Co-Employment: The Discrimination Trap

In our last post, we discussed how companies engaging contingent workers through staffing firms can be overzealous in their desire to avoid the perceived risks of co-employment. But such efforts to avoid co-employment can create situations that are discriminatory — inviting reputational risks, lower productivity, and lawsuits to occur.

Staff augmentation contractors are covered under federal anti-discrimination laws, such that if they feel they are being discriminated against on the basis of race, color, religion, sex, national origin, or disability, they can file claim against their employer and the company they were working. Legal action can also be taken if a contractor’s assignment is terminated or cut short because of a complaint covering the above or if a contractor feels they are being treated less favorably because he or she is a contingent worker.

Often, companies don’t want to deal with problems that arise when dealing with a contingent worker; after all, that’s one of the benefits of working with a staffing supplier. The misunderstanding is that if a company is seen to be part of the solution, they may be looking and acting like an employer, thus risking co-employment. So, they don’t react to workplace fairness, harassment, or discrimination claims if it’s not their employee, but this “hands off” approach could lead to legal action being taken against them.

Here are a few examples:

Sexual harassment. Under federal law, and under the laws of many states, employers are not automatically liable for sexual harassment as long as they maintain a harassment training and complaint program, investigate promptly, and take prompt, effective corrective action following an investigation.  Everyone in the contingent workforce area has a strong incentive to prevent, investigate and correct workplace harassment.  But, in some cases contingent worker complaints are ignored either because the buyer/client assumes the staffing partner will handle the situation, or because the buyer/client does not want to take any action for fear this will make them look like a co-employer. However, if that investigation doesn’t take place immediately and corrective action implemented, it leaves that company open to a potential lawsuit.

As attorney Eric H. Rumbaugh, a partner with Michael Best & Friedrich LLP, says, “Sometimes people wrongly think caring makes you a co-employer.”

Racial discrimination. The same goes for racial discrimination. Under federal law, it’s illegal to discriminate based on a person’s race, whether they are your employee or co-employee, or not an employee at all. If you are firing someone from their job, normal HR due diligence takes place to ensure an employee is not being unfairly discriminated against. In the case of contingent workers, however, some companies do nothing in that regard. They simply call the staffing firm and say, “fire John Doe.” No one did any due diligence to ensure John Doe wasn’t being discriminated against for his race, immediately opening a company up to further investigation. And, again, sometimes the decision not to vet the termination is conscious – the company does not want to do basic due diligence because they think the risk is all on the staffing partner and/or because they (wrongly) think their decision is beyond legal scrutiny because they are not the employer.

Co-employment is complicated, often misunderstood subject and companies’ attempts to protect themselves often put themselves at even greater risk. Not only does this open them up to legal action, but the reputational damage in an era where the war for talent is at an all-time high can leave companies unable to maintain their competitive edge.

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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