Introduction

The development of the Microsoft Windows operating system had a significant impact on home computing, and perhaps just as large an impact on how technology companies manage their core workforce of information technology employees. In 2000, Microsoft agreed to pay $97 million to settle a class-action lawsuit brought by thousands of so-called “temporary” workers who alleged that the company “maintained a fiction that they were temp workers by hiring them through temp staffing agencies to avoid paying them stock options, pensions, and health coverage.” [1] These temp workers had worked on core projects like software development for months or years alongside permanent employees without ever being offered a permanent position at Microsoft.

One might expect such a significant payout to end the use of “permatemps”—permanent temporary workers—in the tech industry. But tech companies learned a different lesson.

Instead of ending permatemping, tech companies simply changed how they integrate their outsourced workers into their everyday operations. Some tech companies now require their staffing agencies to offer some type of benefits package to their temp workers, even though—as discussed below—these packages are typically far inferior to those offered to permanent employees. Others place time limits on individual temp workers’ assignments, although these practices exacerbate temp workers’ job instability. Term-limited temp workers are replaced with new temp workers or take a six-month break before returning to a similar role for another term.[2]

In some tech companies, temp workers are more strategically deployed within units comprised exclusively of temps or other contract workers and supervised by an employee of the staffing agency or other labor contractor, a maneuver that distances the tech company from these workers and may lower the risk that it will be found to be their employer. At Google, for example, outsourced workers are called “TVCs”—an abbreviation for Temps, Vendors, and Contractors—and are excluded from certain internal systems. This work structure is intended to minimize the risk that Google will be responsible to these workers as a joint employer, a “legal designation which could be exceedingly costly for Google in terms of benefits,” according to internal company documents.[3] Google’s “shadow workforce” of TVCs is now larger than its permanent, direct-hire workforce.[4]

While the definitions and roles of “temps,” “vendors,” and “contractors” may vary, at their core they are all part of the same operating system. It’s a system that entices workers with the lead tech company’s prestige, perks of a “cool” work environment, and illusions of high pay, while shifting responsibility to lesser-known subcontractors that become the worker’s employer on paper: Kelly Services, Adecco, HCL Technologies, and hundreds of others, big and small. The result is a two-tiered workforce with a permanent underclass that has fewer rights and less power.

Despite these challenges, temp workers in tech are organizing to build power. In 2015, a group of nearly 100 Microsoft workers who were subcontracted through a staffing agency formed the Temporary Workers of America, the first temp workers in tech to unionize.[5] In 2019, the United HCL Workers of Pittsburgh—a group of subcontracted Google workers—voted to form a union affiliated with the United Steelworkers, and began negotiating a first contract with their employer HCL Technologies. HCL resisted the union, and the National Labor Relations Board charged HCL with unfair labor practices, including that HCL was moving jobs abroad in retaliation for union activity. Nevertheless, the workers continued to exert their collective power and ultimately won their first tentative contract, which includes wage increases, in July 2021.[6] And, in January 2021, the Alphabet Workers Union—a 800-plus group of Google direct employees, temps, vendors, and contractors—publicly launched a national campaign and minority union with the support of the Communication Workers of America to build power in their workplace and pressure Google to act ethically, both as an employer and as a community member.[7] Momentum is growing: with these determined efforts, the hurdles that have made collective action extraordinarily difficult for temp workers at large tech companies are beginning to crumble.

This report discusses the ways in which temping out in the tech industry depresses wages and degrades working conditions for temp workers, exacerbates occupational segregation, weakens temp workers’ collective voice on the job, increases their vulnerability to discrimination, harassment, and other illegal conduct, and locks them into a system of permanent temporary work.

The experiences of dozens of subcontracted workers at Google, Apple, Microsoft, Facebook, Yahoo, and CenturyLink are presented. Temp Worker Justice and NELP informally polled these workers about job quality issues between February 2019 and March 2021.[8] The preliminary findings in this report merit additional investigation.

