Why Term Limits Aren’t the Best Solution for Co-employment Concerns

Term limits for contract employees have been popular since Vizcaino v. Microsoft nearly two decades ago. This class-action lawsuit pitted temporary workers against Microsoft, with the workers alleging that they deserved the benefits of permanent Microsoft employees because they could be classified as common law employees. The workers won the case, taking home a $97 million settlement.

Since then, many companies have set term limits on their contract employees to prevent similar lawsuits because one criterion for common law employees is length of employment. But while this measure might technically protect the company, it also creates new problems. Ultimately the best solution to managing co-employment risks is effective management of the relationship between contract employee and company.

At first glance, term limits seem like a slick legal move. They’re easy for the company to control and halt lawsuits dead in their tracks. But they can also create headaches for project managers, who might lose a contract worker mid-way through a project or have to re-educate each new contract employee on the company’s objectives and processes every time a contractor hits the established term limit.

In the case of contract workers, companies can actually increase their control by relinquishing control to a supplier of contract workers. It seems paradoxical, but companies will mitigate risk and get better results if a supplier takes charge of the contractor’s hiring, termination, disciplinary process, and working relationship with the company.

Under this model, the company will still control day-to-day interactions with the contractor and determine work assignments, but with only a modicum of the human resource interaction. Suppliers then handle the mechanics of compensation, like hours worked and timely payments. They check in to make sure the contractor is doing well and offer additional value through events like on-site training and contractor appreciation events.

For example, one of the core values of Yoh is safety. We use safety meetings not only as a way to instill our corporate values in those who do not work in our offices day in and day out, but also as a way to stay connected with our contracted employees.

Suppliers are also there to settle disputes, discipline contractors, and ultimately act as an advocate for both the contractor and the company. As a sort of neutral third party, suppliers can find solutions that both sides find agreeable. By maintaining this relationship, companies can hold on to their best contractors without fear of a Microsoft-style lawsuit.

That’s not to say that contractual obligations don’t play a role. The company should craft an iron-clad policy around employees and benefits. Suppliers should also clarify their role and scope of services and be sure these attributes are clearly defined in the customer contract and employee offer letters. But when suppliers play an active role, contractors understand that they work for the supplier rather than the company, which mitigates any confusion that might end in the courts.

Chris Hediger

Chris Hediger
Chris Hediger is VP of Enterprise Solutions, for Yoh, a leading provider of high-impact talent, staffing solutions, and outsourcing services and a unit of Day & Zimmermann. For more information, please visit http://www.yoh.com or http://blog.yoh.com.

Chris Hediger

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