Misclassifying employees from Temporary Staffing Agencies is a frequent mistake in prevailing wage. It’s important to know how contractors utilizing these employees are subject to the prevailing wage requirements on applicable projects.
Table of Contents
- What is a Temp Agency?
- What are the Prevailing Wage Requirements?
- Temp Employees, Apprenticeship, and Violation Penalties
- Conclusion
What is a Temp Agency?
A temporary staffing agency, or most popularly known as a temp agency, is a recruiting firm that acts as an intermediary between candidates looking for work and companies needing short-term employees or indefinite temporary positions. Temp agency employees work for what is referred to as a “host employer” (or an employer who has general supervisory authority over the worksite) but are on the payroll of a “primary employer.” The primary employer can be either: A temp agency that hires workers and sends them to work for a host employer, or a professional employer organization (PEO) that puts a host employer’s employees on the PEO’s payroll as its own employees.
What are the Prevailing Wage Requirements?
Prevailing wages are expected to be paid on certain project types. Public works projects most commonly enforce the payment of prevailing wages. Temp agencies may be called in by contractors to assist in performing work for these projects. The “primary employer” status designates which body, between the Temp agency and the hiring contractor, would be held under the prevailing wage requirements in this situation.
When it comes to prevailing wage, temporary staffing agencies must register with the DIR if the temp agency submits their own payroll as the primary employer (See CCR Title 8, § 16410). However, if the hiring contractor includes the temp
employee on their payroll and can submit payroll for them, the temp agency does not need to be registered with the DIR.
Temp Employees, Apprenticeship, and Violation Penalties
As referenced on the DIR’s FAQ website, “Apprenticeship requirements are the responsibility of the contractor. If a Contractor relies on the temp agency and there are problems, it is the Contractor who will be responsible for any resulting penalties.”
Apprenticeship standards are enforced on public works projects and published under Labor Code 1777.5. Meeting these standards are included within a contractor’s duties on public works projects. If a contractor chooses to utilize employees from a temp agency in place of a valid request for apprentices, the contractor may be in violation.
Some of the requirements regarding apprenticeship standards can include but are not limited to not employing apprentices if utilizing an apprenticeable craft, late and/or DAS 140 forms not being sent for apprenticeable crafts, and/or failure to make training payments for all hours worked.
1777.7(a)(1) notes that contractors who violate any of the apprenticeship standards found in §1777.5 “shall forfeit as a civil penalty” an amount not exceeding $100 “for each full calendar day of noncompliance.”
Conclusion
Although temp agency employees can be beneficial when it comes to saving time on training and hiring, employers must be aware and do their due diligence to ensure they are meeting the prevailing wage requirements when they are choosing to work with temp agencies to avoid costly penalties on California State Funded Public Works projects.