The report concludes by recommending policy changes that would raise labor standards for temp workers in tech and would support tech worker organizing to build power in the workplace.

Unequal Treatment, Occupational Segregation, Discrimination, and Retaliation

We use the term “temps in tech” in this report to mean any person who has been employed by a temp agency or other contract firm to perform work for a technology company.[9]

The vast majority of temps in tech we spoke with about how they are treated at work—31 out of 37—said they are treated worse than permanent employees. As one temp in tech put it: “I could write a long novel about the separate and unequal working conditions. There are barriers everywhere.”[10] As discussed later in this report, this unequal treatment takes many forms, including substandard pay and benefits, vulnerability to discrimination and sexual harassment, and hyper-precarious employment, which makes the risk of retaliation for speaking out acute.

Because occupation segregation is pervasive in the tech industry, this unequal treatment is borne disproportionately by people of color. While Black and Latinx workers are underrepresented in the tech industry, they are much more likely to be hired as temps or other contract workers than as permanent employees. According to a 2016 study of the Silicon Valley labor force, although Black and Latinx workers make up 26 percent of the region’s workforce, they comprise only 10 percent of Silicon Valley’s direct-hire tech workers, but 26 percent of the tech industry’s white-collar contract workforce and 58 percent of its blue-collar contract workforce.[11] Asian and Pacific Islanders have a much greater representation in the tech industry’s permanent workforce than other workers of color, but their overall representation masks disparities by community. Indian and Chinese workers are highly represented in the direct-hire tech workforce, which is largely a consequence of tech companies seeking H-1B visas for workers from these countries,[12] whereas Vietnamese and Filipino workers are mostly in the blue-collar contract workforce.[13]

The Alphabet Workers Union has said that including in its movement all Google workers—permanent employees, temps, vendors, and contractors—is critical to undoing the segregated employment system that keeps many Black and brown workers in second-class temp and other contract jobs.[14]

Discrimination is also common. Of the 39 temps in tech we spoke with, 12 believe they experienced discrimination on the basis of their gender, race, ethnicity, immigration status, religion, sexual orientation, disability, age, or other unspecified status. One temp in tech said: “I’ve had two careers destroyed by permanent male employees due to outright sex discrimination. When I went to bosses many times at various jobs, they either made my life hell so I would quit or fired me without warning.”[15] Her experience echoes that of a woman who worked as a temp recruiter for Google, and went public when she was fired from the assignment shortly after complaining that a Google manager had sexually harassed her.[16]

According to news reports, in 2018, thousands of Google employees organized a walk-out to protest the company’s inadequate handling of sexual harassment complaints and the two-tier employment system that makes temp and other contract workers more vulnerable to this abuse.[17] Soon after, Google ended its policy of requiring employees to bring sexual harassment claims to arbitration but did not apply this change to its thousands of temps, contractors, and vendors—yet another illustration of their second-class status.[18]

Temps in tech know that they can be terminated from an assignment at a moment’s notice, which makes speaking out about discrimination or other illegal treatment risky. Of the 24 temps in tech we spoke with who have complained to their temp agency or worksite employer about a work issue, six reported that they believe they experienced retaliation, such as receiving a worse work assignment or losing all opportunities for work, in response. One temp in tech said: “I have no job security and I am fearful of speaking out because I cannot lose my income. . . . I am better off than many temps, but I am operating under extreme anxiety because of job insecurity.”[19] Another reported: ”I’m always job hunting and living in fear. I get let go without a paper trail and without warning.”[20]

Even if temp workers want to make a complaint, they may not know to whom or how to report an issue. According to one temp in tech we spoke with, discrimination and harassment are common, but temp workers are supposed to complain to their temp agency—not the lead tech company—even though “temp agencies often do not have a local HR office. Requests have to be made online with long waiting time for responses—weeks.”[21]

Substandard Pay, Inadequate Benefits, and Wage Theft

A majority of the temps in tech we spoke with—21 out of 39—reported that they are paid less than the industry standard. Even worse, this is unequal pay for equal work. Thirty-six of the 38 temps in tech we spoke with on the subject said they do at least some of the same work as permanent employees.

