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Business Week - June 21, 1999


Business News - July 19, 1999



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A Leg Up for the Lowly Temp
Advocates are lobbying for better benefits and an employer's code of conduct

by Aaron Bernstein in Washington,
published in the June 21, 1999, edition of Business Week

You'll get an earful if you ask Thomas Sullivan what it's like to be a temp.  Two people working side by side at exactly the same job may get different paychecks if they were hired by separate temp agencies, says the Quincy (Massachusettes) resident, who usually temps in telephone-call centers.  One agency made it clear, he says, that a client company didn't want him because he's too old (Sullivan is in his mid-40s).  When another agency tried to prevent him from collecting unemployment benefits by saying he had quit a job when, in fact, he had ben laid off, Sullivan got legal help from the Campaign on Contigent Work, a Boston Advocacy Group. 

In recent years, more than a dozen advocacy groups have sprung up around the country to help people such as Sullivan.   They point out that the 8 million-plus employees who move in and out of temp work every year get paid less than full-timers, lack health care and other benefits, and often fall through the cracks in labor and employment law.

Good Timing
The groups are experimenting with various approaches.  Some offer legal aid and job counseling.  Others are lobbying cities and states to pass laws that would help temps with everything from benefits coverage to unemployment insurance, which in many states excludes temps.  A San Jose (California) group even started a non-profit temp agency that plans to forgo profits to subsidize job training and health care for members.

Now, these groups aim to tackle the issue nationwide.  In March, several dozen leaders formed a loose coalition that plans to push for federal and state laws to help such "nonstandard" workers, who do everything from clerical work to light manufacturing.  Their effort may be well-timed, with today's tight labor markets giving contingent workers more leverage.

The group also is planning a campaign later this year for a code of conduct for the temp industry.  It will follow a code adopted in 1997 by the Temp Workers Alliance in northern New Jersey.   The idea is similar wo codes drawn up in the apparel industry to deal with sweatshops.  Essentially, advocacy groups hope to pressure the industry to police itself by agreeing to a common set of principles.  "We're trying to create new models for the next generation of employee organizations to represent temps and other contingent workers," says Amy Dean, head of the San Jose arm of the AFL-CIO, which started the non-profit temp agency.

The move isn't likely to sit well with the temp industry, which has resisted the New Jersey effort.  "We don't feel that as an industry we need to have a government or any other entity acting as a watchdog," says Edward A. Lenz, general counsel of the National Association of Temporary and Staffing Services (NATSS), an industry trade group.

The groups have been moved to action by phenomenal growth.  Nearly 3 million workers hold temp jobs on a given day, double the number in the early 1990s, according to the NATSS.  But turnover is more than 400% a year, largely because three-quarters of temps find permanent posts.   As a result, some 8.5 million workers, more than 6% of the workforce, spent at least part of 1998 temping, the NATSS estimates.

While many temps like the flexibility temping offers, they earn only $329 a week on average, 35% less than regular workers, according to the Bureau of Labor Statistics.  Only 7% of temps get health-care insurance from their employer, and just 4% get a pension.

Temp groups claim that abusive and even illegal working conditions are widespread.  No hard data exist, but NATSS officials concede that abuses occur.  They argue that most are committed by small agencies, not such giants as Manpower Inc. or Olsten Staffing Services.

One of the few surveys found big complaints from temps.  In 1994, a South Carolina community group called the Carolina Alliance for Fair Employment (CAFE) paid some two dozen temps for a week to detail problems they had encountered.  They said that agencies tell temps to take jobs they're not trained for and don't provide that training.  Agencies also don't give written notice of what the wage will be, put temps in unsafe working conditions, and often place them based on race, age, or sex.  The group tried to implement a code of conduct based on the findings but gave up after agencies refused to comply, says Charles Taylor, CAFE'S head.

The New Jersey Temp Workers Alliance picked up CAFE's code idea and gave it a consumer-oriented approach.  It drew up 24 "Principles of Fair Conduct" and invited all 500 temp agencies in the state to sign in 1997.  The NATTS mounted vigorous opposition.  "Their credibility is suspect to us because they operate under the auspices of the AFL-CIO, says the NATSS' Lenz.  Barrie A. Peterson, an Alliance founder, says the local AFL-CIO, the United Way, and Republican-dominated Bergen County all contribute to his group's budget.

