Winning Justice at Work
WHAT TEMP WORKERS NEED TO KNOW ABOUT TEMPORARY STAFFING AGENCIES TO FIGHT FOR JUSTICE ON THE JOB
TEMPED OUT AND UNDERPAID EVERYWHERE
A significant part of America’s core workforce is “temped out” and denied decent, long-term work. Each year, over 90% of American businesses hire at least 16 million workers through temporary staffing agencies. U.S. government data indicates that temp workers now fill over 3 million jobs each week and account for 2.4% of all private sector jobs.
These official statistics, however, undercount the temp workforce. Thousands of temp agencies are local fly-by-night operations hiding in the economic shadows of low-wage labor markets across the U.S. And staffing agencies operating in the tech sector and white-collar occupations often try to camouflage their identity as temp agencies using misclassification schemes or obscure branding to present a more reputable business image to client companies and professional workers.
The U.S. staffing industry is a multi-billion-dollar behemoth comprised of over 14,000 companies operating out of over 36,000 offices. It is controlled by global mega corporations; the five largest U.S. staffing agencies have a combined revenue of $26.8 billion, and they are hiring more temps than ever before. US staffing revenue is projected to grow 14% this year to reach a record of $212.8 billion. Each dollar of the industry’s gross margin (or gross profit) comes out of workers’ pay.
Staffing agency temp workers are part of a massive contingent, second-tier workforce characterized by below-standard wages, a lack benefits, restricted job mobility, the built-in uncertainty of long-term employment, and difficulty securing their rights under workplace laws. Contingent work takes many forms, including “gig” or platform workers and others misclassified as independent contractors, formerly incarcerated individuals, workers at fast-food franchise chains, underemployed part-time workers, immigrant guest workers, and even adjunct professors.
But workers employed through temporary staffing agencies experience a unique form of sub-standard employment.
THE TEMPORARY STAFFING INDUSTRY – A DRIVER OF LOW-ROAD NON-STANDARD WORK
Temping is no longer limited to a narrow economic niche – providing short-term replacements for sick full-timers and vacationing employees. In recent decades temping has assumed a larger, destructive economic role: providing a second-tier, workforce essential to major industries and service sectors for the long term. Entire job clusters and industries are “temped out,” filled only by agency workers for the long term. A significant and growing proportion are permatemps, who remain stuck in the same “temporary” job for months or years, often toiling alongside direct-hire workers but denied equal pay and benefits for performing the same work.
Temp work is now embedded in every economic sector and occupation. Temps comprise large, essential components of the workforce at recycling centers and giant warehouses used by big box stores, in manufacturing and food processing facilities, in janitorial services, hospitality, auto assembly and parts, and in the skilled trades. In white-collar work and the professions, temps staff all levels of health care facilities, provide skilled computer services for highly profitable tech companies, work in big law firms and science labs, in accounting, the pharmaceutical and finance industries, and in public sector jobs at all levels of government.
21ST CENTURY CAPITALISM DEPENDS ON THE SUPER-EXPLOITATION OF TEMP WORKERS
Of the types of contingent labor studied by the U.S. Bureau of Labor Statistics, temp workers receive the lowest pay and the fewest employer benefits. On average, temps’ wages are 40 per cent lower than direct hires doing the same or similar jobs. Second-tier wages come with the absence of employer benefits like retirement plans and vacation pay routinely provided to direct-hire workers.
The super-exploitation of the temp workforce is compounded by the staffing industry’s well-deserved reputation as a labor market outlaw. The staffing industry is known for its high rates of non-compliance with wage and hour law, widespread violations of health and safety standards, and endemic race and gender discrimination. Rampant wage theft in the industry has resulted in scores of successful class action lawsuits brought to reign in crude systemic denials of overtime pay.
Staffing agencies routinely evade health and safety regulations. OSHA has recognized that temp workers’ chances of death or serious injury are many times higher than that of direct hire employees. And, when temps are injured at work, staffing agencies often game the workers’ compensation system to deprive temps of medical treatment and compensatory payments for lost wages.
