If you manage a restaurant, retail store, or service business, you've probably hired temporary employees to cover a rush, fill in for someone on leave, or handle a special project. It seems straightforward: bring in extra hands for a limited time, no strings attached. But the reality is far more complex than most managers realize.
The U.S. Department of Labor defines a temporary employee as someone hired for one year or less with a specific end date. That sounds simple enough. What many businesses don't know is that hiring temporary workers creates a web of legal obligations around safety training, wage compliance, potential joint employer liability, and benefits eligibility that can catch unprepared managers off guard.
This article is for informational purposes only and does not constitute legal advice. Employment laws vary by state and situation. Consult with an employment attorney or HR professional for guidance specific to your business.
What Makes Someone a Temporary Employee?
A temporary employee is fundamentally different from other worker classifications. Unlike seasonal employees who work during predictable busy periods or part-time employees defined by weekly hours worked, temporary workers are classified by duration of employment. Consider how long they're employed, not how many hours they work per week.
According to the Department of Labor, temporary employment has these key characteristics:
- Duration of one year or less with a clearly defined end date
- Cannot be rehired for more than two consecutive years by the same employer under federal law
- Can work full-time or part-time hours. The "temporary" status relates to duration, not weekly schedule
- Specific end date tied to project completion, return of a permanent employee, or predetermined calendar date
The distinction matters because misclassifying workers carries severe penalties. Companies have paid millions in fines. For example, Uber paid $100 million in New Jersey alone for misclassifying drivers, and Nike faced potential fines exceeding $530 million for allegedly misclassifying thousands of temporary office workers.
The Two Ways Businesses Hire Temporary Workers
There are two primary ways shift-based businesses bring in temporary help, each with dramatically different legal implications:
Direct Hire
You recruit, hire, and pay the temporary employee directly. You handle all payroll: taxes, workers' compensation insurance, and compliance obligations. You have full control, but also full responsibility for everything from wage and hour compliance to workplace safety.
Through a Staffing Agency
A temporary staffing agency recruits, hires, and pays the worker, then assigns them to work at your location. This is where things get complicated, because OSHA explicitly states that "the staffing agency and the staffing agency's client (the host employer) are joint employers of temporary workers and, therefore, both are responsible for providing and maintaining a safe work environment."
This joint employer status means you can't simply hand off responsibility to the agency. Both parties share legal obligations for the worker's safety, training, and in many cases, wage compliance.
The Critical Safety Risk Most Managers Miss
Here's a sobering statistic: According to research from the National Employment Law Project, temporary workers face increased risk of workplace injury compared to permanent employees in similar positions. They're often placed in hazardous jobs without adequate safety training.
The Bureau of Labor Statistics reported that in 2023, private industry employers reported 2.6 million nonfatal workplace injuries and illnesses. Industries that frequently use temporary workers, including accommodation and food services, retail trade, and manufacturing, showed significant injury rates.
The Joint Liability Trap
If you hire employees under a Professional Employer Organization (PEO) or use a staffing agency, both you and the agency can be cited by OSHA for safety violations. OSHA's position is clear: "OSHA could hold both the host and temporary employers responsible for the violative condition(s)—and that can include lack of adequate training regarding workplace hazards."
This creates practical problems:
- Who provides safety training? General safety training might come from the agency, but site-specific hazard training (how to use your equipment, where emergency exits are, food safety protocols) is your responsibility
- Who provides personal protective equipment? Neither party can require the worker to purchase their own
- Who's responsible for recordkeeping? If you supervise the worker day-to-day, you're typically responsible for recording workplace injuries on OSHA Form 300
The best practice is to spell out these responsibilities in writing before the worker starts. OSHA specifically recommends that "the temporary staffing agency and the host employer set out their respective responsibilities for compliance with applicable OSHA standards in their contract."
The 1000-Hour Rule Nobody Warned You About
Here's where temporary employment gets expensive if you're not paying attention. Under the Employee Retirement Income Security Act (ERISA), any employee—including temporary workers—who works 1,000 hours or more in a 12-month period must be allowed to participate in your company's retirement plan if you offer one.