Our conversations with temps in tech suggest that the wage disparities within occupations can be enormous. Of the 21 temps we spoke with who work as computer programmers, software developers, or in other computer and information technology occupations, a majority reported that their hourly wage was under $30 per hour, or an annual income below $62,400 for a full-time employee working 40 hours per week. Seven reported an hourly wage between $20 and $29.99, four reported an hourly wage between $15 and $19.99, and two reported an hourly wage below $15. These wage levels fall well below the median annual wage of $88,240 for computer and information technology occupations.[22]

These workers’ experiences are bolstered by U.S. Bureau of Labor Statistics data, which found that full-time temporary help agency workers earn 41 percent less than do workers in standard work arrangements.[23] This is true even within occupations; temporary help agency workers in information technology occupations suffer a wage penalty relative to their direct-hire counterparts, according to U.S. Bureau of Labor Statistics data.[24]

Other researchers have similarly found that temp and other contract workers in the tech industry are paid substantially less than permanent, direct-hire employees. A 2016 study of the Silicon Valley labor force found that average annual pay is $113,300 for direct-hire employees, $53,200 for white-collar contracted tech workers, and $19,900 for blue-collar contracted tech workers.[25] On contracting, a website that helps people find tech contracting jobs, estimates that tech companies can save $100,000 per year on average per job in the United States by using temps and other contractors instead of direct-hire, full-time employees.[26]

Temps in tech also report woefully inadequate employer-provided benefits. Of the 39 temps we spoke with, only 13 have paid vacation time. Twenty-six reported that they have paid sick time, though this may because the jurisdictions they live in mandate it. One temp in tech said he receives only the “state mandated minimum of 24 hours of sick pay each year.”[27] Only four have access to paid parental leave. Seventeen reported that they do not receive health insurance through their employer, and 28 do not receive any type of retirement contribution from their employer.

“As a temp, my contract may be ended at any time with or without notice, which is very scary during this pandemic. I have paid sick time, but only the state-mandated minimum of 24 hours of sick pay each year. The health insurance options they offer are abysmal. I am lucky to be young enough that I can still be on my mother’s health insurance plan.”[28]

The COVID-19 pandemic has exacerbated these inequities. Because of inadequate paid leave and health insurance coverage, temp workers in tech are at greater risk than their direct-hire counterparts of poor health outcomes or financial devastation if they contract the virus. Yet, according to news reports, tech companies have permitted their permanent employees to work remotely during the pandemic, while many temp workers have been required to report to their workplace.[29]

“I am a white woman who gets paid a good hourly wage as a white collar TVC at Google, but I do the job of a full-time employee with no paid sick days, no paid holidays, no [parental] leave for parenting during the pandemic (a perk that full-time employees enjoy), no retirement contributions. . . . I am excluded from internal meetings and trainings on diversity and inclusion that have taken place in the wake of the George Floyd and BLM protests.”^[30]

Along with substandard pay and benefits, temps in tech are vulnerable to illegal conduct such as wage theft. Of the 39 temps in tech with spoke with, 15 reported that they have experienced at least one of the following wage violations in their temp position: not being paid on time, not being paid for all hours worked, or not receiving overtime pay. According to one press report, project leaders at Google pressured contract workers to work long hours without reporting overtime, making “subtle promises of conversion to full-time status” in the process.[31]

Given their substandard wages and benefits and the risk of wage violations, it is not surprising that most temps in tech would prefer not to work in a temp or other contracted position. Of the 38 temps in tech we spoke with about this issue, 25 said that they had taken a temp job because they were unable to find permanent, direct-hire employment.

