Co-Employment Risk: An Archaic Notion

Co-employment has been debated among lawyers, employers and suppliers of contingent labor ad nauseam for decades. High-profile, multi-million dollar judgments against such as those against Nationwide Mutual Insurance and Microsoft have led many companies to take steps to avoid being deemed co-employers of their contingent workers.

From instituting tenure limits, assigning contractors different colored badges, or not inviting them to company-sponsored events, they think such steps eliminate the risk that they will be seen as a contingent worker’s employer of record.

Unfortunately, making up arbitrary contract length and other “separation” rules does little to protect them. Employment case law rulings like Ling Nan Zheng v. Liberty Apparel Co. and others suggest these protections have minimal to zero impact on defending against co-employment.

In fact, the notion that co-employment is a risk to be avoided is somewhat archaic; there’s nothing inherently risky about it at all. In most staff augmentation situations, co-employment exists regardless of badging, parties and the like. These workers are in your building, using your equipment and getting work direction from someone other than their staffing firm employer — the very definition of co-employment.

Certain factors can protect a company against potential lawsuits and they depend a great deal on the entirety of the work engagement and its economic impact on a contractor. Trying to evade the system by hiring contractors as long-term “permatemps” to avoid paying stock options, pensions and health coverage is a key element brought up in many co-employment suits, as is hiding these resources under statement-of-work contracts.

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Another is to ensure the language in employee benefits documents, pension, stock and bonus plans, a company’s insurance plan, intellectual property, and company property documents specifically define who is and is not allowed to participate, expressly excluding contingent labor.

The same applies to any outside supplier you are partnering with to bring in contingent labor. Employment law violations fall on both an employer (supplier) and the company where the contingent worker is performing the work, and the supplier must have explicit language defining them as the employer of record, laying out the specific skill set of each contractor for a given assignment, a definition of work control, and ownership of any source of instruments or tools.

Our next post will address how trying to protect yourself from co-employment can expose your organization to discrimination lawsuits. 

Ashish Kaushal

Ashish Kaushal
Ashish Kaushal is founder and CEO of HireTalent. He can be reached at ashish (at) hiretalent (dot) com.

Ashish Kaushal

Julie Scagell
Julie Scagell is a freelance writer and consultant.

Ashish Kaushal

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