One thousand hours translates to roughly 20 hours per week for a year. For many shift-based businesses, this threshold sneaks up quickly:
- A temp covering lunch and dinner shifts might work 25-30 hours weekly
- Someone filling in for maternity leave over several months easily hits 1,000 hours
- A seasonal employee hired for "busy season" who stays on a bit longer crosses the threshold before you realize it
The 2019 SECURE Act and its 2024 updates created additional requirements: long-term part-time employees (which includes many temps) who work at least 500 hours annually for three consecutive years must be allowed to make elective deferrals to 401(k) plans.
The trap: Many businesses don't track temporary employee hours carefully enough to catch when someone approaches these thresholds. By the time you realize it, you may already be out of compliance.
Wage and Hour Compliance: Where the Lawsuits Come From
The Fair Labor Standards Act (FLSA) applies equally to temporary and permanent workers. This means:
- Overtime pay for any hours over 40 in a workweek at 1.5 times regular rate (for non-exempt workers)
- Minimum wage requirements (federal, state, or local—whichever is highest)
- Meal and rest breaks as required by state law
- Timely payment of wages
In a joint employer situation with a staffing agency, both parties can be held liable for wage violations. The Department of Labor doesn't care who you thought was responsible; if the worker wasn't paid correctly, both entities may face penalties.
DOL penalties for wage violations include:
- Back wages owed to workers
- Civil penalties of up to $1,000 per violation
- Potential criminal penalties for willful violations
- Liquidated damages equal to the back wages owed
Some states have passed specific protections for temporary workers. New Jersey's Temporary Workers' Bill of Rights, enacted in 2023, requires equal pay for equal work. In other words, temporary workers must receive the same average rate and benefits as permanent employees doing substantially similar work.
Workers' Compensation: The Insurance Nightmare
When a temporary worker gets injured at your business, whose workers' compensation insurance covers it? The answer isn't as clear-cut as you'd think.
If you hired the worker directly, your own workers' comp policy covers the temp just like any other employee. But with staffing agencies, things get murky. Theoretically, the agency's policy covers their employees. However, you can still be sued by the injured worker if there are coverage gaps or disputes about who was supervising the worker when the injury occurred.
Critical steps to protect your business:
- Always get a certificate of insurance from the staffing agency showing current workers' comp coverage
- Consider asking to be named as an alternate employer on their policy via endorsement
- Review your own general liability policy for exclusions related to temporary workers
- Ensure you have "Coverage for Injury to Leased Workers" endorsement if using temps regularly
The Real-World Problems Shift Managers Face
Beyond the legal framework, here are the practical challenges businesses report with temporary employees:
1. The Training Time Crunch
You need help now, but a temp worker doesn't know your systems, layout, or procedures. They make mistakes while learning, which can mean:
- Wrong orders in restaurants
- Incorrect cash handling in retail
- Safety violations they didn't know about
- Slowing down your experienced staff who have to train them
In industries with complex safety requirements or food handling protocols, inadequate training of temps creates serious liability risks. OSHA data shows that lack of adequate training is a leading factor in temporary worker injuries.
2. The Scheduling Black Hole
Temporary workers often juggle multiple gigs or have limited availability. You might hire someone for flexibility, only to find they're unreliable or have conflicts with other jobs. Unlike permanent employees who prioritize your schedule, temps may treat your shifts as secondary, leading to no-shows and last-minute cancellations.
3. The Permanent-Temp Creep
You hire someone "temporarily" but they're excellent, so you keep extending their assignment. Suddenly, they've been with you for 11 months and you're approaching both the one-year limit and the 1,000-hour benefits threshold. Now what? Federal law says you can't hire the same temporary worker for more than two consecutive years without treating them as a regular employee with full benefits.
4. The Communication Gap
In joint employer situations, critical information falls through cracks between you and the staffing agency. The agency doesn't know about the hazard in your back stockroom. You don't know the worker has a relevant injury history. The worker doesn't know who to report a safety concern to. These gaps create liability for everyone.
