Publications

Contingent and Alternative Work Arrangements: A New Strain of Contracting Out (2000)

A new strain of contracting out is attacking the public service. Using a variety of schemes, employers are reducing permanent employment by the introduction of contingent or temporary employment and alternative work arrangements. By reclassifying and relocating positions, they are moving work beyond the reach of bargaining agreements and personnel policies.

In 1999, the Bureau of Labor Statistics biannual survey of contingent workers found that approximately 1.27 million workers providing government services considered their jobs to be temporary. At 6.5 percent this is considerably higher than the private sector’s rate of 4.1 percent. These contingent employees generally fall into three groups: direct-hire temporary and on-call workers paid directly by government agencies; temporary help agency and service contractor workers; and individual independent contract employees with temporary assignments to government agencies.

These 527,000 employees represented 9.9 percent of workers providing services for state governments, 5.4 percent (589,000) of local government workers and 4.7 percent (158,000) of federal. Over 80 percent of these workers were in professional specialty (645,000), administrative support, including clericals (301,000), and service — excluding protective and household — occupations (120,000).

In both public and private sectors, agency temporaries, on-call workers and direct-hire temporaries were disproportionately female and young. Among agency temporaries, a disproportionate number were African American or Hispanic, and a large percentage of on-call workers were high school dropouts. Temporary contract company workers and independent contractors were generally older, male and better educated.

Seventy percent of agency temporaries and 50 percent of on-call workers and direct-hire temporaries indicated that they would prefer a permanent or regularly scheduled job.

There are a number of reasons employers choose to use temporary workers, including arbitrary caps on “head counts” in the public sector, lower wage and benefit costs, and reduced union power. As a result, the U.S. General Accounting Office reports contingent workers: “are more likely than workers in more traditional full-time work arrangements to have low family incomes. ... Contingent workers are also less likely to receive health insurance and pension benefits through their employers.”

The injustices suffered by contingent workers extend beyond wages and benefits. Since most worker-protection statutes assume a permanent, full-time workforce, temporary and on-call workers can find themselves unprotected. They may not meet the time-in-service requirements to be covered by the Family and Medical Leave Act or may have insufficient earnings to be eligible for unemployment insurance benefits.

Public sector collective bargaining laws often exclude non-permanent employees. Even where allowed, contingent workers are sometimes excluded from contract coverage or given fewer rights than permanent employees doing the same work.

AFSCME’s Response to Contingent Employment: Police, Protect and Make Permanent


Strategies to address the problems of contingent workers necessarily vary by the category of worker. Where allowed by law, collective bargaining agreements can be used to police the use of contingent workers, protect contingent workers against abuse and to establish procedures for converting contingent positions to permanent ones. In all cases, legislative action also will be necessary to maintain an appropriate level of full-time positions. Managers frequently claim that they would prefer to hire permanent staff, but the legislature (or city council) has capped the number of employees or won’t pay for permanent staff.

The following collective bargaining provisions and summaries are drawn from AFSCME and private sector union contracts. The underlying concepts can generally be incorporated into personnel rules or legislation.

Restrictions on the Use of Contingents


Time Limits and No Displacements


Temporary employees may be used for a period not to exceed ninety (90) consecutive days or less. Any temporary full-time employee retained beyond ninety (90) days will be considered a regular full-time employee with all rights, benefits, and Union membership as addressed in the Agreement.

The Employer agrees to use temporary employees for only 90 days annually. (AFSCME Council 2, Local 1191-CD and the City of Dayton, Wash.)

Intermittent positions are those positions in which work is of an irregular and unpredictable nature and which do not exceed one thousand (1000) hours per employee in any 12 month period. The Employer agrees not to use intermittent positions to avoid filling permanent full-time positions. The allocation and use of intermittent positions shall be an appropriate subject for the Labor-Management Committee. (OCSEA/AFSCME Local 11 and the State of Ohio)

The Company shall have the right to hire the following temporary employees provided they do not displace Union employees, and qualified employees with recall rights are offered jobs. ... Management will give the Union forty-eight (48) hours notice of need of such help.

