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Q. We use a full-service employee leasing company. Are we exposed to liability for employment claims brought by leased employees?

A. An employer cannot assume that using leased employees or temporary employees from an agency will insulate it from employment problems or liability regarding those employees.

The reason is a legal doctrine called “co-employment” or “joint employment.” Generally, employee leasing companies, temporary service agencies and the companies to which they supply workers will have a sufficient connection with those employees to be deemed co-employers or joint employers. The law’s purpose is to ensure that someone is held responsible for work matters over which they have control.

Employee leasing companies or temporary service agencies pay the employee’s wages and withhold payroll related taxes, provide workers’ compensation coverage, often provide health insurance and other employee benefits, provide HR management and have the right to hire and fire. As the client of the employee leasing company or temporary service agency, an employer provides the workplace and generally oversees and directs the employee’s day-to-day work. The client company also has the power to remove the employee from its workforce. Thus, under the legal doctrines of co-employment or joint employment, both the client and leasing companies have enough of an employment-based relationship with the employee to be considered an employer. Thus they both can be held liable for employment-related problems.

For example, the client company clearly can be held liable for employment discrimination under either Title VII or the Texas Commission on Human Rights Act. If a leased or temporary employee complains of sexual, racial or national-origin harassment in the workplace, the client company can be held liable even though the worker is the employee of the leasing company or temporary services agency.

In such situations, liability also can arise under the ADA, OSHA, FMLA, FLSA and other federal statutes.

The safest course of action is for a client company to assume that it can have employment-based liability for the personnel from employee leasing companies and temporary service agencies. It should act accordingly. 

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