Under Title VII of the Civil Rights Act of 1964, when a company uses workers assigned by a temporary employment agency, both the temp agency and the company using its services are considered statutory employers. However, because the temp agency typically controls payroll matters, it rather than its client is usually deemed liable for legal issues resulting from problems with pay.

Earlier this month, the Fifth Circuit Court of Appeals made an exception to this general rules for a worker who claimed that he was denied overtime pay as a result of race discrimination at his assigned place of work. In Johnson v. Manpower Professional Services, Inc., the plaintiff was an African-American temporary worker assigned by Manpower to work as a recruiter for a manufacturing company. After initially being paid overtime, the plaintiff claimed that the manufacturer reclassified him as exempt from overtime requirements. He alleged that this decision contradicted the FLSA, and was also based on his race in violation of Title VII.

Only the Title VII portion of the appeal reached the Fifth Circuit. The manufacturer alleged that because Manpower made determinations as to proper pay of its employees, only the temp agency should be liable for alleged pay classification claims under Title VII. The Fifth Circuit disagreed, remanding the matter for trial on the plaintiff's Title VII claims.

The court noted that issues over Title VII liability between two statutory employers for pay discrimination rests of a hybrid economic realities/right to control test. While Manpower technically ran the plaintiff's payroll, in reality the manufacturer made all important decisions that resulted in his classification for overtime purposes. The manufacturer made the overtime classification decision, and simply passed this information along to Manpower for payroll purposes. As such, it cannot escape liability for alleged discriminatory motives behind this decision.

Employers often believe that temp workers obtained through outside agencies are independent contractors not entitled to protections under civil rights and labor laws applicable to employees. In almost all legal situations, these temp workers are considered employees of the company using their services as well as the temp agency. Companies using temp workers should make certain that their policies, procedures and practices for dealing with these workers are consistent with their applicable legal obligations.