Investigations
Temp Agency or Tech Platform? Advocates Say Staffing Apps Are Skirting Laws, But Companies Say They’re Exempt
For years, the debate has raged over ride hailing apps Uber and Lyft — are they taxi companies or tech firms?
The tech giants have been firm in their stance that they’re merely a tech platform connecting independent drivers with passengers looking for a ride. To regulators, worker advocates and other detractors, the companies are cab services trying to avoid classifying their drivers as employees.
Now, a similar crop of apps has arisen in the temporary employment arena. The apps connect people looking for work with companies just as staffing agencies do, but assert they’re tech platforms exempt from regulations aimed at protecting temp workers.
The companies have drawn millions in funding, hundreds of thousands of workers, and legal action over their labor practices — including here in Illinois.
“Not surprisingly, their assertion is much like the Uber defense — ‘We’re not an employer of record, we provide laborers through an app, we connect workers with jobs, like Monster.com or LinkedIn,’” said Chris Williams, a labor attorney who’s brought complaints against several temp staffing apps on behalf of the Chicago Workers Collaborative.
Williams argues that under the state law governing temp work, it’s irrelevant if the companies are a direct employer.
“It doesn’t turn on the relationship being an employment relationship, it turns on the relationship being one provides labor to the other,” Williams said. “We think there’s no question that they fall into this category.”
The CWC complaints to the Illinois Department of Labor charge that the apps have failed to register as temp staffing agencies with the state, which Illinois law requires. Williams said that registration might sound trivial but it serves as an important protection for some of the most vulnerable workers in the labor marketplace.
“There’s actually an important aspect to it, both in terms of making sure they’re not fly-by-night and helping to establish the relationship with the companies that end up employing these temps,” Williams said.
Protecting those laborers is a key priority for labor advocates in Illinois, with the estimated number of temps in the state ranging from 200,000 to more than 600,000. The American Staffing Association estimated that as of 2021, there were 1,650 temp staffing agencies in Illinois with an annual payroll of $7.8 billion.
But that whopping figure belies the fact that temps usually earn just 50-67% of workers hired directly by a company, according to a UIC study from 2022.
“Although marketed as a stepping-stone to high quality employment, temp staffing holds workers in a cycle of poverty that is difficult to escape,” that study says.
Other research has found that temp workers are injured on the job at far higher rates. WTTW News recently reported on a lawsuit against the Ferrara Candy Company alleging that it failed to provide proper training and warn temps of potential hazards they’d face on the job, charges the company denies.
Over the last three years, two temp workers have been killed on the job at other Chicago-area industrial food companies.
Additionally, Black and Latino laborers are overrepresented in the temp sector. A 2021 study found that Black workers can face discrimination from staffing agencies over stereotypes that Latinos are harder working.
None of the companies CWC filed complaints about responded to requests for comment, but WTTW News obtained their responses to the state’s Labor Department in which they laid out a defense of their firms.
“Veryable’s business practices demonstrate the stark difference between its business model and that of day and temporary labor service agencies,” wrote a lawyer representing Veryable, one of the temp apps in question. “Individuals that use Veryable’s platform decide where, when, and how long they want to work and at what pay rate, and they bid to work on the operations that Veryable’s business customers post on the platform.”
In a blog post on its website designed to attract companies seeking laborers to the platform, Veryable decries the “true cost of hourly labor” as a burden on businesses.
“Many companies invest a lot of resources and money to maintain a large force of hourly workers and the fact of the matter is that it is expensive, complicated to manage and gives a company no flexibility; often becoming a barrier for a company to grow,” the post reads, describing the cost of benefits, payroll taxes, recruiting and human resources as additional expenses that provide “little to no added value.”
Despite describing itself as a technology platform, Veryable’s website lists 42 regional offices around the U.S. The company raised a reported $32 million funding in 2021. One of its counterparts that CWC also reported to the state, ShiftKey, has a reported valuation of $2 billion.
Another app facing a complaint, Clipboard Health, wrote in its response that it allows “professionals to book on-demand shifts quickly and easily, and healthcare facilities to address staffing shortages expeditiously. … The healthcare professional users of Clipboard’s marketplace are fully independent practitioners who simply use Clipboard’s marketplace to help them easily identify and instantly access desirable shifts which might otherwise be difficult to find.”
The company also says the temps who use its platform are classified as “professional” workers and exempt from the state law, which CWC disagrees with.
Erin Hatton, a professor of sociology at the University at Buffalo SUNY, said the temp agency model moving over to apps is “disturbing, but … not all that surprising.”
“This is the real so-called innovation of companies like Lyft and Uber who have repeatedly maintained, despite the fact that they and their workers provide driving services … that they’re just a technology company, just an app,” Hatton said. “It’s not surprising that other companies are adopting what has thus far been a relatively successful way of evading employment law and labor law.”
According to documents obtained by WTTW News, the Illinois Department of Labor granted the Chicago Workers Collaborative the right to sue seven companies but did not launch a significant investigation of its own — which Williams said is common given the agency’s extremely limited staff, adding that the CWC is planning legal action.
Sharon Block, executive director of the Center for Labor and a Just Economy at Harvard Law School, agrees that the apps are no different than a traditional agency since they connect workers with jobs.
“The way that that connection is made, whether it’s by writing people’s names on a slip of paper and handing it to them and telling them to give it to the management at the other end of the transaction or is done electronically, to me that should not matter in terms of describing the relationship,” Block said.
Block said companies claiming they’re exempt from labor laws because of their use of technology isn’t new. She cited the long ago case of a cab service saying because it used telephones to connect passengers and drivers, it was a technology company merely engaged in dispatch.
“These arguments have been around forever,” Block said. “The mechanism is not what’s important, it’s the nature of the relationship. And I don’t think using an app or some other electronic means of connecting people changes the nature of the relationship.”
Contact Nick Blumberg: [email protected] | (773) 509-5434 | @ndblumberg
