It is early autumn in New England and the weather is changing. For ski areas, retail business operations, and other seasonal businesses this means there soon could be significant increases in their employee ranks in response to seasonal needs and demand. While there are some signs that the economy is rebounding from recession, hiring across the U.S. and here in New England is still slow. Most of the hiring that has taken place this year has been for temporary or seasonal positions. There are real advantages to hiring temporary or seasonal employees, but there are potential pitfalls to also avoid.
Why employers hire temps.
The American Staffing Association recently published a survey that reveals why employers hire temporary workers. That survey noted that 80% of employers who responded indicated that they hired temporary workers to cover for employees who are out on leave (e.g. sick leave, short term disability, maternity, FMLA or military leave). Peak or seasonal spikes in work represented 72% of the hires. Short term projects represented the need for hiring 68% of the temporary placements. Finally, 59% of those employers said they used temporary hires as a way to evaluate talent before making a longer term commitment.
What's the difference between a temp, a seasonal hire and someone hired on a more permanent basis?
Employment laws generally apply to employers based on a threshold number of employees. These laws sometimes distinguish between full and part time employees, temporary and seasonal workers. In some cases, part time, temporary and seasonal workers are not counted for purposes of determining whether or not a law applies to that employer. These classifications also sometimes determine whether those individuals are covered by these laws. These definitions vary between federal and state laws. Broadly speaking, however, an employee is either full time or part time regardless of whether he/she is permanent, temporary or seasonal. "Temporary" employment is for a set period of time — e.g. days, weeks, months, life of a project, period of permanent employee's absence. Finally, "seasonal" employment is also for a set period of time but tied to annually recurring periods of work for the business. Again, the significance of these distinctions is that an employer may or may not be required to comply with certain statutory obligations and even if the employer is covered by the law, the employee may not be.
Hiring through an agency, where is the person employed?
Staffing companies exist for the express purpose of helping businesses through temporary periods when more employees are needed for the business to operate more effectively. The American Staffing Association (ASA) claims 90% of client businesses say staffing companies give them flexibility to keep fully staffed during busy times. Millions of U.S. workers are employed by or provided to work for other employers through temporary staffing or placement firms.
Some agencies offer on site supervision, employee handbooks, timekeeping, payroll, benefits and other traditional employer provided benefits and services. However, just because an employer has a contract to provide these services for the temporary employees, the temporary employee may still be deemed your organization's employee. As such, care and attention needs to be paid to workplace safety, discrimination, training, wage and hour law compliance and benefit plan eligibility issues. The temporary employee …
As many employment laws have coverage thresholds based on the number of employees, temporary workers can subject a business to state and federal employment and discrimination laws and regulation. For example, under Title VII, the ADEA, and the ADA, an employer is covered if it has an employment relationship with the requisite number of employees for the relevant number of weeks, regardless of the daily work schedules of the individual employees.
The US Equal Employment Opportunity Commission (EEOC) in its guidance on coverage questions has suggested that employers look at the number of employees on their payroll; exclude individuals who are not employees, e.g., discharged/former employees or independent contractors, and then add to that figure any other individuals who have an employment relationship with the employer, such as temporary or other staffing firm workers.
This count can subject employers (and their staffing agencies) to liability for discrimination claims but this count can also create compliance obligations (e.g. Family and Medical Leave Act policy and benefits, federal and state WARN (mass lay off) notices and benefits, etc.). The duration of the temporary work relationship can determine whether the person is counted as an employee for some discrimination statistics but other statutes and regulations don't make those distinctions. In other words, using a staffing agency or otherwise hiring a temporary employee could save some money on administration, supervision and benefits but employers must also be aware of other hidden traps and costs associated with these workers.
Are there issues unique to hiring seasonal workers?
Seasonal workers are those employees who are hired to help during seasonal or peak times (e.g. ski season, summer vacation, harvest time, etc.). While they would certainly be considered employees, they may not be counted for coverage purposes of some laws or covered by others. The most significant coverage issues for seasonal workers are unemployment benefits and WARN or WARN-like separation notices and benefits.
Large-scale layoffs and mass terminations usually occur in the late fall or early winter. This is when companies look at 4th quarter or year-end numbers or otherwise want to make personnel adjustments to start the new year. That has traditionally been the busiest season for layoffs and terminations. In a slow economy, however, layoffs or large-scale terminations occur at other times of the year as well. Sometimes these personnel actions happen without much forewarning. A number of factors may lead to such decisions and trimming payroll or shutting down a facility may be in the organization's best interest, but there can be significant fall out from such large-scale job losses. In addition to the obvious increases in unemployment claims, costs associated with benefit conversions and subsidies, and the potential for more individual claims for wages, wrongful termination or discrimination, as well as the negative publicity and impact on moral for those who remain, there are other potential pitfalls for struggling employers. One is the potential liability for violations of federal and state laws related to notices due in advance of the layoffs or terminations.
On August 10, 2009, Governor Lynch signed SB40 into law. This law, which went into effect on January 1, 2010, is now known as the New Hampshire Worker Adjustment and Retraining Act ("NH WARN Act"). While it is modeled after the federal WARN Act, there are some important differences for employers to note.
NH WARN Act differs from the Federal WARN Act
The federal WARN Act requires covered employers to give employees 60 days advance notice when there is going to be a plant closure or mass layoff (involving more than 1/3 of the workforce but at least 50 employees). Under the NH WARN Act, like the federal WARN Act, the threshold for notice for a mass layoff is a reduction in force which results in an employment loss at a single site in New Hampshire involving job losses of at least 250 employees (excluding seasonal and part-time employees). The NH WARN Act's notice threshold is lower than the federal WARN Act: at least 25 affected employees (excluding part-time or seasonal employees) if they constitute at least 33% of the employer's full-time employees. The federal WARN threshold is at least 50 affected employees. The other important difference between the NH WARN Act and the federal WARN Act is the threshold number of employees for the employer to be covered by the Act. Under the federal WARN Act it is 100 employees. Under the NH WARN Act the threshold is 75 employees.
