Permatemp Work – A Practice Best Avoided | DCR Workforce Blog

Permatemp Work – A Practice Best Avoided

workersNearly 13 million workers in America head to work as temporary or contract employees, and the utilization of temporary workers in America is growing year on year. We keep hearing criticism of Permatemp arrangements. What is a “permatemp’? It refers to a situation in which a worker is assigned to a long-term, on-site temporary job by a single staffing client; or when a private company or public employer hires workers on a seasonal basis, then continues them for full time work, year after year, while retaining their temporary classification. When companies engage temporary employees for long-term assignments, making them indistinguishable from regular employees except for the fact that they are not receiving benefits (e.g., paid vacation time, group health insurance), they may benefit financially, but they may also find themselves at risk for being sued by these long-term temporary employees — both for the employee benefits they are not receiving as well as work-related injuries. In addition, long-term temps may be considered full-time employees for the purpose of inclusion in class-action lawsuits against a company.

Maintaining a worker in a ‘permatemp’ relationship violates the tenets of the US Department of Labor and of the Internal Revenue Service (IRS). A worker who is supervised and provided direction on a day-to-day basis for an extended period of time may qualify as a ‘common law employee’ even if paperwork exists to show that the worker was deputed by a staffing company. This makes the staffing agency and the client company ‘co-employers’, equally responsible for the worker. According to the IRS, the permatemp would be eligible for all the benefits offered to the regular employees at that workplace, under the same qualification standards applicable to them.

If an employer engages a temporary worker who is engaged and paid through a staffing agency but was doing the same work for an extended period of time in the same position, there may exist possible cause for claiming a common law relationship. There are no Federal or State laws specifying how long a temporary assignment may last. However, a ‘permatemp’ assignment is generally thought of as an engagement that lasts a year or more. Broadly stated, a claim could be supported in situations where:

  • The worker has little or no relationship with the staffing agency which pays his/her wages and is ‘supposed to be the worker’s employer’.
  • The temporary worker is working side by side with regular employees, doing the same job (or even if regular employees are doing the same work elsewhere in the company) where they receive higher pay and better benefits.
  • The temporary worker is supervised by a regular employee of the client company on a day to day basis.
  • The work extends through the whole year while it is labeled as seasonal work.

To avoid the risks of permatemp assignments, many companies have established and enforce tenure limits and tenure gap periods. They also ensure that all workers sign contractual agreements with their staffing agencies, reinforcing the agency as the Employer of Record and specifying the expected end date of the engagement. Supervisors within the client companies should not conduct performance reviews or provide career counseling to temporary workers. All performance issues should be directed to the staffing supplier for corrective action.

DCR would like to know more about your company’s policy on the use of permatemps.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.

2 responses to “Permatemp Work – A Practice Best Avoided”

  1. KC says:

    Are there laws where companies must have a contractor/temp to permanent employee ratio? I have been a “permatemp” for a well-know biotech for 2.5 years, and I was put under the impression my role would go permanent and I would get a raise, only to find out it is not true. My role has evolved over 2.5 years and while my agency gets paid approx $56k/year to keep me in my role, I am paid less than what is expected of a research study coordinator. Also this biotech is not converting contractors for another 2 years. It seems as though this company has more contractors than permanent employees. Is this legal?

    • admin says:

      Thank you for forwarding your comment to us.

      There are no laws governing the lengths of assignments that companies can offer to temporary workers or the ratio of permanent to temporary employees. Many companies choose to set limits based on their own business requirements. Agreements between companies and their suppliers specify the conditions under which temporary workers can be transitioned to permanent employees.

      We advise you to review the initial agreement reached between you and the staffing agency that employed you. Does it specify an anticipated end date, or indicate that the position would be converted to permanent after a given amount of time? You then should talk to the staffing agency about your expectations and concerns.

Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.