Labor Ready Inc. one of the nation’s largest temporary employment agencies, may be systematically misclassifying the work performed by its employees – resulting in lower workers’ compensation premiums – the Building and Construction Trades Department (BCTD) of the AFL-CIO charged recently.
An analysis of workers’ compensation records conducted by the BCTD revealed that Labor Ready has been paying lower "white-collar" premium rates for a significant share of its employees in two states-even though the company has consistently described its workforce as "primarily blue-collar" workers, for whom workers’ compensation premium rates are considerably higher. In announcing its findings, the BCTD is calling for an investigation into Labor Ready’s practices by state governments as well as by the National Council on Compensation Insurance, the primary organization for workers’ compensation rate-setting.
"This is yet another example of how Labor Ready builds its income in ways that appear suspect," said BCTD President Edward G. Sullivan. At the company’s annual shareholders meeting in Seattle recently, the BCTD – which owns stock in Labor Ready – also distributed a report documenting a pattern of unsound business practices and mistreatment of workers that is putting the investments of Labor Ready shareholders at risk.
In its public documents and on its company website, Labor Ready repeatedly and definitively describes itself as a temporary agency dealing primarily in "blue collar" and "manual" labor.
Labor Ready’s "customers are primarily businesses in the freight handling, warehousing, landscaping, construction, and light manufacturing industries" that "require workers for lifting, hauling, cleaning, assembling, digging, painting and other types of manual or unskilled work," according to 10-K annual reports filed with the federal Securities and Exchange Commission.
"Labor Ready is a temporary employment company that focuses strictly on blue-collar labor," said the company’s former CEO Glenn Welstad in an interview with the Wall Street Corporate Reporter.
In fact, a section on Labor Ready’s website entitled "Industries We Serve" lists three dozen types of work, none of which involve clerical, retail sales, or white collar activities of any kind.
And yet, a thorough review of the workers’ compensation records in two states where Labor Ready operates-Ohio and Washington-revealed that the temporary agency has been making premium payments at the lower white-collar rates for many of its workers.
In Ohio, during the period between July 1, 1998 and June 30, 1999, Labor Ready classified 10.2 percent of its workforce as "retail store employees – not otherwise classified" and another 8.8% as "clerical office employees – not otherwise classified." More Labor Ready employees in Ohio were classified in these two categories than in any other classifications.
In Washington, during the 1998 calendar year, fully 47% of Labor Ready’s workforce was classified as performing work in the "office services"category.
The difference between workers’ compensation premium rates for white- collar and blue-collar workers is dramatic. In Ohio, for example, the base premium rate in 1999 was $10.86 for every $100 of payroll for landscaping employees -- compared with only 43 cents per $100 of payroll for clerical employees. In Washington, the 1999 rate for was $2.2405 per hour worked in construction, but only 8.18 cents per hour worked by office service workers supplied by temporary agencies.
The anomalous workers’ compensation contributions paid by Labor Ready in Ohio and Washington warrant investigations in those and other states where the agency operates, BCTD officers said today. BCTD officers also said they believe Labor Ready’s customers may knowingly tolerate these practices, and should share in any penalties and fines if they are proven to have had knowledge of misclassifications.
With more than 800 offices in the United States, Canada, and Puerto Rico, Labor Ready is one of the largest and fastest-growing temporary employment agencies in North America.
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