When The Contingent Worker Becomes More Than Just Attached To The Client Company
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When the Contingent Worker Becomes More Than Just Attached to the Client Company

By Stephanie A Miller, Director, employee & labor relations, Lowe's Companies, Inc.

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Stephanie A Miller, Director, employee & labor relations, Lowe's Companies, Inc.

According to a 2010 study conducted by software company Intuit, more than 40% of the U.S. workforce will be so-called contingent workers by 2020. That’s more than 60 million people. For purposes of this article, contingent workers include contractors, temporary workers (i.e., staffing agencies) and those who are self-employed (including freelancers).

Clearly, we’ve rapidly become a country of contingent workers.  It has greatly expanded over the last decade to include: “moonlighting,” cobbling together work through a variety of sources (i.e., having a part-time job plus temporary project-based work), temporary contact jobs (working full or part-time for a single employer for a limited time), or freelance business owners who are hired on to help an employer with their workload.

What has led to this explosion in contingent work? Several key factors have made it so prevalent in the last decade or so.  These factors include:

• Technology is making it easier to secure freelance work;
• Contingent workers generally make more money than regular full or part-time workers;
• Workers are seeking more flexibility and freedom (including where they work and live); and
• Despite the challenges of having to pay for their own healthcare, periods of isolation, and sometimes unpredictable salaries, contingent workers love freelancing.

Sometimes contingent workers become more attached to the client company that has contracted them than to their own employer. This creates misplaced loyalty and the contingent workers are sure to be disappointed and unclear about which organization should be meeting their needs.

Moreover, the issue of allegiance becomes a problem for the client company if co-employment results. This article will outline the pitfalls of contracting with contingent workers and suggestions to safeguard against creating a co-employment situation.

What is co-employment? Why is it an issue?

Co-employment exists when a client company’s relationship with the contingent worker takes on the characteristics typically associated with their regular full or part-time employees. In other words, the more control a client company has over how, when, and where the contingent worker does the client company’s work, the greater the likelihood a co-employment situation exists. 

When co-employment exists, both the client company and the contingent worker’s agency is liable for employment decisions made by the other. If a contingent worker files a legal complaint, both the agency and the client company could be responsible for any damages awarded.

How do you evaluate whether co-employment exists?

The IRS’s “right-to-control test” includes a set of twenty factors designed to evaluate who controls how work of a contingent worker is performed. The test presumes that the contingent worker controls the manner and means by which services, products, or results are achieved for the client company.  Keep in mind that a worker does not have to meet all 20 criteria to qualify as a client company employee versus a contingent worker – and no single factor is decisive in determining the status.

Briefly, the 20 factors include:

Level of instruction

Requirements for reports

Amount of training

Method of payment

Degree of business integration

Payment of business/travel expenses

Extent of personal services

Provision of tools/materials

Control of assistants

Investment in facilities

Continuity of relationship

Realization of profit/loss

Flexibility of scheduling

Work for multiple client companies

Demands for full-time work

Availability to public

Need for on-site services

Control over discharge

Sequence of work

Right of termination

How do you reduce co-employment risk?

Because issues of co-employment are directly related to a client company’s actions with contingent workers, these guidelines provide client companies with a solid foundation for avoiding co-employment.  

 

Do:

Don’t:

Train the contingent worker on the assignment to ensure they perform the job tasks.

Inform a contingent worker that they are suspended and/or terminated.

If the contingent worker engages in is a safety violation, address immediately them.

Discuss pay rates, increases, incentives, bonuses, etc. directly with the contingent worker.

Report any absences, tardiness, unacceptable behavior or any other policy infraction to the agency.  The agency needs to address directly with the contingent worker.

Discuss the possibility of becoming a regular employee of the client company with the contingent worker.

Refer all questions regarding pay, benefits, duration of assignment, or employment opportunity to the contingent worker’s agency.

Make offers of continued temporary employment to the contingent worker.

Inform the agency of the contingent worker’s requested schedule changes.

Discuss issues regarding absences, tardiness, unacceptable behavior or any other policy infraction directly with the contingent worker.

Assist the agency in evaluating the contingent worker.

Discuss performance concerns directly with the contingent worker.

Ensure appropriate supervision is available for contingent workers while client company employees are attending company sponsored activities.

Include contingent workers in client company events, all-hands meetings, team events and meetings, etc.

Encourage contingent workers to report all concerns they may have with the client company’s workplace to the agency.

Independently investigate concerns raised by client company employees about contingent workers.

Contact the agency when employees of the client company raise concerns about a contingent worker.  To the extent the agency needs information from the client company’s employees, cooperate and share facts so the agency can fully investigate the allegations raised against the contingent worker.

Interview contingent workers during a workplace investigation without express consent from the agency.

Conclusion

The key to ensuring insulation from co-employment situations is establishing governance of the relationship between the client company and the contingent worker. In sum, the client company must be willing to lose direct control over myriad of employment actions and regain it by indirect methods.  These methods include clearly defining the roles and responsibilities of the client company, contingent worker, and their agency; frequent communication between the client company and agency about the contingent worker; and the client company and agency need to appropriately partner to address concerns between employees and contingent workers.