When Should a ‘Temp’ Become a Regular Employee?

Aug 12 2019 - Hiring - HRWatchdog

Employers can face liability for keeping temporary workers for an extended period.

I hired a number of employees to work on a short-term project for me. I classified them as “temporary” and therefore not eligible for benefits (other than paid sick leave). The project keeps getting extended though, and many of those employees have now been working for me for several months. At what point do I have to fire them or make them regular full-time employees?

There is no specific time limit on how long a worker may be classified as “temporary.” However, if temporary employees have been performing the same job duties as regular full-time employees for an extended period but are ineligible for the benefits those other employees receive, their employer could face liability.

‘Permatemps’ Likely Entitled to Benefits

In 1992, a group of temporary workers sued Microsoft for improperly maintaining them as “temporary” for years at a time.

Referring to themselves as “permatemps,” these workers were hired on a short-term basis during a period of rapid growth for Microsoft, but many remained on staff as “temporary” for two or more years. They were not permitted to participate in Microsoft’s employee benefits (such as health care, pensions and stock purchase plans), even though they performed the same jobs as regular full-time employees, and often for a longer tenure.

Following an appellate court ruling that the permatemps should have been permitted to participate in Microsoft’s stock purchase plan, Microsoft negotiated a $97 million settlement with them.

It also changed its policies to favor staffing agencies that offered more generous benefits and required temporary workers who stay at Microsoft for one year to leave the company for at least 100 days.

Employer Treatment Matters

While the Microsoft case was under way, a group of PG&E employees sued their employer, claiming that they were misclassified as temporary workers and improperly denied benefits.

Like the Microsoft permatemps, the PG&E employees had worked for PG&E for years — often more than a decade. They used PG&E equipment, supplies and trucks, and attended PG&E training classes alongside regular employees but remained employed by third party staffing agencies and ineligible for PG&E benefits.

The Ninth Circuit Court of Appeal held that although they were leased by PG&E from staffing agencies, the workers could be considered regular employees based on PG&E’s treatment of them. The circuit court sent the case back to the trial court to determine if PG&E treated the leased workers as employees. If it did, the workers could be retroactively eligible for benefits.

Lessons for Employers

Although neither the Microsoft case nor the PG&E case offered a clear time limit for employing temporary workers, the cases still offer some guidance for California businesses:

  • First, temporary workers should not perform the same duties as regular, full-time employees on an indefinite basis. Employers should establish policies limiting the duration of employment of temporary workers and specifically defining the scope of their job duties.
  • Additionally, if business necessity requires an employer to retain temporary workers for an extended period, it should consider changing their status to “regular, full-time” and making them eligible for benefits.

Staff Contact: Michelle Galbraith

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