A worker who seeks employment through a temporary agency is the most common type of leased employee. A temporary agency is a company that contracts with businesses to provide workers on a contingent basis. These temporary agencies handle all payroll, tax, and other human resources functions for the workers.

Other leased employees (other than workers from temporary agencies) are employed by employee leasing firms (also called “professional employer organizations”) that supply companies with an entire work force of employees for extended amounts of time, rather than on day-to-day basis. The leasing firm takes over all payroll, tax, and other human resources functions for the workers.

You may also hear the term “contingent worker” used to refer to temporary and leased employees, as well as other kinds of non-permanent work arrangements. The contingent workforce comprises many categories of workers, ranging from highly paid management consultants who are satisfied with their work arrangements to low-paid service sector workers who receive no benefits and would rather have full-time, permanent jobs.

Workers take temporary and other contingent jobs for a variety of reasons, both personal and financial. These reasons include workers’ preference for a flexible schedule due to school, family, or other obligations; need for additional income; inability to find a more permanent job; and hope that the position will lead to permanent employment.

Employers hire contingent workers for a number of legitimate reasons: to accommodate workload fluctuations, fill temporary absences, meet employees’ requests for part-time hours, screen workers for permanent positions, and save on wage and benefit costs.

However, some employers may use contingent workers for less praiseworthy reasons, such as to avoid paying benefits, reduce their workers’ compensation costs, prevent workers’ attempts to unionize, or allow them to lay off workers more easily. When a workplace uses contingent workers, it shifts costs traditionally borne by employers — such as health insurance, pensions, and job training — to both individual workers and taxpayers. From the employer’s viewpoint, treating workers as non-employees immediately saves payroll costs ranging from 15 to 30%.

Temporary workers and other leased employees are covered by the same employment laws as regular workers. However, because of the short-term, often project-oriented nature of their work, temporary workers are sometimes misclassified as independent contractors and, as a result, denied their rights as employees. Whether or not you have been misclassified will depend on whether you perform the same duties as regular workers.

Usually, a temporary agency/employee leasing firm will put you on its payroll and make the necessary payroll deductions on your behalf, as well as make the employer’s contribution to these taxes. However, if there is a violation of these payroll requirements, a court could determine that both the employer and the temporary agency/leasing firm are legally liable for the failure to pay you correctly. Likewise, if you are not paid overtime or have other wage and hour problems (such as not getting a final paycheck or vacation pay), the temporary agency/leasing firm and the employer may both be legally liable. For more information, see our pay and hours section.

It depends. Temporary workers and other leased employees can receive unemployment insurance if they are otherwise eligible to receive it (e.g. they were not fired for misconduct, are actively seeking employment, etc.).

However, you may have difficulty qualifying for unemployment insurance because you may not have worked consistently enough to establish the requisite “base period” of wages needed to make you eligible. See workplacefairness.org for more information on unemployment insurance. 

Yes. Temporary workers/leased employees are generally eligible to receive workers’ compensation, usually through the temporary agency/leasing firm by whom the worker is employed.

A temporary agency/leasing firm can be held liable as an employer if it discriminates in providing job opportunities (e.g. job placement, advertisements, employment counseling, and job referrals) to the employee. Employers that lease employees have also been held liable for employment discrimination that occurs in the workplace.

Using a “Right to Control” test (similar to the test used in determining independent contractor status), employers that lease employees have also been held liable for employment discrimination, including harassment, that occurs in the workplace. If you are being harassed by an employee of the employer, you should complain to both the employer (following any published rules or policies) and also to the agency (again following any rules or policies of the agency).

A staffing firm is required to inform its client (the employer) of any harassment complaints and insure that the client investigates promptly and takes corrective measures. Additionally, it is against the law for the staffing firm to replace you because you complained of harassment, even at the client’s request, but the agency may also be able to offer you the opportunity to take a different assignment at the same rate of pay/benefits if you would prefer that to remaining at your current job placement.

Typically, a staffing firm is considered your prospective employer during the application process because it has not yet identified the client for whom you will work. In such cases, only the staffing firm is obligated to provide reasonable accommodation through the application process. If a staffing firm and a client are joint employers, both are responsible for providing reasonable accommodation, absent undue hardship, if there is notice of the need for accommodation or if the need for accommodation is obvious. See workplacefairness.org for more information on disability discrimination. 

Yes. The Occupational Safety and Health Act (OSHA) requires employers to maintain a safe and healthy workplace for their employees. The act does not distinguish contingent workers from other employees and covers contingent workers except for independent contractors and other self-employed workers. The party (whether the recipient employer or temp agency/leasing firm) responsible for unsafe conditions in a workplace will be liable for OSHA violations. See workplacefairness.org for information on workplace health and safety.

Yes, as long as you meet the other requirements for coverage, discussed in more detail on workplacefairness.org. Under FMLA, temporary/leased employees are considered to be jointly employed by the leasing firm and the recipient employer, and must be counted by both the leasing firm and the recipient employer in determining employee coverage and employer liability.

As the primary employer of the worker, the temporary agency/leasing firm is responsible for giving required notice to the employees, providing FMLA leave, and maintaining health benefits. In addition, the temporary/leasing agency is primarily responsible for restoring the employee to the same or an equivalent job.

However, the recipient employer is also responsible if it replaces the employee with another leased employee from the same leasing agency. The recipient employer is also prohibited from interfering with the temp/leased employee’s rights under the act or retaliating against an employee for asserting those rights.

Temporary workers are entitled to receive retirement benefits if they satisfy the 1000 hour rule. The “1000 hour rule” refers to a federal regulation under the Employee Retirement Income Security Act (ERISA) that generally states a temporary employee must vwork at least 1000 hours within a 12-month period to be elibible to participate in a company’s retirement plan, meaning they can start contributing to their retirement benefits; this rule essentially defines a “year of service” for eligibility purposes. 

• National Employment Law Project
• Freelancers Union