(“Originally published on SIA Staffing Stream, February 05, 2014.”)
As temporary workers increasingly represent a larger portion of the workforce, companies who retain the services of staffing agencies tend to focus on issues like pay rate, mark-up and bill rate. While it is important to examine these factors in order to determine the actual cost of engaging a contingent worker, it is equally important to understand what constitutes “time worked”.
TheU.S. Federal Labor Standards Act (FLSA) tells us that “all covered, nonexempt employees must be paid at least the minimum wage for all hours worked. A workweek, which can begin on any day of the week, is seven consecutive 24-hour periods or 168 consecutive hours.”
In simple terms, the FLSA defines “hours worked” or “time worked” to be the time an employer requires employees to work as well as hours in which the employer knows or has reason to believe that the employees are continuing to work and the employer is benefiting from the work being done.
While the FLSA does not require employers to provide rest breaks (defined as of 20 minutes or less), if they are provided they must be treated as time worked, and the worker must be paid.
The FLSA further specifies that meal breaks of 30 minutes (or longer) are not considered time worked, and are unpaid. However, when employers covertly encourage workers to cut their meal breaks shorter than 30 minutes or make them work through meal breaks, the time must be considered hours worked and must be compensated. For example, if workers are asked to cover the phones during their lunch break, they are considered to be working, not at lunch, even if they are eating lunch at their desks. If the company is using a timekeeping system that automatically deducts the lunch time from pay checks and the company fails to make the needed adjustments, a collective action FLSA lawsuit may be staring the company in the face!
For workers older than 16 years, the FLSA does not limit the number of hours in a day, or days in a week, an employee may be required or scheduled to work, including overtime hours.
How does that impact staffing companies? The same rules apply to contingent workers provided through an agency as it does to permanent employees. As the Employer of Record, staffing agencies are responsible for all employment regulations governing employment taxes, worker’s compensation, and documentation, record keeping and reporting. When engaging contingent workers, companies utilizing these workers on short-term assignments will be counted as secondary employers while the staffing agency will be the primary employer. The lines of accountability and responsibility get blurred due to this shared liability. Both parties are considered responsible for ensuring that hours worked are properly calculated and that workers are paid in compliance with all FLSA regulations. The staffing agency must ensure that policies regarding work hours are clearly understood and adhered to by hiring managers and workers.
Ensuring compliance with FLSA regulations is just the beginning. Twenty states impose regulations on lunch periods and mandatory breaks. In each case, the time worked, length of meal period, number of meal periods, length of break, and applicable worker classes may vary. To further complicate matters, collective bargaining agreements (CBA) cannot deprive workers of rights under FLSA, but can expand the definition of “hours worked” to include breaks and meal periods, and can specify the number and length of required breaks.
Staffing agencies and the companies using their services must demonstrate that they are proactively ensuring compliance with federal and state regulations. Responsibility for regulation cannot be shifted to the workers. To elaborate, in a class action suit brought recently against a hospital, the hospital argued that its employee handbook specifies policies regarding time worked, making it the workers’ responsibility to bring up any non-compliance issues with their supervisor. Workers argued that the process of making a claim was complicated and arduous. They also argued that the hospital management knew that workers were required to work through lunch breaks. They were also made to spend uncompensated hours away from work every week laundering their uniforms at home – as the hospital provided no laundry services but stipulated specific standards of cleanliness for the uniforms. The court sided with the workers’ claims, and the hospital will be paying the price once it is decided how many workers were affected and for how long.
To make sure that they avoid any possible liability and legal action on account of contingent workers, businesses and their suppliers should put some controls in place:
Consider the services of a managed services provider (MSP) and vendor management system (VMS), particularly in environments with facilities in multiple states, a variety of non-exempt worker types, a large population of contingent workers and a large supply base, and workers operating under a collective bargaining agreement. MSPs are skilled in reducing the complexities associated with contingent labor, and VMS systems automate the calculation of hours worked and provide visibility into potentially dangerous non-compliant practices.
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