Still, 32 New Jersey agencies have endorsed the Alliance's principles so far.  The group publishes a Consumer Reports-style review that lists agencies using "best practices."  "I agreed because it sounded like they're trying to keep the industry legitimate," says Alan Baker, owner of Horizon Personnel Inc., a small agency in Parsippany, NJ.

The San Jose group decided to go even further and create a model agency.  It's part of an ambitious three-year project by the San Jose AFL-CIO to help temps and other contingent workers.  The AFL-CIO's Dean, director of the project, has raised $1 million from private foundations.  She formed a temp group called Together@Work, which began accepting dues-paying members in January.

Dean also started the non-profit agency called Solutions@Work to help temps find good jobs.  Focusing on low-wage clerical jobs in Silicon Valley, the agency has placed a dozen temps since it opened early this year.  It formed a link with a local community college, where it offers members free classes in computer skills and word processing.  One temp, Mireya Soltero, spent seven months getting training and finishing a high school equivalency dioploma.  That helped her qualify for a data-entry job at M&M Home Medical Co., a private company in Sunnyvale, California.  "I asked my boss for a permanent job, and [now] he's looking for something for me," says Soltero, who started in late April.

Premium Price
M&M was willing to pay Soltero $10 an hour, more than what other local agencies charge, because of her prior training.  "We've hired two temps from them, and they'll be our first choice, because other agencies don't bring us the caliber of people we need," says Bob Burnett, M&M's operations director.

Solutions@Work also is negotiating with health-care providers for a group rate, says Dean.  Eventually, if the agency grows fast enough, it hopes to tap the markup other agencies take as profit and return it to members so they can buy coverage.

Of all the ranks of temps, says the NATSS, about one-third choose temp jobs for the flexibility.  The rest, however, say the want a permanent job.  Advocacy groups may not achieve that goal.  But today's booming economy is giving temps a window of opportunity for making their concerns something more than just a temporary concern.


Temp Groups Are Sprouting Up All Over

More than a dozen groups help the estimated 3 million temp workers in the U.S.  Here are a few:

Group founded by San Jose AFL-CIO chapter has a non-profit temp agency that plans to forgo profits to subsidize members' health care.

Campaign on Contingent Work
Boston center helps temps who come in with legal and employment problems and lobbies city and state for new laws for temps.
Carolina Alliance for Fair Employment
A South Carolina community group, has 1,000 dues-paying, low-wage temps.  It provides legal help and lobbies for legislation.
Temporary Workers Alliance
A northern New Jersey group, publishes a consumer guide listing local temp agencies that follow the Alliance's employment principles.


Permanent Rights for Temps?

At least 32 temp agencies in New Jersey have adopted
the Temp Workers Alliance's "Principles of Fair
Conduct."  A sampling:
Applicants are not given or refused assignments based on gender, race, age, national origin, religion, sexual orientation, size, or physical ability.  
  Adequate on-site orientation and training are provided for each assignment. 
  The agency does not require temp workers to register with it exclusively or prohibit temps from accepting a job directly with a client company.  
  The agency will not require client companies to pay an additional fee for hiring a temp as a
permanent employee.


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David L. West on the Controversy
Surrounding Contingent Workers ...

The issue of employers using highly skilled temps full time to keep costs down has been in the forefront of late, particularly with high profile class-action lawsuits against Microsoft and Atlantic Richefield (ARCO).  They are charged with misclassifying workers as temps to avoid offering benefits.  David L. West is executive director of the Center for a Changing Workforce in Seattle.  He is also communications director for Bendich, Stobaugh & Strong of Seattle, the law firm that recently won a ruling against Microsoft.  West was in New Jersey last week to speak with, among others, the Task Force on Temporary Workers in Hackensack.

Published in the July 19, 1999, edition of Business News

BUSINESS NEWS:  What are so-called common law employees or permatemps?