5. The Customer Service Impact
Temporary workers don't have the same investment in your business as permanent staff. Customers can tell when they're being served by someone who doesn't know the menu, can't answer questions about products, or lacks familiarity with company policies. For businesses built on customer relationships and repeat visits, this matters.
How This Differs from Seasonal and Part-Time Workers
Understanding the distinctions helps you classify workers correctly:
Seasonal Employees: A subset of temporary workers tied to predictable seasonal demand (holiday retail rush, summer tourism, harvest seasons). They're still temporary, but the pattern is recurring and the role is considered a seasonal job. Many temporary workers are NOT seasonal. For example, someone covering parental leave or a special project is temporary but not seasonal.
Part-Time Hours: Refers to how much someone works (typically under 30-35 hours per week), not how long they work for you. A temporary employee can work full-time or part-time hours. The classifications overlap but measure different things. A temp working 40 hours/week is full-time temporary. A permanent employee working 20 hours/week is part-time permanent.
Unemployment: When temporary employment ends on its scheduled end date, the worker may be eligible for unemployment benefits depending on state law, their total work history, and whether they were employed through an agency or directly. This varies significantly by state.
Best Practices for Managing Temporary Employees
Based on guidance from OSHA, DOL, and employment law experts, here's what shift-based businesses should do:
Before Hiring
- Define the assignment clearly: Specific start date, end date, and reason for temporary status. Put it in writing.
- If using an agency: Review their contract carefully. Ensure safety responsibilities, training obligations, and workers' comp coverage are explicitly stated. Don't sign generic contracts that leave liability questions unanswered.
- Check your insurance: Verify workers' comp and general liability coverage extends to temporary workers.
- Track hours from day one: Set up a system to monitor when temps approach 1,000 hours or one year of employment.
During Employment
- Provide the same safety training and equipment as permanent employees. Document all training provided.
- Supervise fairly: Don't treat temps as expendable or assign them only the worst tasks. This creates resentment, safety issues, and potential discrimination claims.
- Maintain clear communication: If using an agency, establish a point person who coordinates between your business and the agency.
- Document everything: Keep records of hours worked, training provided, and any incidents or performance issues.
At Assignment End
- Don't let assignments drift: If a temp's end date arrives and you want to extend, do it formally with a new written agreement rather than continuing on without documentation.
- Exit properly: Return any equipment, complete final paperwork, and if appropriate, offer to bring them back for future needs within legal limits.
- Consider conversion: If you want to hire the temp permanently and they're from an agency, expect to pay the agency a conversion fee (typically 15-25% of annual salary). Budget for this upfront.
Be sure to consult an employment attorney if:
- You're structuring a temporary worker program for the first time
- A temp has been injured and there are coverage or liability questions
- You're using temps extensively and worried about joint employer status
- A temp or agency has made a claim about wages, safety, or discrimination
- You want to convert temps to permanent employees and need to negotiate with an agency
- State-specific temp worker laws apply to your situation (like New Jersey or Illinois)
Employment classification is fact-specific and complex. What works for one business may not work for another, even in the same industry. The IRS provides Form SS-8 that employers or workers can file to request an official determination of worker status if there's uncertainty.
Using Temporary Workers Responsibly
Temporary employees can be a valuable resource for covering short-term needs in shift-based businesses. But "temporary" doesn't mean "simple." Between joint employer liability, safety training requirements, the 1,000-hour rule, and complex wage and hour compliance, temporary workers create risks that many managers don't anticipate.
The businesses that succeed with temporary workers are those that:
- Understand they have the same basic obligations to temps as to permanent employees
- Put agreements in writing and don't rely on informal arrangements
- Track hours and benefits eligibility carefully
- Take safety training seriously for every worker, regardless of how long they'll be there
- Work with reputable staffing agencies who understand and share compliance responsibilities
Temporary employment is about the duration of the relationship, not an excuse to avoid normal employer obligations. Get it wrong, and "temporary" help can lead to permanent legal problems.
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