‘Permatemping’ and Deceptive Recruitment and Retention Practices

Although some temp and staffing agencies that specialize in tech placements market themselves as gateways to permanent employment in the industry, the reality is far different. According to news reports, contracted workers at Apple accepted a position with Apex, Apple’s staffing firm, with the hopes of landing a full-time position at Apple—a possibility that Apex played up—only to find their chances were small because Apple had reduced its practice of converting any contract workers to full-time positions.[33]

Of the 39 temps in tech who answered our questions about the length of their current or most recent assignment, 20 reported that the assignment lasted one to two years, and 10 had been at their assignment for more than two years. The length of these assignments indicates that temp positions do not provide a pathway to permanent work and professional advancement in the tech industry.

Many of the temps in tech we spoke with report that that they were given inaccurate or misleading information when applying for their jobs. The most prevalent misrepresentation relates to “temp to perm”—the possibility to move to permanent, direct-hire employment with the lead tech company. Of the 39 workers we spoke with, 27 said they were misled about a material term of their employment, citing the likelihood or timing of conversion to permanent employment as the most common types of misrepresentations.

Even worse, temp agencies commonly adopt practices that restrict temp workers’ opportunities to obtain permanent employment. Many contracts between temp agencies and client companies require the companies to pay a “conversion fee”—sometimes equal to two months of a temp worker’ salary—if they hire that temp worker as a permanent employee. Because temp workers don’t have access to these contracts, they may be unaware that these provisions exist.

Furthermore, temp workers’ contracts with the temp agency may have a “non-compete” provision, which prohibits a temp worker from working for a competitor during and for a certain amount of time after their current employment. Depending on how broadly the term competitor is construed, this clause could prevent a temp in tech from working for any other temp agency or client company of the temp agency. Nine of the temps in tech that we spoke with said that their staffing agency had prevented them from working for another staffing agency or taking a permanent job with their worksite company.

Conversion fees and non-compete clauses are designed to limit temp workers’ mobility and keep them in temp work on a long-term basis, which increases the temp staffing industry’s profits. A staffing agency charges its clients an hourly billing rate for the services of a temp worker, and pays that worker an hourly pay rate. The markup or “spread” between the billing rate and pay rate is how the business operates and where profits are derived. The bulk of the work that the agency does is all up front: securing the contract with the client, and recruiting, screening, and placing workers.

Therefore, staffing agencies maximize their profits in two ways. First, they charge the client companies as much as possible while paying their workers as little as possible. Second, they reduce turnover and keep a temp worker generating as many billable hours with the same client as possible, for as long as possible. And so the underpaid permatemp is born.

“[I] was told by [the temp] agency that 90 days from start of training I would receive a $500 bonus and a $1/hr pay increase. I reached 90 days yesterday, upon which I received an email stating that I would NOT be getting the bonus, or the pay increase. I feel like I was misled, and would not have taken the position without these benefits.”[34]

Contract Terms Commonly Used to Limit Temp Workers’ Job Opportunities

• No-poach agreement: An agreementbetween companies not to hire or solicit their employees. While often illegal, these agreements nevertheless exist in many industries.
• Non-compete clause: A contract provision that prohibits an employee from working for an employer that is in competitionwith their current employer.
• Conversion fee: Contractually set cost that temporary staffing agencies may charge their clients if clients want to hire or “convert” a temp worker into a permanent employee.

Conclusion

Temp and other subcontracted workers in the tech industry are a second-class workforce comprised disproportionately of people of color who do much of the same work as permanent, direct-hire employees but for less pay, worse benefits, no job security, and a high likelihood of discriminatory or other illegal treatment. This system is no accident. It was created by tech companies so that they could divide workers from each other and extract as much labor as possible at the lowest cost from their temporary workforce while avoiding accountability as an employer for the conditions they created. The middleman in this relationship—the temp and staffing agencies—entice workers with promises of permanent, direct-hire employment at a tech company when, in reality, the system locks these workers into permanent temporary work.

Meaningful solutions require individual workers to build cross-racial solidarity and collective power. Temps in tech should reach out to organizations like the Federation of Tech Workers, United HCL Workers of Pittsburgh, and Temp Worker Justice to learn more. Systemic change is needed to lift the many tens of thousands who are held back, and to give workers the ability to enforce violations and improve their conditions.