WEST:  These are employees who have been denied benefits such as pensions, 401(k)s, stock purchase plans, vacation pay, disability insurance and health care because the companies have misclassified them as temporary workers or leased employees or contingent workers.  Another word for it, permatemp, is someone who works at a company for more than a year doing the same thing that regular employees do, but still is not classified as a full-time employee.

BUSINESS NEWS:  Microsoft has been doing this?

WEST:  Forty percent of Microsoft's workers are contingent workers.  Bendich, Stobaugh & Strong has won three consecutive decisions against Microsoft, the most recent on May 12 (1999), in the U.S. Court of Appeals saying that Microsoft illegally denied benefits to what they called temporary employees and what we call permatemps.  As a result of the ruling, all of Microsoft's common-law employees are now eligible for benefits.  What is yet to be determined is how much the benefits will be going back to 1986.  We're also waiting to hear what Microsoft is going to do so they are not continuing the practice.

BUSINESS NEWS:  When was the first decision handed down?

WEST:  The first decision was in 1996 and held that these workers could participate in Microsoft's employee stock purchase plan.   Microsoft, during the late 1980s, had thousands of workers they called independent contractors.  Not only did they not provide benefits, they were not taking out taxes for them.  Microsoft admitted that in 1990, paid back taxes and said they would convert them into regular workers.  But they only converted a few, and the rest they hired through payrolling agencies.  Microsoft created a second tier of workers.   One class got the Cadillac package, many of whom have become millionaires.   The second class was not getting basic benefits, even though some of them were supervising Microsoft employees.  Microsoft has decided not to provide benefits for these permatemps because they do not care if they stay or not.  They think they are replaceable.  These are positions like writers, editors, web-page designers and software testers.  Microsoft considers them less important than the software developers, who they have to pay top dollar for.  Microsoft is engaged in this strategy to save money.

BUSINESS NEWS:  Saving money is a priority for most businesses.  Why shouldn't they call on staffing firms?

WEST:  We have no problem with legitimate, temporary employment.  That's where companies such as Kelly and Manpower recruit workers and provide them to companies on a short-term basis.  We have a problem with the situations where people are staying on the job for more than a year.  These are no longer temporary employees.  And the companies, we believe illegally, are saying they are not the employer, but rather the employer is a staffing agency, employee leasing company or a professional employer organization.  We feel this is a violation of federal common law definition of who is an employee and who is not.  It also raises a much larger policy question about the shifting of benefits costs from the employer to the public.  According to the Bureau of Labor Statistics, only 6% of temporary-help workers get health insurance.  And in the long-term, who's going to provide the retirement for these workers?

BUSINESS NEWS:  When did the issue surrounding contingent workers begin?

WEST:  The boom in contingent workers started in the 1980s.  There was a big push for downsizing in goverment and at the corporate level.  The trouble with downsizing is unless you're going to stop taking in business, somebody still has to do the work.  In many cases, companies would shift people off their payroll into another category under vendors.  They would hire them back through contractors and staffing agencies.  We have a lawsuit pending against ARCO, which had a hiring freeze in the late 1980s.  But they still needed to have the work done, so every time they hired somebody, they did so through a staffing agency.   Companies are continuing to announce layoffs as a part of restructurings and mergers.

BUSINESS NEWS:  Does the temporary help industry need more oversight?

WEST:  It used to be tightly regulated by states.   As labor market intermediaries, they had to meet certain standards for licensing and everything else.  But from the 1950s to 1970s, the industry was deregulated at the state level, so in addition to being agencies, they could also function as employers taking responsibility for the paycheck.  Advocates for temporary workers are looking at re-regulating the industry.

BUSINESS NEWS:  Are agencies and employers becoming more aware?

WEST:  Yes.  There are efforts by advocacy groups like the Task Force on Temporary Work in Hackensack to put out a Consumers Guide to Best-Practices Temp Agencies.  We encourage the industry to work with consumer groups to follow the necessary guidelines.  Employers need to be very careful about how they use temporary workers.  If they're going to keep somebody on-site for more than six months and supervise that worker, he should be on their payroll.  If they are using a staffing agency to keep them on somebody else's payroll, they are inviting trouble.