Government investigations penalized two temporary staffing agencies in recent months for improper compensation and book-keeping practices.
The agencies have been ordered to pay back overtime wages that were mislabeled as "per diem" payments in May and June after undergoing investigations by the Wage and Hour division of the United States Department of Labor. The improper book-keeping allegedly prevented employees from collecting overtime and violated the Fair Standards Labor Act.
Temporary Agencies' Violations
Hutco Inc. is a six-branch temporary employment agency based in Louisiana. In May, the firm was ordered to pay back nearly $2 million in unpaid overtime wages to 2,267 employees after it tried to avoid doing so through dodgy record keeping. In June, a similar investigation by the Wage and Hour division resulted in Savard Marine Services, another Louisiana-based temporary staffing agency, paying back nearly $60,000 to 107 workers who were unjustly compensated for their overtime work.
Following the second investigation, Cynthia Watson, the southwest regional administrator of the Wage and Hour division, voiced her concerns about these similar violations that occurred within a month of one another.
"Unfortunately, we are seeing too many companies like Savard Marine Services utilizing the same evasive pay practice to lower overtime premiums," she said. "We are concerned that, in this competitive market, labor service providers are looking to each other for new and creative ways to cut labor costs."
Alternatives to Temporary Staffing
These dishonest practices could have negative effects on the company that receives these temporary employees. Not only does the company risk associating itself with negative press, but employee productivity may suffer when workers feel they may be cheated out of just compensation.
This recent trend among staffing agencies may signal more than just a competitive market, but an outdated business model. A company looking for contract labor may benefit from seeking out alternative employment solutions that pay employees based on performance rather than duration to ensure that their employees receive just compensation and produce productive labor.