Systemic discriminatory hiring practices also plague temp workers who, when compared to non-contingent workers, are more likely to be Black or Latino and often immigrant, particularly in low-wage service and production jobs. Because of widespread collusion by employers and staffing agencies to advance discriminatory hiring preferences, the EEOC has recently launched a campaign to root out the higher rates of discrimination experienced by temps.
TEMPORARY STAFFING – AN EXPLOITIVE LABOR-ONLY FORM OF SUBCONTRACTING
Temporary staffing is built upon a labor-only subcontracting model. Under labor-only subcontracting, the staffing agency is considered the boss, even though it performs only nominal employer functions, i.e., issuing paychecks, withholding payroll taxes, and carrying worker’s compensation insurance. User corporations are treated as staffing agency customers, masking their role as the “real boss”, i.e., the primary employer controlling the means and methods of temp workers’ labor. This structure provides user companies with minimal legal and public accountability for employing a class of workers paid sub-standard wages and deprived of the rights and benefits that routinely accompany direct-hire employment arrangements.
The labor-only sub-contracting business model is simple: bill “client companies” high hourly rates for temp labor, then turn around and pay temps as little as possible. High rates of profit accumulate based on the mark-up - the difference between the hourly billing rate that agencies charge client employers and the hourly wage rate paid to temp workers. This is the sole source of profit for the industry.
The mark-up is essentially a hidden fee that staffing agencies charge workers for every hour they work, whether their assignment lasts days, months or years. Mark-ups range from a low of 20-35% in high-volume staffing contracts. The typical mark-up is 45-75% above a temp worker’s wage. Some contracts, however, contain a 100% mark-up. Whatever the rate, the salient feature of the staffing mark-up is that agency takes as gross profits up to half of what the user employer pays the agency for the temp worker’s labor. That’s why unions and labor reformers have always considered labor-only contracting as grossly exploitive and prone to abuse.
In modern times, the exploitive character of the staffing industry mark-up has been made possible because it is unregulated by any state or federal laws. The mark-up is not only unregulated, it is kept hidden from temp workers and the public and regarded as a confidential trade secret by the staffing industry and its clients. This was not always the case. There is a long-forgotten tradition of organized labor and its allies successfully taking on scurrilous labor contractors who profited by charging workers a fee to access to the job market.
THE FORGOTTEN ORIGINS OF THE TEMPORARY STAFFING INDUSTRY
The temporary staffing agency is an offshoot of the private employment agency, a universally despised business whose unscrupulous job brokering practices and exorbitant fees bilked millions of workers seeking jobs in the late 19th and early 20th centuries. In 1915, after hearings in most major industrial cities, the U.S. Commission on Industrial Relations described the practices of the employment agency business as “reek(ing) with fraud, extortion, and flagrant abuses of every kind.”
Workers have a long tradition of challenging this form of workplace exploitation. Under the slogan “Don’t Buy Jobs,” the Industrial Workers of the World waged a militant and impactful national campaign to ban the employment agencies. Labor reformers, like future U.S. Secretary of Labor Francis Perkins, joined in by targeting and publicizing widespread and egregious agency exploitation. As a result, Minnesota, Idaho, and Washington state passed laws abolishing fee-charging employment agencies. Even after the U.S. Supreme Court overturned these laws as part of its campaign to curtail most protective labor legislation, states continued to strictly regulate private for-profit employment agencies by limiting the size of the fee that workers could be charged for access to the labor market.
The scourge of fee-charging by employment agencies was a major impetus for the creation of the free public employment agency. In 1933, the U.S. Congress could no longer ignore fee-charging employment agencies and passed the Wagner-Peyser Act, establishing the U.S. Employment Service, a nationwide system of free government-run employment services prohibited by law from charging a fee to either the worker or the employer for job placement.
By the beginning of the post-World War II period, private fee-charging employment agencies were marginalized, and its job-placement function was assumed by a federal and state system of publicly run employment services. Labor contracting also diminished in the face of higher levels of union jobs throughout the economy, offering workers higher pay, seniority, health and retirement benefits, and job ladders to more skilled and better paying positions.
HOW THE STAFFING INDUSTRY ESCAPED REGULATION IN THE 20TH CENTURY
The temporary staffing industry did not come onto the jobs scene until in 1950s. Initially, its role was marginal – providing businesses with short-term replacements for sick or vacationing administrative staff. And it was strictly regulated under employment agency laws: the temp agency mark-up was treated as a hidden fee charged to workers’ wages and regulated in the same way as fees other employment agencies charged.
