You've probably heard about "co-employment." While the term is used today more than ever, you may not fully understand what it is and how it could affect your business. Over the next several months, we will be bringing you a series of articles that discusses this very important topic.
Co-Employment: What It Is and Why You Should Care
Today's workforce looks much different than it did 20 years ago. With the temporary help industry employing more than 2.3 million individuals, employers need to start paying attention to some basic rules that govern this new workforce.
Within the last several years, the issue of co-employment hit the front page of many newspapers when computer software giant, Microsoft Corporation, was forced to pay former contract employees retroactive fringe benefits because the company was found to not have clearly differentiated between contract and permanent employees of the corporation. The tremendous cost to Microsoft has put small and large business owners on a heightened state of alert, trying to identify potential liabilities and minimize their risk.
As with any issue, a clear understanding of the issue itself is extremely important.
Co-Employment exists when two or more employers have actual or potential legal rights and responsibilities for the same employees. For example, you contact our office and ask for a temporary employee. While we are the temporary's employer, you may also have some legal rights and responsibilities for that same employee, even though you are not the "employer on record." From a legal standpoint, this means that if an employee files a legal complaint and wins, both our organization and your organization could be found liable if we do not take steps to clearly define who the employee's employer is.
There are two main types of co-employment: inherent co-employment and assumed co-employment. Inherent co-employment is typical within the staffing industry. The staffing company is responsible for the majority of employment related responsibilities and the client company is responsible for day-to-day operational responsibilities, like supervision and workplace safety. There is very low risk to the client company, as long as the roles of the staffing company and client company are clearly defined. Assumed co-employment happens when the client company assumes employer responsibilities, such as interviewing, selection, performance discussions and disciplinary action. In these cases, the client has a stronger relationship (or at least the perception of a stronger relationship) with the temporary employee than the staffing company does. Of course, when the client company is perceived to have the stronger employment relationship, the legal risk increases greatly.
Are you at risk? Ask yourself some simple questions:
Are temporary and contract employees treated exactly the same as your regular employees?
Do your managers keep personnel files on temporary employees and conduct performance or disciplinary discussions with them?
Does your organization insist on participating in the hiring process? That is, do you give your requirements to the staffing company and then require that you interview each candidate as well, even for a temporary assignment?
Do you ask your temporary workers to call their supervisors directly if they are ill, going to be late, or need some type of assistance?
Answering yes to any of these questions could mean that you may be putting yourself at a higher risk of co-employment related lawsuits. Of course, there are many potential risk factors and some hold more risk than others. What is important is that you are aware of these potential factors and take steps to avoid them
There are many legal opinions about how to minimize this risk: from taking steps to correctly classify contract employees, limiting contact with temporary and contract workers, implementing time limits and most importantly, allowing a staffing company to do its job and be the employer. Our next article will discuss how to minimize your risks and give you suggestions that will help you to protect your business from the risks of co-employment.