term “leased employee” means "any person who is not an employee of the recipient . . .", which has been interpreted to mean "common law employee". Since that test is a facts and circumstances test it is a potential trap for the unwary. If that were case, the service can't be excluded and the person isn't eligible for the leased employers benefit plans.

I think everyone overlooks this assuming that temps would be leased employees afer a year, but there are cases where temps could be considered common law employees of the receipient. The easiest example of this is when a company rehires retirees and then pays a third party to cut checks. The reality is that the temp agency is a payroll processor and that is only one factor in whether or not a person is a common law employee. Reality is nothing changed and the retiree is likely to be considered employed by common law standards.

and BTW, there has to be an agreement betwen the recipient and the agency and id be surprised if there was no writing.

[austin3515]

Thank you Plan Man for driving the silver spike right through the heart of my theory!

[Steelerfan]

Thank you Plan Man for driving the silver spike right through the heart of my theory!

serously though, you have to admit it wasn't that good an argument!

[austin3515]

Agreed...

[Guest mjb]

I found this in Notice 84-11:

A-5. A leased employee is any person who performs services for a recipient if:

(1) such services are provided pursuant to an agreement between the recipient and any other person (the "leasing organization"), ...

Q-6. Must the agreement referred to in paragraph (1) of A-5 between the recipient an the leasing organization be in writing?

A-6. No, an oral contract between the recipient and the leasing organization will satisfy the "agreement" requirement.

While an employement agreement can be at will without any written contract between the employer and employee, there are collateral consequences in the case of a leased employee which preclude not having a written agreement between the employer and leasing organization.

If there is no written agreement between the recipient and the leasing orginaization who is the employer who is required to file the I-9? The failure of an employer to complete an I-9 is subject to a penalty of $1100 per employee. Why wouldnt the recipient employer be assessed the penalty in the absence of any written agreement designating for whom the employee is performing services? If the employee executes the I-9 with the leasing organizating why isn't the leasing org the employer?

[austin3515]

The temp agency gets the 1099 while the temp is temping, because they are an employee of the temp agency.

Then when the recipient hires the temp, the recipeient gets the I-9 because they are the employee of the recipient.

[Guest mjb]

The temp agency gets the 1099 while the temp is temping, because they are an employee of the temp agency.

Then when the recipient hires the temp, the recipeient gets the I-9 because they are the employee of the recipient.

1. What does a 1099 have to do with protecting the recipient employer from being subject to penalities for violating the 1986 immigration act? The lack of requirements for a written agreement in the IRC does not protect the employer from violating the requirement to get a I-9 form for each employee under the immigration laws.

2. What protection does the recipient employer have in the event of an audit by ICE that the temps are employeees of the agency if there is no written agreement between the agency and the employer? Counsel for the employer would never allow a client to be put in such a risky situation, not to mention the bad publicity that would result from a raid by ICE.

There is more involved here than just the IRC requirement for leased employees.

[austin3515]

The temp agency gets the "I-9" [revised] while the temp is temping, because they are an employee of the temp agency.

Then when the recipient hires the temp, the recipeient gets the I-9 because they are the employee of the recipient.

Well mjb, sounds like you;re questioning the viability of a multi-billion dollar industry. Good luck with that...

My belief is that the industry norm does not include signed agreements.

[Guest mjb]

No I am protecting the interest of an employer because without any written agreement with the employment agency as to what their responsibilities are, the emplmoyer is at risk if the agency failsl to perfom its duties. This isnt some thing you learn in CPA school.

Try running this question by corporate counsel and see if they agree that there is no business risk to an employer who doesn't have a written agreement with a temp agency regarding the agency's duties for the temps that they pay under both federal and state law.

I dont know what indsustry you are referring to but I have never known an employer who hired temp employees who did not have a written agrement with the agency and usually had a written agreement with the the temps as to what the terms of the relationship were.

[masteff]

I dont know what indsustry you are referring

...

usually had a written agreement with the the temps as to what the terms of the relationship were.

The "industry" is the multi-billion dollar temporary employment industry.

And I worked enough temp jobs to know you're well off base about recipient companies have any sort of written agreement w/ the temps doing the work. If you've seen such, then yours are the exception and far from the norm. As a temp employee, I have an employment application and I-9 on file w/ the leasing agency. I never had anything in writing between me and the recipient company (except maybe a non-disclosure or internal security form). Are you possibly confusing a written job description as an "agreement"?

[austin3515]

"This isnt some thing you learn in CPA school."

Let me see if I can understand this correctly - that was supposed to be a put-down?

[Guest mjb]

I dont know what indsustry you are referring

...

usually had a written agreement with the the temps as to what the terms of the relationship were.

The "industry" is the multi-billion dollar temporary employment industry.

And I worked enough temp jobs to know you're well off base about recipient companies have any sort of written agreement w/ the temps doing the work. If you've seen such, then yours are the exception and far from the norm. As a temp employee, I have an employment application and I-9 on file w/ the leasing agency. I never had anything in writing between me and the recipient company (except maybe a non-disclosure or internal security form). Are you possibly confusing a written job description as an "agreement"?

Smart recipient employers require that temps sign agreements upon commencing service recognizing that they are not employees of the receipient employer and are not eligible for benefits under the employer's plans because under the doctrine of repudiation the acknowledgement by the temp of ineligibility for benefits commences the statute of limitations in the event the temp later files a claim against the employer for benefits under ERISA. I guess you are not aware that the statute of limitations is based on state law which can be as little as 2 yrs from the date the temp acknowledged that he/she was not eligible to participate in the employer's plan. If the temp files a lawsuit for benefits against the recipient employer after the s/l has expired the claim will be dismissed by the court.

[masteff]

Smart recipient employers require ...

I didn't argue whether or not it was "smart". I simply stated that it's not common. I even sent emails this morning to a few HR consultants I know at various companies and they agreed that while they make every independent contractor sign something, they've had no experience of any company ever requiring temporary employees to do so.

One person had a couple interesting stories along that line. An employee of an independent contractor who tried to file under ADA, claiming they didn't have a job for her after she returned for an injury. The EEOC sending paperwork on a claim by a temp (which was countered by saying "sure, we'd be happy to go to mediation but didn't you mean to send the paperwork to this agency over here (or do you just want our deep pockets)"). And the one that made me shake my head was the temp who got let go a day after calling the recipient company's harassment complaint 800-number.

[Guest mjb]

Smart recipient employers require ...

I didn't argue whether or not it was "smart". I simply stated that it's not common. I even sent emails this morning to a few HR consultants I know at various companies and they agreed that while they make every independent contractor sign something, they've had no experience of any company ever requiring temporary employees to do so.

One person had a couple interesting stories along that line. An employee of an independent contractor who tried to file under ADA, claiming they didn't have a job for her after she returned for an injury. The EEOC sending paperwork on a claim by a temp (which was countered by saying "sure, we'd be happy to go to mediation but didn't you mean to send the paperwork to this agency over here (or do you just want our deep pockets)"). And the one that made me shake my head was the temp who got let go a day after calling the recipient company's harassment complaint 800-number.

Maybe you have been talking to the wrong people. Hiring temps is usually done by the personnel departments of large corporations and in some cases it is supervised by the finance people as a risk mangment matter. The waivers also include other legal protections such as a waiver of rights to any intellectual property or inventions that the temp may create as well as the requirement that the temp must return all company property, manuals, instructions, etc upon temination of service.