Temp Agencies are common in the current economic environment as Companies are not ready to hire full time. The result is a temp employee may have two employers to chase if one of them violates his or her employee rights.
The legal theory is known as the "Joint Employer Doctrine" and it holds that a temporary employer and a "client" employer will both be liable under the anti-discrimination and anti-retaliation laws. The reality is that the "client" employer provides the location, equipment, and supervision where the work is done. The "client" also has substantial influence over who is assigned and who remains as a "temporary employee" even if not technically hiring or firing the employee. This degree of control makes the "client" employer a co-employer even though the temp agency selects, assigns, pays, and provides benefits for the employee. The result is that the "client employer" saves on administrative and tax costs, acquires more flexibility in controlling the size of its work force, but really gains no advantage in being immune from suit for discrimination or retaliation.
Here is a list of reasons for employees to be glad to have two employers:
1) The FMLA [Family Medical Leave Act} requires an employer to have 50 or more employees. The two employers together may have the requisite total number.
2) Both must comply with the California and Federal labor laws, concerning rest breaks and meal breaks, and compliance with regulations included within the Private Attorney General Act [PAGA], such as seating for retail workers.
3) The employee may trigger access to Employment Practices Liability Insurance if one of the employers is covered.
4) Arbitration may not be required if both employers have not signed an arbitration agreement taking the case away from a Jury.
5) The Leasing Company will likely have an indemnity contract requiring it to pay all liability, costs, and fees incurred by the "client" company, giving it a greater incentive to settle.
6) If the "Temp" employee in fact has been working for the "client" employee for many months, but not receiving the same benefits as "full time, permanent" employees, federal law [ERISA] has been interpreted by the courts to require the same benefits to be provided to the "temps" or "leased" employees.
7) If either employer has failed to provide and enforce anti-harassment and anti-discrimination policies, the other employer will be jointly liable for the failure.
8) If one of the employers is liable in punitive damages, the other may be jointly liable to pay the full measure of damages.
Bottom line: "Leased" or "temp agency" employees have many points of leverage to bring when suing for retaliation, harassment, or discrimination.