Getting a Handle on Contingency Work

Exact statistics are hard to come by, but it seems a large percentage of American businesses use contingency workers.

What are “contingency workers”? They include temporary workers but also independent contractors, freelancers, and part-time workers.

If your business uses contingency workers during busy times, it’s advisable to hire them through a staffing firm that knows the applicable laws and classifications under the Fair Labor Standards Act, said Sara Austin, founder and partner of Austin Law Firm, LLC, in York.

But it’s important to choose a reputable staffing agency—perhaps through referrals. Unreliable agencies can sometimes disappear without paying their employees’ wages. This can lead to legal troubles for a business, even if it already paid the staffing agency.

Using a reliable staffing agency also guarantees that appropriately skilled people are hired and no legal issues arise.

Traditionally, the staffing agency has been the employer, but now the trend is toward what’s called joint employment. Both the business and the staffing agency can be held responsible for any obligations to contingency workers under applicable law.

For example, if a worker is harassed, both the staffing agency and your business might be held responsible for stopping it.

The concept of joint employment used to apply only to unionized workers, but now the National Relations Board has broadened that. Often, companies have such a level of direction and control that there really are two employers, even if the business isn’t directly paying the workers.

As a business owner, assume you have to comply with anti-discrimination and similar laws with respect to everyone, even temporary workers.

“All employment decisions should be made without regard to race, gender, religion, or other protected classification,” cautioned Austin.

Also, both the business and staffing agency may be held responsible for any wage discrepancies.

For example, if the business requires the contingency workers to work overtime but not to punch in or out, this could trigger payment obligations.

Make sure there are deep pockets on both sides and that the staffing agency is a good partner in case there’s a determination of joint employment.

The staffing agency is the employer—that hasn’t changed, said Austin. (It’s just a question of a possible joint-employer relationship under some circumstances.)

In an attempt to avoid the finding of joint employment, there should be an agreement that both the staffing agency and business remain independent companies with no direction and control over each other, and with only the staffing agency having direction and control over the duties of the contingent worker.

That agreement has to be clear as to who pays the worker; who directs his/her work on a daily basis; who disciplines him/her; and who removes him/her if necessary. If the business steps in, it is putting itself into the possibility of being determined a joint employer.

The courts are looking at instances in which the staffing agency isn’t the sole employer by virtue of direction and control over the contingent worker, Austin said.

It’s also advisable to have an agreement with the staffing agent through a written contract, identifying who is responsible for various aspects of the employment relationship, including unemployment taxes, Medicare contributions, and compliance with various laws, including the Fair Labor Standards Act, which governs overtime payments.

Moreover, advised Austin, “Do not treat contingency workers as ‘employees’ of the business. They should not be provided with business cards, employee ID badges, handbooks, or access to corporate facilities.”

However, under the right circumstances, they should be given any badge necessary for them to enter and exit the work premises and any rules or policies they need to follow.

The staffing agency may say to the contingency employees: “I want to send you to XYZ business. But you have to agree to abide by the rules and policies of XYZ business (which are set forth in their handbook).”

In other words, the staffing agency basically adopts the business’s policies as its own and requires the worker to abide by them while they are placed at XYZ company.

Another area of concern is background checks. Don’t assume the staffing agency has conducted an effective check for contingency workers.

Over the years, the contingency workforce has grown considerably. That makes it more important than ever that the same screening process be applied to them (by the staffing agency) as to permanent employees.

The staffing agency must also not discriminate.

“If an agency, for example, uses code language for the racial group of a contingency worker, the business may be held responsible for discrimination if it knows about and approves of (or has even directed) that discrimination,” said Austin.

Do contingency workers get benefits, which essentially mean health insurance?

“Of course they do,” she said, “under certain circumstances, and if they do receive benefits, they come from the staffing agency.”

But what happens if the staffing agency doesn’t provide benefits to all employees? Usually health benefits are medical and don’t include dental or vision, although these are sometimes added on.

There’s the Affordable Care Act. Coverage depends on how big the business is and who provides what.

HIPPA protects against preexisting conditions, and there is also COBRA—which gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances, such as voluntary or involuntary job loss.

What about insurance? Who is responsible and in what cases? This is an issue under the ACA and any particular policy of the staffing agency.

“The law might provide one thing, but the agency can provide another (as long as it is not stricter than the law),” Austin said. “For example, if the law requires coverage to be provided to an employee who works at least 30 hours, then the agency cannot require employees to work at least 31 hours to get coverage.”

However, the agency can offer coverage to employees who work under 30 hours if it so chooses.

Should you involve an attorney in contingency worker situations?

“It’s not a bad idea, because you might need [an attorney] now or later. There are a lot of legal issues, and that could save you heartache, time, and money rather than calling an attorney after the fact when there might be no legal way to remedy the situation.”

The attorney can help both the business and staffing agency figure out direction and control issues. BW