Employers’ reliance on temp work only mushroomed in the closing decades of the 20th century after the staffing industry figured out how to circumvent the strict state regulations governing the private employment agency business. In the 1960’s and 1970’s, led by Manpower, Inc., the staffing industry launched a successful stealthy blitz of employer-friendly legislatures, winning legislative changes to employment agency laws in every state. The staffing industry pushed through two key changes to the law that: 1) exempted “temporary help service firms” from state laws regulating employment agencies, and 2) declared temp agencies to be “employers” instead of “agents” who “assigned” their “employees” to work “temporarily” at their clients’ places of business.
These anti-worker changes to employment agency law allowed the temporary staffing industry to grow without any government regulation of its job brokering functions. The industry’s expansion and legitimacy were established by hiding behind a legal fiction of its own creation – that temporary staffing agencies are employers not labor contractors or intermediaries. A temporary staffing agency’s legal status as an employer obviously rests on nothing more than a staffing agency having responsibility to perform ministerial acts - issuing pay checks, carrying obligatory worker’s compensation and unemployment insurance, and either assigning temps to the user employer’s worksite or simply placing the user’s current employees on the temp agency’s payroll.
By defining itself as an employer and not a labor broker, staffing agencies expanded, successfully selling their business model as a solution for those employers looking for a “more flexible,” low-cost, no benefits model of sub-contracting in factories, offices, and warehouses. The staffing industry went mainstream – and became highly profitable - by selling employers on a subcontracting scheme to increase their own profits by evading the higher costs and legal responsibilities associated with standard, direct-hire employment.
Temporary staffing arrangements hurt all workers, not just the “temps.” Research shows that the presence of temps in an industry significantly drives down wages for everyone working in that industry. Staffing agencies are strategically used as part of employer anti-union strategies. Employers hire temp agency workers, or threaten to hire them, to undermine union organizing drives and break strikes. Where unions already exist, the threat of bringing in temps is used to intimidate workers, undermine solidarity and dampen wage demands at the bargaining table. In short, temping out a section of the workforce has become a divide-and-conquer strategy in the 21st century.
WHY THE REAL BOSSES HIDE BEHIND TEMPORARY STAFFING ARRANGEMENTS
As temp agency employment mushroomed, the abuses, costs and risks of working through a temp agency were not always apparent. Workplace laws put in place during the New Deal and Civil Rights eras to blunt the worst forms of workplace exploitation and discrimination were not designed to address exploitation in temporary staffing arrangements designed to blur the user employer’s legal obligations for temp workers. This made workplace abuses perpetrated by the temp staffing industry difficult to challenge.
Progress in challenging temp agency exploitation only developed when temp workers, unions, worker centers began to organize and when allies in federal and state government began to target temp agencies and their user clients as joint employers, equally responsible for the sub-standard terms and conditions facing the growing temporary workforce. Opponents of low-road temping also challenged staffing industry propaganda that promotes a cynical myth - that temping is a gateway to permanent, standard employment. There is little to support the industry’s claim. In reality, staffing agencies and the user firms they contract with do everything they can to keep temp workers in marginal and precarious employment relationships.
Two widespread staffing industry practices stop temps from gaining access to direct-hire standard jobs desired by most temps. First, staffing agencies have institutionalized permatemping – deploying workers who toil in the same second-tier jobs for years. Permatemping now accounts for a third staffing agency work arrangements. And only 7% of temp workers are converted to permanent hires.
Second, temp workers are prevented from moving into direct-hire jobs from their temp positions because staffing agencies routinely charge a bondage fee that worksite employers must pay the temp agency if they want to directly hire a temp worker as a permanent employee. The median fee for “unbonding” a temp worker is 20% of a temp worker’s annual salary to discourage direct hiring of the temporary workforce.
Like the mark-up, in most states and job categories, bondage fees are unregulated and buried in the contracts between the staffing agency and the worksite employer which are not accessible to temp workers. The U.S. Department of Justice has recently used anti-trust law’s criminal provisions to saddle temp agencies with steep fines for staffing agreements containing “no-poach” provisions that prevent temps from accessing standard jobs at the worksite employer’s business.