(1) Summer employees from the second week of May through the second week of September... (Bailey-Fischer & Porter Co. and Auto Workers, reported by BNA)

Numeric Limit


The Union will be advised of those employees who are designated as temporary employees upon their hire. Temporary employees will be limited to 15 percent of the regular, full-time employee population (this percentage will be increased to accommodate vacation replacement). Such employees will be utilized as replacement under, but not limited to, the following circumstances: vacations, daily absenteeism, long-term disability, leaves of absence, part-time work assignments, temporary increases in the work force. (Kellogg Co. and Grain Millers, reported by BNA)

The employer agrees that limited-term employees shall be kept to the lowest number to meet needs and that limited-term employees will not be used to avoid filling positions through Civil Service. The employer cannot rotate limited-term employees in and out of a job to provide a continuously filled position. (AFSCME Council 40, Local 60 and Dane County, Wis.)

Information


The employer must provide the union with a list of temporary employees every six months with the date of hire and percentage of time worked. (East Bay Regional Parks District, Calif.)

Protection Against Abuse


Coverage under the Collective Bargaining Agreement


A temporary employee ... shall be covered by this agreement after 6 months of continuous service, except that a temporary employee may be terminated at any time by the Employer without right of appeal. (AFSCME Council 4 and the state of Connecticut)

Employees working at least 67 days per year and 14 hours or 35% of the normal bargaining unit workweek are covered by the collective bargaining agreement. (AFSCME Council 6 and the state of Minnesota)

The employees of the state hired in seasonal, casual, durational, or any status other than a Merit full-time who perform work of a like or similar nature to Merit full-time union employees who are covered by AFSCME collective bargaining agreements shall be subject to all the terms of such collective bargaining agreements during the periods such employees are actually employed, provided that:

a) Such employees shall not be subject to contractual rules governing seniority, transfers, layoff, recall, or promotional bidding.

b) Such employees are hired with the explicit understanding that their employment may not exceed two years in duration, except if extended at the discretion of the State.

c) Such employees may be laid off at the discretion of the State prior to the completion of a two-year period when their employment is specified for a lesser time period, or due to a lack of work, or a lack of funds specified for such positions.

d) The union security provision of collective bargaining agreements shall apply to such employees in the same manner and time as for probationary employees. (AFSCME Council 81 and the state of Delaware)

Benefits Provided after a Minimum Number of Working Hours


All long-term non-permanent employees (those who work more than 120 days) receive annual and sick leave accrual, health and life insurance and holiday benefits. These are pro-rated for less than full-time work. (AFSCME Local 52 and the state of Alaska)

Temporary employees who have worked at least 1040 hours are eligible for retirement benefits. (City of San Francisco)

After working 1000 hours in a rolling 12-month period, “limited appointment” employees become Retirement Plan members and are retroactively eligible for retirement plan credits. They are also eligible prospectively for medical insurance coverage similar to regular employees. If they work on average 17.5 hour per week but less than 1000 hours in a 12 month period they are eligible for limited health benefits and participation in the University’s defined contribution pension plan. (AFSCME University of California Contract Campaign, Local 3299 and the University of California at Los Angeles)

Seasonal employees continuously employed on at least a half-time basis for six months are eligible for health insurance coverage. Seasonal employees regularly employed on a full-time basis for at least 25 days get up to 8 hours of additional compensation for time worked on each of the first 3 holidays in their season. Those that have worked at least half time for 9 1/2 months receive personal leave like regular employees. Those that have 9 1/2 months work in each of the last three years, even if not 1/2 time work, receive 3 days of leave per year. (CSEA/ AFSCME Local 1000 and the state of New York)

Temporary Pool


The Employer agrees to the creation of an employment pool of temporary employees. ... The employment pool will be administered by the Employer and a quarterly report containing the name, social security number, home address, classification and hour worked to date, will be supplied to the Union. The Commonwealth will have the right to establish reasonable standards for the work performed by pool employees.

The parties agree that employees covered by this article will not be used to reduce the number of permanent employees performing the levels of work existing as of the ratification date of this Agreement. To that end parties agree that employees covered by this article will not be assigned to perform full-time duties which are permanent and full-time in nature.

Salaries and working conditions and other articles of the agreement which will be extended to employees of the pool shall be established by the parties. (AFSCME Council 13 and the state of Pennsylvania)

Conversion to Permanent Positions


“Limited term employees” will be converted to career status after 1000 hours of work within a 12-month period (without a break in service of 120 consecutive days or more). Time served as a limited term employee counts toward probationary requirements in the new position. Employees can be converted retroactively to career status if they meet the service requirements and were hired after January 1, 1998.