Employers who fail to give the required notice, as outlined below, would be responsible to provide wages and benefits to those employees. In addition, the potential civil fines and penalties that could be imposed on employers are much steeper under the state law.
The federal WARN Act has several exceptions and exemptions built into the law. The NH WARN Act has many of those same carve outs. There are two important distinctions. First, as outlined above, the thresholds are lower under the state law. Sponsors of the legislation suggested that these lower thresholds would cover at least 300 more employers in New Hampshire than would have been covered under the federal WARN Act. Second, the NH WARN Act includes a first of its kind corporate liability piece that provides the New Hampshire Department of Labor the ability to make the corporation and its parent company responsible for fines and civil penalties associated with a violation of the NH WARN Act. While this provision is much better than the earlier version of SB40, which held business owners and decision makers individually or personally liable, this provision has still caused some concern in the business community because of the impact the law might have on foreign and out of state investment in businesses in New Hampshire.
What job losses are covered?
The NH WARN Act applies only to a "plant closing" or a "mass layoff") in New Hampshire. A "plant closing" is defined in this act as a "permanent or temporary shutdown of a single site of employment in New Hampshire, of one or more facilities or operating units, if the shutdown results in an employment loss at the single site as that occurs during any 30-day period for 50 or more employees, excluding any part-time employees." A "mass layoff" means a reduction in force which is not the result of a plant closing and which "results in an employment loss at a single site of employment in New Hampshire during any 30-day period for at least 250 employees, excluding any part-time or seasonal employees, or at least 25 employees, excluding any part-time or seasonal employees, if they constitute 33 percent of the full-time employees of the employer." An "Employment Loss" under this law includes employment terminations, or a layoff of greater than six (6) months or a reduction in work hours of more than 50% during each month of any six-month period. However, "Employment Loss" does not include a plant closing/layoff if before the closing/layoff the employer offers to transfer the employee to a different site within a reasonable commuting distance with no more than a six-month break in employment, or if the employer offers to transfer the employee to any other site, regardless of distance with no more than a six-month break in employment and the employee accepts the transfer within 30 days of the offer, closing or layoff, whichever is later.
Notice requirements
The NH WARN Act requires that at least 60 days before a plan closing/mass layoff, a covered employer give notice to the affected employees, their representative(s), if any, the Commissioner of the New Hampshire Department of Labor, the State Attorney General, and the chief elected official of each municipality in New Hampshire in which the plant closing/mass layoff occurs.
Seasonal workers not counted and not due notices but be careful!
The NH WARN Act doesn't include notices to seasonal workers and other employees who were hired understanding that their employment was limited to the duration of a particular project or undertaking. The key for employers to reduce their risk of liability under this law is to confirm in writing with the seasonal worker that the employment assignment is limited to that engagement which is for the duration of that season or peak need. If those employers hire some of those same workers in a different capacity in the next season, that too should be confirmed in writing as a separate and distinct seasonal work engagement.
So, are there any other benefits to hiring temporary or seasonal workers?
Under the Federal Government's 2010 HIRE Act, part-time and seasonal employees are considered to be qualified individuals, thereby enabling employers to take the tax credits provided under the Act. Under this stimulus-like federal law, employers are relieved from social security payroll tax withholding for employees hired between March and December 2010. They are also eligible to receive a $1,000 tax credit per employee for those employees who continue to work for the organization for at least one year. There are no restrictions on the number of hours a new employee works. All wages a qualified individual earns between March 19, 2010 and December 31, 2011, are subject to the credit. Of course, a seasonal employee is not likely to meet the criteria for the retention credit of $1,000 for 52 consecutive weeks of employment, but this does not change such employee's qualification for the 6.2% Social Security payroll tax credit during his or her employment up to December 31, 2010.
Other issues to consider when hiring temporary or seasonal workers.
To avoid many common workplace claims that could eat up in legal fees and related costs whatever savings you realize by hiring temporary and seasonal workers, employers should, at a minimum, take the following steps:
- Coordinate or centralize all hiring decisions in your organization to avoid confusion and inconsistent standards for the treatment of these employees;
- When working with an agency make it clear in your agreement who will be responsible for employee records, time keeping, benefits, workers compensation, payroll, taxes, etc.;
- Understand that these employees are your employees or co-employees with the staffing agency;
- Be aware that these employees may counted towards employee numbers thereby subjecting your organization to coverage under certain state and federal employee laws;
- Compy with applicable employment laws;
- From the outset make it clear to the employee the employee's wage rate, pay day, pay period, eligibility for benefits (if any) and expected duration of employment;
- Watch the duration of employment because longer engagements can have an impact on benefit eligibility (e.g. leave policies, insurance programs and 401(k) plans);
- Make sure these employees are aware of your workplace policies and work rules;
- Beware multiple engagements or automatic renewals of employment assignments with the same worker as that could impact the employee count, overtime exceptions and coverage under certain state or federal laws; and
- Consider the impact on moral and stability of your workplace as more temporary and seasonal workers could mean a less cohesive workforce.
Conclusion
While there are advantages to hiring temporary and seasonal workers, employers must be careful to comply with all applicable state and federal employment laws. Short cuts during a busy season could lead to expensive fines and legal fees in the months or years that follow.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.
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