Wage order coverage for temporary help agency employees follows the client's industry, not a default order

DEPARTMENT OF INDUSTRIAL RELATIONS
DIVISION OF LABOR STANDARDS ENFORCEMENT
LEGAL SECTION
45 Fremont Street, Suite 3220
San Francisco, CA 94105
Telephone: (415) 975-2060
Fax: (415) 975-0766

MILES E. LOCKER, Staff Counsel

December 24, 1997 Also Sent by Fax
to (213) 620-1398

Richard J. Simmons
Sheppard, Mullin, Richter & Hampton
333 South Hope Street, 48th Floor
Los Angeles, California 90071-1780

Re: Determining the Applicable Wage Order
for Employees of Temporary Help Firms

Dear Mr. Simmons:

This is in response to your letter of September 29, 1997, to
Labor Commissioner Jose Millan, concerning the above-referenced
topic. In that letter, you state that it is your "understanding
that the Division of Labor Standards Enforcement (DLSE) has
historically maintained the enforcement position that employees
of temporary help firms are governed by the provisions of Wage
Order 4, irrespective of the industry of the employer to which
they are temporarily assigned." For the reasons set forth below,
we have determined that contrary to your assertion, this has not
been DLSE's historic enforcement position, and that this will not
be DLSE's enforcement position in the future.

Your letter fails to cite any documentary support for what
you contend to be the DLSE's historic enforcement position. In
fact, we have been unable to locate any opinion letters,
interpretive bulletins, management memos, former operations
manual provisions, or any other stated expression of such an
agency policy. The DLSE pamphlet, "Classifications - - Which IWC
Order?", published in 1986, makes no mention of any special
policy for temporary help agencies. Moreover, an examination of
the "Wage and Hour Manual for California Employers" (5th edition,
1994), which you authored, contains no mention of any DLSE policy
concerning the coverage of IWC orders unique or specific to
temporary help firms. Furthermore, my conversations with past
and present DLSE supervisors and managers have failed to disclose
the existence of any such "unwritten policy." In short, you are
mistaken in your beliefs concerning DLSE's historic enforcement
position in this area.

In fact, DLSE's enforcement position has always been, and
remains, that employees of a temporary help agency are covered by
the Industrial Welfare Commission order which applies to the
industry in which these temporary employees are assigned. For
example, if a temporary help agency assigns one of its employees

Richard J. Simmons
December 24, 1997
Page 2

to a manufacturing company as an assembly line worker, that
employee is covered by IWC Order 1, just like those other
assembly line workers who are permanently employed by the
manufacturing company. As Order 1 is an industry-wide order,
rather than an occupational order, it covers all of the employees
who are employed in that industry, regardless of their
occupations. Thus, Order 1 applies not only to the manufacturing
company's assembly-line workers, but also to its clerical
employees. A temporary help agency that sends clerical employees
on an assignment to work for a manufacturing company must,
therefore, apply Order 1 to the work performed by these clerical
employees.

Of course, if a temporary help agency assigns an employee to
work at a business that is not covered by an industry-wide order,
the employee will be covered by the appropriate occupational wage
order. As most temporary help agencies seem to specialize in
sending out employees whose work is covered by IWC Order 4 to
businesses that are not covered by any industry-wide order, those
temporary employees are covered by Order 4. But if that same
employee is sent out by the temporary help agency to perform
clerical services for an amusement park covered by Order 10, an
industry-wide order, that employee is then covered by Order 10.
To do otherwise would result in applying different wage orders to
employees who are performing similar work in the same workplace,
something we do not believe the IWC intended.

Moreover, to enshrine IWC Order 4 as a "default order" for
employees of temporary help agencies, irrespective of the work
performed and the industry in which this work is performed, would
encourage employers covered by industry wage orders that continue
to provide for daily overtime after December 31, 1997 to change
their method of staffing so as to come under the provisions of
Order 4. This would provide a competitive advantage to employers
who use the services of temporary help agencies, and would lead
to inconsistent application of overtime requirements as to
businesses that compete against each other in the same industry.
The IWC industry orders establish certain minimum labor standards
and a level playing field in each of the various industries. The
enforcement policy that you propose would subvert these standards
and bring about the erosion of an industry-wide level playing
field.

As you point out in your letter, however, enforcement
difficulties may arise if the temporary help agency sends an
employee to different businesses, covered by different wage
orders, within a single pay period. Prior DLSE enforcement
policy in this area has been to apply the appropriate wage order
to the work being performed, even if that means that an employee
is covered by different wage orders during a single pay period.
Upon reflection, in response to the issues raised by your letter,
the Division has concluded that for purposes of ease of

Richard J. Simmons
December 24, 1997
Page 3

enforcement of overtime requirements, in those instances when an
employee employed by a temporary help agency is sent on
assignments to different businesses in the same pay period, and
the work that is performed by the employee at these different
businesses within a single pay period is covered by more than one
IWC order, all of the work performed by that employee in that pay
period will be subject to the overtime pay requirements of the
IWC order under which the employee was primarily covered. Thus,
an employee of a temporary help firm who is assigned to two or
more different businesses within a single pay period, and whose
work for each of these businesses is covered by separate wage
orders, will have all of his or her hours for the pay period
covered, for overtime purposes, by the one wage order under which
the employee worked the greatest number of hours in that pay
period.

Among the merits of this enforcement policy is the fact that
it takes into account the actual work performed, the industry in
which the work is performed, and the actual amount of time spent
performing that work, in determining which IWC order controls.
Under this enforcement policy, both the temporary agency that
employs the workers, and the DLSE in auditing any overtime
claims, will be spared the enormous burden of applying multiple
wage orders to work performed within a single pay period.

Thank you for your ongoing interest in the development of
California wage and hour law. Feel free to contact us with any
other questions.

Sincerely,

Miles E. Locker
Attorney for the Labor Commissioner

cc: Jose Millan, Labor Commissioner
H. Thomas Cadell, Jr., Chief Counsel
Tom Grogan, Assistant Labor Commissioner
Greg Rupp, Assistant Labor Commissioner
Nance Steffen, Assistant Labor Commissioner