FIGHTING BACK AT WORK, IN THE COURTS, AND WITH STRONG REGULATORY REFORMS
Challenges the exploitation of temporary staffing arrangements requires recognizing that temp workers have two joint employers – the staffing agency and the user firm where temps actually do productive work. Both employers share legal responsibility for temp workers who suffer from discriminatory employment practices, health and safety problems, unequal pay and wage theft, violations of the right to organize or form unions. Armed with this understanding of joint employer responsibility, workers, legal advocates, unions, and worker centers have fought back against low-road temping.
As far back as 1997, Microsoft techs employed through staffing agencies won equal access to lucrative stock purchase plans previously available only to direct hires when a federal court ruled that Microsoft was a joint employer of these workers alongside the staffing agency.
The labor movement and worker centers have made use of federal labor law to protect temp workers right to organize collectively at work, to fight abusers and join labor unions. The National Labor Relations Board has found staffing agencies and their user clients jointly liable for violations of the right to organize.
The NLRB has published a new regulatory rule to capture the many ways staffing agencies and worksite employers’ control and exploit the temp workforce. The new rule recognizes that staffing agencies and user firms are jointly responsible for violations of temp workers’ rights whether they control work conditions through direct supervision and management or indirectly through contractual terms that give user employers the right to control temps work conditions.
Temp workers have successfully brought suits that challenge widespread discriminatory hiring practices when employers have requested staffing agencies provide workers of a particular race or gender.
Class action lawsuits have challenged wage theft experienced by temp workers, holding both staffing agencies and user firms liable for millions of dollars in minimum wage and overtime law violations that have robbed thousands of temp workers of earned wages.
Worker Centers and unions in New Jersey, Illinois, Massachusetts have fought for laws to end some of the most blatant exploitation of temp workers by staffing agencies and their client employers. Key features of these “Right to Know” laws require staffing agencies to inform temp workers their hourly wage, the length of their work assignment, where they work, and mandate that staffing agencies provide safety equipment and workers’ compensation.
In New York City, construction unions joined the fight to challenge exploitive temp agencies, known as “body shops.” These agencies paid formerly incarcerated workers sub-standard wages, taking advantage of the difficult workers have who have served time in prison.
Journalists at ProPublica exposed how temp agencies received hundreds of millions of dollars in Work Opportunity Tax Credits, even though the jobs they offer don’t lead to permanent employment. Many top recipients of the credit have long records of labor violations.
At the height of the Covid epidemic, temps and legal advocates in many states won unemployment benefits for temps laid off from a staffing agency work assignment, dealing a blow to state laws the staffing industry lobbied for that deny most temps unemployment benefits.
Temp workers are beginning to join unions and demanding the right to convert their jobs to permanent employment. Temp workers in tech jobs are part of the organizing effort of the Alphabet Workers Union at Google. Blue collar temps at a Ford parts supplier in Ohio have set the pace by demanding equal pay and permanent jobs as members of the United Auto Workers Union at the facility.
Most recently, in New Jersey, worker centers and organized labor advanced a bill requiring temp workers receive equal pay for equal work, i.e., that they be paid the same rates as direct-hire workers who perform the same jobs. While last minute lobbying by the staffing industry undermined passage of the bill, the fight continues.
These victories and struggles show it is possible to win when temp workers organize and ally with worker centers, unions, and legal advocates to fight for rights and justice at work.
TAKING ON THE CHALLENGE OF LOW-ROAD TEMPING
A coordinated nationwide collaboration among all organizations who fight for temp workers is needed to curb the abuses and exploitation of temp workers in all sectors of the economy and in every part of the country. Key components of this strategy require organizing in the community and at work, demanding regulatory reforms, and fighting court battles to win:
Equal Pay for Equal Work
An End to Bondage Fees and Exploitive Mark-ups
Transparency in Temp Contracting and a Path to Permanent Jobs
Enforce Safety and Health Standards
Stop Wage Theft
End Discriminatory Hiring Based on Race, Gender or National Origin
Fight for Union Representation for Temp Workers
Pass Temp Worker Right to Know Laws at the state and federal levels