Avoid Costly Temporary Worker Co-employment Claims

There are many reasons why it makes sense to bring on temporary labor.  Companies can “try out” temporary employees before making direct offers, on-board strong talent for short-term projects, reduce costs associated with benefits and HR administration, etc.  Still, there are risks associated with contract labor use:  namely, co-employment risks.

We’ve all heard the phrase “co-employment risk” and many companies seem to throw it around to add clout to the value of their solutions.  But to really get our hands around the issue, we must define the widely-used term.  What exactly is co-employment?—it is defined by Staffing Industry Analysts as:

“…[a] relationship among two or more employers when each has specific actual or potential legal responsibilities to the same worker or group of workers.”

This can become problematic when a contract worker believes that s/he is owed certain benefits or compensation directly from the company at whose site s/he is providing services.  It is good practice for contract staffing providers to establish all of the paperwork associated with proper employer-employee relationships, but this may not be enough.  If that staffing provider’s customer inadvertently undermines the preexisting employer-employee relationship, courts could rule in favor of the contract employee.

When dealing with a provider’s contract employee, by all means:

  • Train the new resource to perform job-related tasks;
  • Take immediate corrective action if the resource is violating safety rules;
  • Report any absences, tardiness or unacceptable behavior to the contract staff provider;
  • Refer all questions relative to pay, benefits, duration of assignment, or opportunity for employment to the provider;
  • Inform the provider about any changes in the resource’s work schedule; and
  • Assist the provider in evaluating its contract employees.

However, doing the following could increase the possibility of the contract employee believing that s/he is really your employee:

  • Informing a provider’s contract employee that s/he is terminated or suspended;
  • Discussing pay rates, increases, incentives or bonuses;
  • Improperly discussing opportunities for regular full-time employment;
  • Improperly extending an offer for employment;
  • Requesting that a contract employee complete timecards or forms with your company’s name on them;
  • Counseling contract employees concerning tardiness, punctuality, attendance, dress code, child- or elder-care arrangements or other personal matters;
  • Inviting contract employees to company-sponsored events, such as picnics, holiday parties, etc.; or
  • Otherwise treating providers’ contract employees as if they were direct employees of your company.

When working with knowledgeable staffing providers and following these guidelines, most companies will not face actionable claims made by providers’ contract workers who may come to believe that they have a right to participate in the benefits and compensation structures provided to your direct employees.  In addition, companies using contract agencies should review their written benefit plans and ensure that they clearly exclude contract agency personnel from any right to participate.  Finally, because these are important legal matters, please ask an expert to ensure that you are not exposing yourself to potentially costly liability.

It should also be noted that co-employment reaches beyond contract workforces to independent contractors, as well.  But that will be the subject of another post in coming weeks.