A Manager’s Guide to Co-Employment Law

October 29th, 2012

Co-employment is not a dirty word, although Microsoft’s upper management might disagree.  In 2000, the company was involved in a class action lawsuit – Vizcaino vs. Microsoft – in which a group of contingent workers sued for access to employee benefits.  The court held Microsoft liable and cost the company approximately $97 million.  The case caught the attention of companies across the country, and it raised the issues around co-employment to a national level.

But it is still not a dirty word.  Co-employment simply describes a legal relationship between two companies (usually a human capital management [i.e. staffing] firm and their client) in which both have actual or potential legal rights and duties as employers.

It is an inherent part of the relationship between the human capital management/staffing  firm and its clients.  With temporary workers, liability may arise when the client performs a role that the staffing firm – as the “primary employer” – should perform.  This could result in a situation where both companies have actual/potential legal rights/duties with respect to the same worker or group of workers.

What are the client’s responsibilities?       

Generally, a client only has three primary obligations when it comes to temporary/contingent workers:

1)      Supervise and direct day to day work

2)      Control work site conditions, ensuring the site is safe

3)      Determine the length of the assignment

What are the human capital management firm’s responsibilities?

Your human capital management/staffing firm partner is responsible for:

1)      Work authorization check (I-9 and e-Verify)

2)      Pre-screening, reference check, behavioral assessment, drug screening, background check, etc.

3)      Hiring and firing

4)      Establishing pay rates

5)      Paying worker and related payroll taxes and benefits

6)      Providing workers’ compensation and unemployment coverage

7)      Assigning and reassigning workers to jobs

8)      Compliance with wage and hour laws and other employment regulations

In addition, your partner should do the following in order to insulate you and your business from unnecessary liability:

1)      Obtain job descriptions and select qualified candidates

2)      Maintain regular contact and provide performance feedback to the workers

3)      Handle all personnel issue so that you do not keep “personnel files”

4)      Manage all employees’ problems or concerns directly

5)      Ensure that all workers are properly trained. 

What Will Not Decrease Your Co-Employment Risk

1)      Reducing contract worker’s hours – this can carry the risk of violating the Employee Retirement Income Security Act of 1974 (ERISA) if this practice is construed as an effort to prevent workers from reaching needed hours for benefits plan participation. 

2)      Work reallocation  – this is also known as “churning” workers and is extremely inefficient for obvious reasons, since no one remains in the job to truly understand it. 

How to Decrease Your Co-Employment Risk

1)       Work with a reputable human capital management firm.

2)      Have the firm provide on-site supervision, when hiring a large number of workers for an extended period.

3)      Minimize contact with the contract workers and have them (whenever possible) take up any HR-related issues directly with the human capital management firm.

4)      Avoid discriminatory conduct

5)      Maintain a safe site for all employees.

Snelling is one of the oldest, reputable and knowledgeable firms in this industry.  We take great care to maintain this reputation and take significant measures to ensure that we limit your co-employment risk.  We can help you take the steps necessary to reduce you company’s exposure to co-employment liabilities.   Visit our Office Locator page to find your local Snelling office, where our talented staffing managers can help you today.

*Disclaimer:  This blog is for informational purposes only and is not intended to replace consultation with and advice from competent legal counsel.    

NOTE:  A full-color, downloadable PDF is available.  

One Response to “A Manager’s Guide to Co-Employment Law”

  1. Arlene Almaguer Says:

    What is the best practice for reimbursable expenses; travel or items purchased on behalf of the Company by the Contractor/Temp Worker? Should the “hiring” company set up and pay the contractor or should this be handled by the human capital management firm?

    Thanks in advance for your input.
    Arlene

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