Temporary Versus Contract Employees Under the New DOL Rule

Temporary workers can offer flexibility while ensuring Fair Labor Standards Act compliance. 

On March 2024, the new U.S. Department of Labor (DOL) 2024 Independent Contractor Rule, took effect. This guidance serves as a compass for distinguishing between employees and independent contractors under the Fair Labor Standards Act (FLSA). This rule replaces its predecessor, the 2021 Independent Contractor Rule, and places a spotlight on what's known as the "economic reality" test to assess worker status.  
 
The new rule scrutinizes multiple factors to decide whether a worker is an employee or an independent contractor. It looks at the investments made by the worker and the employer, the permanence of the relationship, the nature and degree of control, whether the work performed is integral to the business, and the skill required for the initiative. 
 
In some cases, under the new rule, contractor workers are reclassified as employees, with the protections that come along with it. However, companies may have work cycles that ebb and flow or need the flexibility of hiring workers for specific projects or time periods.

How Do Temporary Staffing and Augmented Staff Fit into the FLSA? 

Consider this scenario:   A sudden increase in demand means additional support is needed. The hiring manager is uncertain how long the demand will last and doesn’t want to hire more full-time employees until it’s clear whether the need is cyclical. The hiring manager would need to work with HR to apply the “economic reality test” to decide the right classification for the job opening to ensure compliance. 
 
The new classification rules make using a temporary staffing agency a safer choice to avoid FLSA issues. 

Temporary workers are usually treated as W-2 employees by staffing firms. That means they're already covered by existing labor laws, scoring protections like minimum wage, overtime pay, and workplace benefits. So, when it comes to the new rule, these temporary workers are already where they need to be — classified as employees, not as independent contractors. 

For companies, the advantages of using temporary staffing include: 

• Compliance: With the spotlight on proper classification under the new rule, tapping into temporary staff from reputable agencies ensures adherence to FLSA requirements.
  
• Risk Mitigation: By entrusting staffing firms with the responsibility of classification, payroll management, and benefits administration, companies mitigate the risk of misclassification and the potential legal repercussions that come with it. 

• Flexibility: One of the standout advantages of temporary staffing is its inherent flexibility. Businesses can swiftly adjust staffing levels in response to fluctuating demands without the burden of long-term commitments, ensuring optimal resource allocation. 

• Expertise: Temporary staff often bring a wealth of specialized skills and experience, enhancing project outcomes and overall productivity. Their expertise can fill critical skill gaps and inject fresh perspectives into the workforce. 
• Cost Control: Through staff augmentation, businesses can scale their workforce up or down as needed, aligning staffing levels with project requirements and effectively managing costs without compromising productivity or quality. 

Navigating the complexities of the 2024 Independent Contractor Rule can be challenging for any business, but it doesn't have to be.  

As a seasoned staffing agency, Premier Staffing Solution can provide valuable assistance in finding the right staffing solutions for an employer's business needs. By partnering with Premier, companies can take advantage of the flexibility, expertise, and risk mitigation that temporary staffing and staff augmentation provide, and ensure compliance with the FLSA, and stay focused on business goals. 

Could temporary workers enhance your workforce?  Contact us to discuss your needs and learn about our flexible solutions. 

PSS cannot and does not provide legal advice. It’s important to consult with qualified counsel before adopting any new policies. It’s also your responsibility to determine whether legal review of work product is necessary prior to implementation.