Navigating Labor Shortages in the Food Industry and the Effects of Relying on Contingent Workers
The Situation: Faced with a tight labor market, U.S. employers in the food industry are increasingly relying upon temporary labor to meet their staffing needs.
The Result: Temporary labor presents additional legal and labor relations challenges for food industry employers, including unforeseen joint-employer liability and an increased risk of unionization among nontemporary employee populations.
Looking Ahead: Food industry employers that utilize temporary labor must be cognizant of the legal and labor relations risks temporary labor presents and take meaningful steps to mitigate those risks.
From farm and food processing to food service, the global food industry has been rattled by labor shortages. The U.S. food industry has increasingly responded by relying on temporary labor to fill workforce gaps. Temporary labor is costly, with high markups on workers' hourly rates, high turnover, and reduced productivity. Temporary labor also poses significant legal and labor relations risks that food industry employers should take steps to mitigate.
Principal among those risks is joint-employer liability. Under the joint-employer doctrine, both the staffing agency and user of temporary labor may be held jointly and severally liable for employment law violations involving temporary employees, including under antidiscrimination, wage-hour, wage payment, employee representation, employee privacy, and other employment laws.
Although the definition of "joint employer" varies based upon applicable law, generally speaking, a staffing agency and user of temporary labor may be found to be joint employers if the user of temporary labor exercises sufficient control over temporary employees' terms and conditions of employment. If found to be a joint employer, a user of temporary labor may find itself saddled with unexpected litigation costs, fines, penalties, and other liabilities arising from the conduct of its staffing agency over which it lacked oversight or control, such as liabilities arising from verifications of employment eligibility and other pre-employment screening practices. Oversight and training gaps in temporary worker populations can also create wage-hour compliance risks under meal, break, and rest period laws, predictive scheduling laws, and other federal, state, and local laws.
Beyond joint-employer liability risks, temporary workforces often experience greater rates of injury due to temporary workers' inexperience, lack of training, and mistakes, which creates occupational health and safety compliance risks. Increased risk of injury, together with high turnover (among other factors), can feed dissatisfaction among both temporary and full-time employees, which, in turn, may increase support for union organizing.
A proactive approach to managing temporary workforces is necessary to effectively mitigate these risks. Employers in the food industry should consider the following:
- Closely Review Agreements with Staffing Agencies. Employers who use temporary labor should regularly review agreements with their staffing agencies from both a legal and human resources perspective. At a minimum, these agreements should: (i) delineate the parties' oversight responsibilities with respect to the temporary employee population; (ii) include indemnity structures that allocate liabilities for legal violations consistent with the business's risk tolerance and the parties' understanding; (iii) contain market representations with respect to the staffing agency's compliance with labor and employment laws; and (iv) utilize rate structures and temp-to-hire arrangements that meet the employer's recruiting and staffing needs.
- Consider Pre-Employment Screenings. Employers should consider requiring their staffing agencies to perform pre-employment background checks, drug tests, and employment verification (including E-Verify) for all temporary workers supplied by the staffing agency. If an employer elects to utilize these pre-employment screening services, their staffing agreements should: (i) memorialize the staffing company's obligations and (ii) allocate liability for potential legal violations.
- Regularly Review Policies Applicable to Temporary Employees. At least annually, employers should review policies applicable to temporary workers—including safety and health policies—to ensure they are consistent with applicable labor and employment laws. Many employers also conduct privileged safety compliance audits to mitigate occupational health and safety risks and/or wage payment practice audits to evaluate and, if necessary, improve compliance with applicable employment laws.
- Utilize Reputable Staffing Agencies. Reputable staffing agencies will carry workers' compensation, general liability, and employment practices liability insurances with sufficient minimum limits to cover employment-related liabilities. Insurance requirements, including minimum levels of coverage, should be memorialized in the parties' staffing agreement. It is also a good practice for employers periodically to perform targeted litigation searches to determine whether their staffing agencies have been named and/or found liable in any employment litigation, including searches for National Labor Relations Board charges, Occupational Health & Safety Administration citations, and discrimination claims.
- Regularly Evaluate Recruiting and Retention Competitiveness. Temporary worker populations can have a marked impact on full-time employee populations. Employers should consider conducting wage benchmarking, employee satisfaction surveys, exit interviews, and unionization risk assessments among their full-time employee population to evaluate recruiting and retention competitiveness. Proactively engaging employees on workplace issues should be a priority. To this end, front-line supervisors and business leaders regularly should receive labor-management relations training to ensure they know how to effectively engage employees to ensure compliance with applicable labor and employment laws.
Three Key Takeaways
- In response to a tight labor market, employers in the food industry have increasingly relied upon temporary labor to fill gaps in their workforces.
- The use of temporary labor comes with attendant legal and business risks; it is not only costly but also presents potential joint-employer liability and labor relations challenges.
- Now is the time for food industry employers who utilize temporary labor to review proactively their staffing agency relationships and manage their temporary workforces.