When a long-term nonpermanent employee works longer than 12 months, the employer must review the reasonableness of establishing a permanent position and if established the position must be offered to the incumbent employee. (AFSCME Local 52 and the state of Alaska)

Seasonal and hourly employees who have been employed by the City half-time or more in a calendar year shall be considered to be a non-probationary permanent employee, full-time or part-time as the case may be. ... Employees made permanent by operation of this provision shall be entitled to all rights and benefits in accordance with the collective bargaining contract. [The contract also provides a schedule converting long-term seasonal/hourly employees to permanent status.] (AFSCME Council 40, Local 60 and the City of Madison, Wis.)

Employees also have successfully challenged improper classifications in court. These settlement agreements discuss conversions to permanent employment:In 1997, King County, Wash., settled a case involving approximately 2,500 past and present employees who were miscategorized as “temporary workers” even though they had worked for the county for years. As “temporary workers” they were denied health insurance, paid leave and other benefits. In addition to a financial settlement for the affected workers, about 500 long-term temporary workers were placed in jobs with full benefits. The settlement also provided for a procedure and appeal process to ensure that workers were properly classified. (Logan vs. King County, Wash., State Superior Court, King County No. 93-2-20233-4 SEA, Settlement Agreement 1997)

Bellevue, Wash., recently agreed to establish a settlement fund of $719,000 to compensate around 90-100 current and past employees who were denied the benefits of regular city employees because they were misclassified as “temporary” or “hourly” employees. The agreement calls for the city to: “conduct an annual review of its ongoing work and utilization of nonbenefited workers, including temporary agency workers, to determine if there is any body of work that more appropriately and effectively could be accomplished through hiring employees in classifications eligible for partial or full benefits.” (Jordan, et al. vs. City of Bellevue, Wash., State Superior Court, No. 98-2-21515-1 SEA, Notice of Proposed Class Action Settlement)

Alternative Work Arrangements


“Payrolling” — Using Temporary Employment and Staffing Agencies to Avoid Contracts and the Law


Some public employers use “payrolling” to keep otherwise regular employees off the public payroll. For a fee, temporary employment and staffing firms serve as the employer of record. The temporary employees work side by side with, and are managed by, public agency staff. In addition to keeping their personnel count down, public employers are able to deny these employees the wages, benefits and rights they would receive as public employees covered by a collective bargaining agreement and public personnel policies.

Payrolling was recently dealt a setback when a King County, Wash., judge ruled that individuals who worked with and were controlled and supervised by the government meet the common law definition of employee, even though the county classified them as temporary workers and paid them through a private company. Following this ruling, the county agreed to settle the lawsuit and compensate over 500 “permatemps” for lost pay and benefits. Many of these employees had worked for the county more than five years. The settlement also requires the county either to establish new positions or stop doing the work. The county also must monitor its use of payroll agencies to prevent abuses in the future. (Clark vs. King County, King County Superior Court No. 95-2-29890-7 SEA)

“Payrolled” employees of the Metropolitan Water District of Southern California have a similar class-action case pending, and AFSCME Local 1902 has a grievance pending against this practice. The district has hired employees through private employment agencies and is treating them as if they were temporary employees of the agencies. The employees contend that they are no different than any other regular employee of the district. They were hired for an indefinite period of time and work side by side with district employees doing the same work. Their work is supervised and directed by district managers. The only contact most of these workers ever have with the employment agency is when first hired. Nevertheless, they are not benefiting from the wages, benefits and rights they should have under the collective bargaining agreement and the district’s administrative law. (Cargill, et al. vs. Metropolitan Water District of Southern California, et al., Los Angeles Superior Court, Case No. BC 191881)

Beyond Payrolling


Los Angeles County has taken “payrolling” a step further by creating its own third party employer. Some of the attorneys and staff working for the Los Angeles County Counsel are paid by Auxiliary Legal Services, a nonprofit corporation created and controlled by the county. Claiming that this payrolling scheme was set up to evade civil service laws, employees of the corporation have sued the county. It is also seen as an attempt to stave off unionization. The workers have charged that their wages are lower than those of county employees, in violation of the law and the county charter. (Shiell vs. Los Angeles County, Calif., Superior Court, No. BC 208582)