Federal and state policymakers must prioritize changes to the law that both raise labor standards for temp workers and support the innovative and bold tech temp worker organizing that is happening right now.

It is time to level the playing field and give temps in tech across the country a real opportunity to join with their fellow co-workers—both temp and permanent alike—to build power and raise standards at their workplace.

Necessary policy changes include the following:

• Equal pay for equal work: Temp workers should be paid the same as permanent employees performing similar work.
• Joint employer liability: Tech companies—as well as all other companies that contract out work to intermediaries like temp agencies—should be responsible as joint employers for working conditions for their contracted workers. They should also be at the bargaining table during union negotiations.
• Transparency about the terms and conditions of assignments: Staffing agencies should be required to provide temp workers with written notice of the terms and conditions of each assignment, including the length of the assignment, the possibility of transitioning to permanent employment, and the “spread” between the temp worker’s hourly wage and the hourly charge to the client company for their labor.
• Prohibition on employment terms that limit temp workers’ other job opportunities: Contract terms that limit temp workers’ opportunities to obtain permanent employment at a client company—or even accept employment with a competitor company—should be prohibited or strictly limited.
• Record-keeping requirements: Temp agencies should be required to keep records about each assignment, including its length, pay, and hours, and each temp worker applicant and placement, including demographic information and length of employment. These records can shine a light on discriminatory and abusive practices.

Legislation in Congress Would Kick-Start Needed Reforms

• The Worker Flexibility and Small Business Protection Act of 2020, 4738, would ban permatemping and make companies that contract out labor to staffing agencies and other labor intermediaries joint employers of the temp workers whom they employ, so that these companies would be responsible as employers for the working conditions they create.
• The Restoring Worker Power Act of 2020, R. 7638, would dramatically improve labor standards for temp workers by, among other provisions, requiring equal pay for temp workers and permanent workers doing similar work; limiting conversion fees and banning non-compete agreements in temp contracts; and requiring staffing agencies to disclose to their workers the material terms and conditions of their work, including the “spread” between a worker’s hourly wage and the hourly charge to the client company for the temp worker’s labor.
• The Protecting the Right to Organize Act of 2021, R. 842, would make it easier to hold companies that contract out labor to staffing agencies responsible as joint employers of those workers under the National Labor Relations Act, so these companies would be required to bargain with their temp and other contracted workers over the terms and conditions of their employment.

Acknowledgements

NELP and Temp Worker Justice (TWJ) thank the United HCL Workers of Pittsburgh and the Federation of Tech Workers for their contributions in support of this work. The authors also thank Kim Diehl, Maya Pinto, Cathy Ruckelshaus, and Rebecca Smith for providing guidance on this report, and George Gonos for research support on this project (and countless others) for temp workers.

This work could only be accomplished with the support of worker leaders who have spoken up and shared their stories, including Gina DePelsMaeker and Kevin Kiprovski. NELP and TWJ also recognize and thank co-author and current temp worker Ben Gwin. The connections that Ben has built with workers across the country and his successful activism in his workplace in Pittsburgh are remarkable.

Artwork by Lena Chandhok.

About TWJ

Temp Worker Justice is the national nonprofit organization for temporary workers. It launched in 2019 with the support of NELP. TWJ empowers temporary workers and workers’ organizations with research and education, and it provides organizing support to the National Temp Worker Council, a group of worker leaders who are challenging the temporary staffing industry. For more information, visit www.tempworkerjustice.org.

For more information, contact:

Dave DeSario

Director, Temp Worker Justice

Dave@TempWorkerJustice.org

www.TempWorkerJustice.org

Ben Gwin

United HCL Workers of Pittsburgh

TempEmployees@gmail.com

www.federationoftechworkers.org

Laura Padin

Senior Staff Attorney

National Employment Law Project

lpadin@nelp.org

www.nelp.org