The U.S. contingent workforce:strength in numbers. The U.S. job market consists of 939,000 As companies continue to rely on contingent accounting professionals; 812,000 people are staff as an important part of their workforce employed by the publishing industry; another strategy, employers need to be mindful of the 1.2 million workers in the real estate sector; intricacies that relate to using contingent labor. and just over 1 million professionals work While many of the well-known aspects of using in machinery manufacturing. All of these are contingent staff — flexibility, lower risk, and cost examples of sizable, high impact industries effectiveness — are clearly understood, there within our economy. are other aspects that have historically lacked clarity and resulted in some less-than-positive However, none of these sectors matches the outcomes for employers. Perhaps the most size and scale of the contingent workforce, significant of these aspects is co-employment. a portion of the U.S. job market that currently employs almost 1.8 million professionals. As a leading indicator of the economy, the contingent workforce will be the first to expand as the economic picture gets brighter.
What is co-employment?Co-employment refers to a circumstance in which a worker has simultaneousemployment relationships with two or more employers for one work situation.This dynamic typically comes into question with contingent workers as the staffingprovider and on-site company both assume different portions of the responsibilityfor an individual’s employment situation.Co-employment lessons excluding only those workers who put in less than five months a year. This generalization inlearned from Microsoft. their employee stock purchase program benefitsUnderstanding why co-employment has become package opened the window for the law toa hot topic for HR and legal professionals requires include the company’s contingent, contract andopening a window into one organization in par- independent contractors.ticular: Microsoft. In the early 90s, the companywas involved in a class action lawsuit — Vizcainov. Microsoft Corp. — in which a group of contin- What can employers dogent, contract and independent workers sued to protect themselves?the company for access to employee benefits. The Microsoft case caught the attention ofUpon investigation by the courts, they eventually employers across the United States, all of whichruled in favor of the workers and expanded the were very concerned about learning frominitial group of plaintiffs from a few hundred to Microsoft’s mistakes and protecting themselves.thousands of former staffers resulting in millions One popular stance taken by companies inof dollars of fees. Although this ruling doesn’t reaction to the ruling was to enlist assignmentapply to all employers who rely heavily on limits within their organizations to limit thecontingent and contract staff, it did bring to light amount of time a contingent worker could bemany important missteps that companies need with the company. This approach limits a contin-to avoid in order to stay in the clear around gent employee’s ability to make any claims forlawsuits and penalties. benefits as a result of a lack of any long-term employment within their contingent, contractOne such misstep, which Microsoft was respon- or independent contractors. But, is this the right,sible for, was treating independent contractors strategic response or just a knee-jerk reaction?as though they were part of the company’spermanent colleague base. By providing this The reality is that mandating assignment limitssame treatment, but not access to benefits, is not an effective way to avoid co-employment.this became an unfair balance wavering against The terms of the relationship between theMicrosoft’s case. Also, and almost more impor- organization and the contingent worker is thetant, Microsoft did not clearly exclude contingent, more important indicator in this scenario — notcontract or independent laborers from their the amount of time the two parties have beenemployee stock purchase program. The exact working together. Since the Microsoft ruling,wording of their program was written such that much has been learned about how to preventall “common law employees” would be eligible, penalties from co-employment. 3
Partnering with a co-employment expert. Co-employment is clearly not something Create a clear and employers can afford to get wrong. While most staffing providers are experts on the co-employ- differentiated benefits plan. ment subject, finding the right business partner A major issue in Microsoft’s case was their to align with your contingent, contract and usage of the phrase “common law employees” independent labor workers is not something in their employee stock purchase program, to enter into lightly. which only separated employees by length of service. This lack of clarity is what really opened Here are some things to consider to help you the organization up for scrutiny and penalty. avoid co-employment pitfalls: As organizations put together policies around their benefit offerings, it is important to be as Establish clear boundaries. detailed as possible outlining exactly which type of employees are eligible for benefits. In a co-employment situation, in order for the Clearly detail whether or not contingent, staffing provider to be positioned as the primary contract and independent workers fall within employer responsible for the worker, there the plans remit. This sort of clarity can help must be clearly outlined roles for each party. you avoid questions and litigation in the future. All employer responsibilities such as recruiting, In addition, another effective strategy is having pay negotiation, insurance coverage, HR issues, contingent workers sign a waiver that they on boarding and termination must be handled will not claim access to benefits from their solely by the staffing provider with the on-site assignment company at any point. company only taking responsibility for direction and supervision of day-to-day responsibilities. When either party goes beyond their role, it Stay current. becomes unclear which party is the primary Knowing the latest in labor laws and employer and will make determining employ- government regulations can be a tough task ment more challenging. Employers must also while keeping up with your contingent workers. be sure that contingent workers are identified It is critical to select a staffing provider that differently in their organizations to further can offer expertise and guidance around illustrate their role versus permanent staff at co-employment and other labor laws that the organization — issuing separate ID badges, can affect your business — both positively having their email addresses look different, etc. and negatively — to help your organization further differentiates the two parties and their mitigate risk. place within the organization.4
Less co-employment risk equals greater workforce efficiency. In the current recession, employees who have Over the years since the Microsoft case, there survived recent rounds of mass layoffs have has been much debate around the dynamics an increased workload — the demand to do and implications of co-employment. At the “more with less” is more prevalent than ever. same time, organizations have learned how to It is not uncommon for organizations that have successfully engage and define their relationship a growing workload with a shrinking amount of with contingent, contract and independent labor people to “slip” and end up making a contractor workers. With the right guidance, organizations feel like an employee. The delineation becomes can avoid issues with co-employment simply blurry since contractors can begin to take on by applying the appropriate processes, policies critical roles inside an organization. Has your and programs. In the end, what is abundantly organization crossed that line? How can you clear, especially in tough economic times, is be sure? that contingent, contract and independent labor workers are an essential part of any strategic As you engage with contingent, contract and organization’s workforce strategy. The key is independent workers, consider utilizing a to ensure you have the right strategy or program staffing provider to minimize co-employment in place for managing these types of workers risk. Managing the co-employment framework and the result is effective and cost-efficient. is what these organizations do day-in and day-out, so they have a unique ability to provide the expertise, guidance and execution that will enable your company to avoid co-employment pitfalls. For more strategic advice on managing a more productive and cost-effective workforce, please contact your local Adecco representative or visit us at adeccousa.com.6