Independent Contractors


Rather than utilize permanent, direct-temporary or even “payrolled” positions, some employers utilize workers as independent contractors. By definition, independent contractors are self-employed. As such, they are excluded from collective bargaining and the protection of key labor laws. In addition, employers acquiring their services are not responsible for paying their Social Security, Medicare or unemployment taxes. Given these incentives, it is not surprising that the General Accounting Office has found that employers often classify workers improperly. In 1996 thousands of workers successfully sued Microsoft over this issue. The federal courts found the company had misclassified the workers as independent contractors and deprived them of employee benefits. (Vizcaino vs. Microsoft Corp., 97 F.3d 1187 and Microsoft Corp. vs. Vizcaino, U.S. No. 99-498, cert. denied Jan. 10, 2000)

Unfortunately there is no definitive test to determine if a worker is an employee or independent contractor. The criteria used by courts to determine employment status vary by statute since there are different definitions for tax purposes, minimum wage eligibility and for establishing the right to collectively bargain. One of the key factors used to distinguish between an employer and independent contractor is the degree of detailed control the paying party exercises over how the work is undertaken. Other factors include level of skill required to do the work, the worker’s opportunity for profit or loss and whether the worker is an integral part of the business.

The IRS’s 20-factor test can be found at The Independent Contractor Report.

Next Steps


These are only a sampling of strategies AFSCME locals and other worker advocates are using to meet the challenges of contingent employment and non-traditional working arrangements. If you haven’t previously investigated the use of these arrangements, you may wish to use bargaining or Freedom of Information Act requests to collect information on the numbers and types of workers involved, their length of employment, and the conditions under which they are working. A labor/management committee could also study the question.

The information can be used to make the case for restricting the use of contingent workers and for seeking better wages and working conditions for workers trapped in these positions. Where the law allows temporary workers to be represented, an organizing opportunity may exist. Political and legislative action can be used to improve their wages and working conditions and to gain conversion of temporary positions to permanent bargaining unit positions. Where there are “living wage” campaigns, these efforts might be linked. They are both aimed at insuring that public money is used to create good jobs.

We are interested in hearing of your experiences with this issue. If you have information to share or would like additional information or assistance, contact the Department of Research and Collective Bargaining Services at (202) 429-1215. The following reports and Internet sites are recommended for more detailed information:

  • Center for a Changing Workforce
  • George Erickcek and Susan Houseman. Temporary, Part-Time and Contract Employment in the United States
  • Susan Houseman. Flexible Staffing Arrangements: A Report on Temporary Help, On-call, Direct Hire-Temporary, Leased, Contract Company, and Independent Contractor Employment in the United States. August 1999
  • Monthly Labor Review, November 1998
    Sharon R. Cohany. Workers in Alternative Employment Arrangements: A Second Look
    Steven Hipple. Contingent Work: Results from the Second Survey.
  • Monthly Labor Review, October 1996:
    Sharon R. Cohany. Workers in Alternative Employment Arrangements
    Anne E. Polivka. Contingent and Alternative Work Arrangements, Defined
    Steven Hipple and Jay Stewart. Earnings and Benefits of Contingent and Noncontingent Workers
    Steven Hipple and Jay Stewart. Earnings and Benefits of Workers in Alternative Work Arrangements
    Anne E. Polivka. A Profile of Contingent Workers
    Anne E. Polivka. Into Contingent and Alternative Employment: By Choice?
    Donna S. Rothstein. Entry into and Consequences of Nonstandard Work Arrangements
  • National Alliance for Fair Employment
  • U.S. General Accounting Office. Contingent Workers: Incomes and Benefits Lag Behind Those of the Rest of the Workforce, GAO/HEHS-00-76, (Appendix III offers a summary of key federal labor laws and their coverage of contingent workers and the definition of employee under the various statutes.)

Who is a Contingent Employee?


The Bureau of Labor Statistics' definition of contingent worker used in this article includes all salary and wage workers who do not expect their employment to last. It does not include permanent part-time workers. Depending on the jurisdiction these workers may be called:

Agency Temporary Employees
Casual Employees
Contract Employees
Day Laborers
Direct-hire Temporary Workers
Durational Employees
District Temporary Employees
Intermittent Workers
Limited Appointments
Limited-term Employees
Long-term Nonpermanent Employees
On-Call Workers
Project Workers
Seasonal Workers
Temporary Workers
Term Employees
Print Version