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Should Temp Agencies Compensate Workers for Interview Time?

Prior to the economic downward spiral, most companies willingly paid travel expenses for candidates to interview for positions. Whether transportation, meals or overnight hotel accommodations, reimbursement costs were part of the recruitment budget. Changes in the market has tightened budgets and increased the pool of local candidates. Increasingly, companies are declining to pay travel costs for candidates.

Nevertheless, this raises questions for temporary staffing agencies who are also adjusting to changing dynamics in the job market. As more companies rely on staffing agencies for contingent workers and direct-hire placements, should candidates expect to be reimbursed for their interview time?

Generally, temporary employees are placed on assignments without going through an interview process. There are occasions, however, where employers want to interview temps before they begin working. Even though these are not permanent positions, temps are asked to meet with supervisors for various reasons. Some employers may want to discuss the important of a project. Others simply want to meet workers face-to-face before committing to a contract.

It might be reasonable to expect reimbursement for interviewing expenses in direct-hire situations. However, temporary contract positions are not given the same level of consideration by employers and staffing agencies. Enter court decisions and some employers may begin to see an increase in using staffing agencies.

When agencies reimburse temporary employees for interview time, they might try to recover those costs by increasing their rates. For some, this could create a conflict between the need to recruit sharp workers for various positions and to offer competitive rates.

Who should bear the cost of interviewing varies among state laws, which affects consistent practices for the staffing industry? Since state laws vary, individual staffing agencies must determine what is legally required for interview time compensation. The degree of control that staffing agencies have over temporary employees may play a huge factor in determining who is responsible for reimbursement costs. Additionally, agencies will need to decide whether preparation time and post-interview time are also reimbursable expenses.

General Rules for Reimbursing Interview Expenses

Typically, reimbursing candidates for travel and interview time depends on the company, the type of job and the candidate. Reimbursing candidates was more common when fewer candidates were available with a specific skill set. Not only did the economy change budget earmarks for many companies, but it also changed the candidate pool.

In a competitive job market, staffing agencies and employers may have multiple applicants for every position. With a sufficient volume of applicants to choose from, employers are reluctant to recruit out-of-town candidates. There is simply no incentive to recruit candidates from other cities or states and pay for their expenses. If they do, travel expenses are generally the responsibility of the candidate.

Since there is an exception to most rules, this may change for staffing agencies that recruit top-level positions. Agencies and/or employers are more likely to make travel arrangements or reimburse major expenses. Likewise, a limited pool of candidates for essential positions may prompt employers to pay to interview non-local candidates.

Recent Settlement Affecting Reimbursement Rules

In September 2011, a $2.75 million lawsuit was settled between Kelly Services, Inc. and several plaintiffs in California regarding interview time compensation. The plaintiffs claimed that Kelly Services should reimburse them for time spent interviewing with Kelly clients. Additionally, the plaintiffs argued that they should be reimbursed for interview prep and travel time.

Reversing a previous ruling, the court decided that the level of control the Kelly maintained over temporary employees required a change. Under the settlement, the court ruled that interview time was compensable under California state law. Kelly's control over scheduling and contact with employees during the interview process led to the ruling. This ruling does not require Kelly to reimburse temporary employees for commuting time or preparation time. The judgment is being appealed.

What This Could Mean for Temporary Staffing Agencies

Since the suit against Kelly began in 2008, temporary employees with other staffing agencies began to file similar lawsuits. Both current and former temporary employees in California began seeking reimbursement for unpaid wages and interview time with various clients. This led to another class action filing in August 2010.

Basically, this additional lawsuit was filed under the wage payment law for California. Plaintiffs charge that staffing agencies failed to pay for interview time with clients. If state courts uphold or adopt the court's decision in the Kelly lawsuit, staffing agencies may face an unprecedented number of claims for unpaid wages. They will have to reimburse temporary employees for any time spent interviewing for assignments.

The only way staffing agencies can avoid these costs is to prove that temp employees were not under their control during the interview process. Applicable minimum wage rates in California will determine how much agencies will have to pay. Results of these conditions could cause most staffing agencies to limit interviews with clients before assignments begin.

Some staffing agencies might choose to stop allowing temps to interview before an assignment begins. Another repercussion from this ruling is for staffing agencies to increase client rates to cover the additional expense. This business decision may fluctuate based on client need. For instance, those who insist on interviewing temps for brief assignments will pay a higher rate than those who do not.

Both cases attempts to advance the concept that temporary employees interviewing with clients are selling staffing agencies. By extension, they are working for the staffing agencies competing for assignments. This might be a helpful theory based on California law. However, other states might experience its impact due to the federal Fair Labor Standards Act. Essentially, FLSA links benefits for the employer with time worked by employees. Staffing agencies would not be exempt.

Traditionally, the employment relationship between staffing agencies and temporary employees continue during idle periods. This industry standard could possibly prevent agencies from asserting that candidates are not employees during a client interview. However, this contradicts claims against termination if staffing agencies argue that discharge does not occur whenever a temporary assignment ends.

Exposure for Staffing Agencies

Issues raised in the California cases do not pose a high financial risk as other types of wage/hour claims. Typically, interviews occur once before an assignment begins and does not continue throughout the assignment duration. Furthermore, interviewing may involve several candidates with the total interview time relatively small compared to other wage/hour issues.

Putting on and taking off protective gear, meal breaks and asking employees to work off-the-clock remain contentious matters. Wage payment violations in California can create other employment law hassles and penalties for pay stub inaccuracies. Exposure for staffing agencies become magnified more in these issues and may increase plaintiffs' potential for successful litigation.

What Staffing Agencies Can Do

Compensating temporary employees for interview times is an emerging issue with inconsistent resolutions. Until a uniform law or industry practice is established, staffing agencies must think of creative solutions that minimizes their exposure to legal action. Short of not permitting client interviews with temporary employees, staffing agencies may have one of two strategies at their disposal.

One alternative strategy is simply to pay temporary employees for client interviews. Currently, employment law does not forbid voluntary wage payments that are not legally required. Since temps are doing something for pay – when the interview is for a temporary assignment – agencies could pay the state minimum wage rate. Staffing agencies would need to disclose the rate of pay and temporary employees must agree to the pay before an interview for this strategy to work.

Pressure from competitive agencies and expectation of clients may suppress billing clients for interview time. Staffing agencies may list the reimbursement as a business expense. If clients agree to pay this expense, requests for interviews with temporary workers may decline.

In some situations, staffing agencies might worry that a change in strategy to pay for client interviews is an admission of past improper practices. There are limitations to how far back wages can be recovered, which decreases agency exposure. Agreeing to a minimum wage rate for interviews helps to remove the risk of a court ruling against the agency. It is less likely that a court would make individual rulings for each employee's last or typical pay rate as the measure for what is owed.

The other alternative strategy is to wait for more favorable controlling court opinions. While waiting, staffing agencies could make operational changes that would make plaintiff wins more difficult. For instance, agencies may abandon language such as “employed between assignments” in any documents that are shared with temporary employees. Agencies may also consider having employees sign waivers or an acknowledgement of a nonpayment policy for interviews.

By emphasizing that client interviews are voluntary, staffing agencies can reduce the degree of control over temporary employees. The onus is on employees whether they want to commit the time to interview for temporary positions.

Historically, very few staffing agencies have paid temporary employees to interview with clients. Until a final answer on interview compensation is reached, staffing agencies must look to state laws and business practices for the best solution. As the use of temporary workers continue to increase, dynamics of the job market could lead to automatic adjustments.