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The federal government has significantly increased its reliance on temporary workers, particularly for health care jobs.
When Fredy Amador worked as a quality technical specialist for a temp agency in Chicago, he and his co-workers had more or less the same jobs as the permanent employees, who tended to be white. “We used to work in the same department, we used to be co-workers,” Amador told The American Prospect. “We did the same testing. Everything was the same. We used to work at the same desks, same computers.”
Because Amador was a temporary worker, he didn’t get the same pay or benefits, despite working for the company for six years. But when Amador asked about switching to full-time work, he was told that the company had no permanent slots. This made no sense to someone who was effectively a full-time temp.
The experience inspired Amador to become an organizer at the Chicago Workers’ Collaborative. Amador’s experience is not uncommon in the temp industry, which often recruits people with the prospect of full-time jobs, only to lock them out.
The temporary staffing industry works as a third party, hiring workers and then contracting them out to host companies. Temporary jobs have been the fastest-growing category of work since the 2008 recession, with one report finding that the number of temp jobs has grown more than four times faster than the number of jobs overall. Only about 7 percent of temp jobs ultimately convert to full-time.
The temp industry is largely unregulated at the federal level.
The federal government exerts significant influence on the temporary industry through the byzantine federal contracting system. Particularly during the Trump administration, the federal government significantly increased its reliance on temporary workers, according to a report from the National Employment Law Project, particularly for health care jobs in agencies like the Veterans Health Administration and the Indian Health Service. “If you’re replacing permanent health care workers, nurses, hospital staff, [and] doctors with temporary nurses [and] health care workers, how can you provide consistently good care?” asked Laura Padin, a senior staff attorney at NELP and an author of the report.
This July, the Biden administration announced an executive order targeting the use of noncompete agreements. Noncompete agreements bar workers from switching jobs and going to work for a competitor, and the agreements ostensibly exist to protect companies from workers stealing trade secrets. But the agreements have proliferated among blue-collar and service work jobs, which the Biden administration argued “makes it harder for [workers] to switch to better-paying options.”
Temp agencies are no strangers to noncompete agreements, and Biden’s executive order is welcome news for protecting workers in an industry that is lightly regulated. But temp agencies also use other legal tools that function in a similar way to noncompetes but that have received much less scrutiny. One of the most important is conversion fees.
A conversion fee is an agreement between a temp agency and the client company, where the client company agrees to pay a fee to convert the employee to full-time work. Unlike noncompetes, there is almost no transparency for workers around whether a temp job has a conversion fee, Padin told the Prospect, because the contracts are between the temp agency and the client, rather than the temp agency and the worker.
“The fee can be very substantial, it can be two months of a temp worker’s salary depending on when the client company wants to hire them,” said Padin. “That’s going to create a huge disincentive for client companies to hire temp workers permanently.” And if the worker cannot convert to full-time, they lose out on increased wages and benefits.
Conversion fees are not the only tool temp agencies use to depress wages. Typically, temp agencies make money by taking a cut of the wages their clients pay their direct employees. This markup, however, is typically hidden from the temp employees themselves. “Temp workers don’t know any of that,” said Padin. “They don’t know what the markup is, they don’t know what the difference is between what they’re making and what the temp agency is charging the client. And if they did, they would probably be outraged.”
Amador told the Prospect that while he didn’t know if his temp agency used conversion fees, he did know that he was paid less than other full-time employees because he worked closely with them. “People should know so they can see the difference,” said Amador. “Some people who are temps, they do more than people directly employed by the company.”
It’s unclear whether these schemes would be covered by a rulemaking limiting or banning noncompete agreements. The Federal Trade Commission has the authority to look at conversion fees and other tactics if they constitute unfair methods of competition. Biden’s executive order encourages the agency to curtail non-competes “and other clauses or agreements that may unfairly limit worker mobility.” That could potentially extend to agreements between employers.
These legal provisions, advocates say, ultimately have the effect of creating a segregated workplace. In Illinois, whose state labor department specifically collects data on workers in the temp industry, 85 percent of blue-collar temporary workers are workers of color, while workers of color make up just 35 percent of the workforce in general. Other studies have found that temp jobs in Illinois discriminate by race, with Latino workers being more likely to receive job offers than Black workers.
The temp industry is largely unregulated at the federal level. Padin suggested that a place to start could be setting labor standards for temp workers contracted by the federal government. This could include policies such as requiring temp agencies to be more transparent about what they pay temp workers, as well as policies requiring limits on how long temp workers can remain temporary workers before becoming permanent employees. Using the contracting power could force a conversation about conversion fees and other tactics, and encourage temp agencies to harmonize their policies for private-sector workers as well.
“There’s so much we could do just through the government contracting system to raise labor standards,” said Padin. “And then other companies will also raise their standards if the government is doing that.”
