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The construction industry has seen a sharp rise in temporary employment agencies in the past few years but such agencies are not the only providers of contingent workers. Over the past few years, "professional employment organizations" (often simply called PEOs) have picked up more than 250,000 construction workers. PEOs look like a cross between a payroll service and a temporary agency. PEOs take a client businesss payroll over and become a co-employer. Sometimes this happens without the workers even knowing that they have been "fired" by their jobsite employer and simultaneously "hired" by the PEO until they notice a change in their paycheck, or worse, a problem crops up.

Whether agencies operate as temporary firms or PEOs or some "hybrid" combination, they undergo a lot of shape-shifting and adaptation to grow in the construction market.

Consider Allstaff, who Des Moines, Iowa Local 347 organizer Jeff Rose called after reading newspaper advertisements seeking electricians. The IBEWs persistence provided a temporary victory when the company got into trouble with the National Labor Relations Board and left town only to return with a whole new identity.

"Theyre like a chameleon," Rose said. "They can change names, they can change phone numbers and boom, theyre back in business."

Rose and several other inside wireman electricians applied for the positions through the employment agency Allstaff. After being summoned to take a test, each was evaluated as competent and offered a jobwell outside their stated geographic area. "They would find out what our travel limits were and then tell us they didnt have anything in our area," Rose said.

This continued with workers in Iowa, Wisconsin, Minnesota and Illinois until union electricians who omitted clues to their union membership were hired. The staffing company was eventually found by the NLRB to have discriminated against 16 IBEW members for their union affiliation. The two sides settled, Allstaff paid them back wages of $185,000 and agreed to place their names on a preferential hiring list for one year.

The company paid but did not honor its agreement to hire the union workers, so the local filed another unfair labor practice charge with the NLRB. Also under the original settlement, Allstaff agreed to provide the IBEW with a list quarterly of the workers they hired. That they did, but the names were bogus. "We knew we were going to have to be the sheriffs," Rose said. "It wasnt a month before they were back to their old tricks discriminating against IBEW applicants."

Figuring it was not worth the trouble of dealing with an aggressive union, the company gave up in Iowa and Wisconsin, at least under the name Allstaff. But they have recently resurfaced under a new name, Trillium, which was actually their old name before they became Allstaff.

Such employment agencies are more common than people recognize. "Theres a lot of these companies out there," Rose said. "People dont think theyre operating in their area but they are."

What Are Professional Employment Organizations?

Like temporary agencies, professional employment organizations become joint employers with the jobsite employer. The main difference between temporary agencies and PEOs is the source of the workers. Temporary firms provide the workers, usually for short-term assignments, while PEOs transfer the jobsite employers work force to the PEOs payroll and then "lease" them back on a permanent basis. Some construction related employment firms will provide temporary workers or act as a PEO, depending on customer needs. Such hybrids are a new animal in construction.

The appeal of PEOs for contractors is similar to that of temporary hiring hallsno responsibility for payroll, workers compensation insurance or training. The largest PEO in the United States is Administaff, which bills itself as a personnel management company serving as a full-service human resources department for small and medium-sized businesses. The giant payroll company, ADP, bought a PEO and is now the second largest in the PEO industry.

The PEO industry has a history of non-compliance with laws and legal problems. In the early 1990s, the industry almost collapsed under the weight of numerous scandals over bogus health insurance plans. Then, the industry called itself "employee leasing." Some of these employee leasing firms sold service packages to clients that included low-cost health insurance and collected fees accordingly, but then when claims came in, workers and some embarrassed jobsite employers discovered that the employee leasing agency did not really have health insurance. So many of these cases piled up that the industry felt it needed a name change.

Despite the name change, the PEO industry is going through a new wave of scandals:

Simplified Employment Services, the seventh largest PEO, filed for bankruptcy in July 2001, leaving 39,000 employees without coverage. SES was also recently sued in Texas for selling worthless insurance from an insolvent self-insured Texas company to its clients, leaving employees with major unpaid medical bills.

TTC Illinois, the 10th largest PEO, went bankrupt in June 2001, leaving 24,000 employees and thousands of employers without insurance coverage.

Employment Solutions of Phoenix, the sixth largest PEO, went bankrupt at the end of 2000, stranding 34,900 employees, and owing more than $5 million in pension fund withdrawal liabilities.

Other large PEOs are on the verge as well. Fifth-ranked, Florida-based Gevity has been undergoing a financial crisis since its workers compensation carrier cancelled its coverage and other insurers were reluctant to pick it up.

The Building Trades department has teamed up with the AFL-CIO to fight the Professional Employer Organization Workers Benefits Act of 2001 (sponsored by Senator Bob Graham, a Florida Democrat and Senator Chuck Grassley, Republican of Iowa). The bill would override a recent IRS decision and allow PEOs to offer 401(k)s despite the industrys history of mismanagement and theft from pension plans and benefits.

The Building and Construction Trades, AFL-CIO, which cut its teeth on a long-running investigation of Labor Ready, is finding that its not just temporary agencies that threaten workers rights, particularly the right to organize.

"Its a bit like fighting cockroaches," said Will Collette of the BCTD. "There are a lot of splattered cockroaches out there, but if we dont learn to eradicate the vermin then at least we will be able to control them."

Such a proliferation of companies could endanger organizing efforts because nonunion contractors can use these various types of agencies, and the resulting joint employer relationship, to violate their obligations under the National Labor Relations Act.

As part of its investigation, the BCTD is looking for help in researching such agencies. Please send names, phone numbers and literature of PEOs to the Building and Construction Trades Dept, AFL-CIO, 815 16th Street NW, Washington, DC 20006. Phone (202) 756-4635, fax (202) 628-0724 or E-mail at collette@bctd.org.

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