The following information regarding staffing and co-employment issues will help clients understand how to minimize risks and make decisions in the best interest of their customers and shareholders.
By understanding the facts surrounding co-employment issues, clients are able to make informed decisions that will support their specific needs. Listed below are some key facts regarding co-employment that will help with that decision process.
- The definition of co-employment is a legal doctrine which applies when two businesses exert some control over an employee's work or working conditions.
- Co-employment issues can arise regarding discrimination laws, workers' compensation, occupational safety and health (OSHA), wage and hour compliance, family and medical leave rights, and labor management and benefits eligibility.
- Co-employment liability can result if a staffing service fails to perform its employer responsibilities or a client incorrectly assumes employer responsibilities.
- Clients can be jointly liable for overtime payment if they direct a staffing service employee to work overtime. A client is also liable for discrimination if it requests a staffing service to fill an order on a discriminatory basis. The staffing service can also be liable if it fulfills that request.
- Clients with pension plans covered by ERISA (Employee Retirement Income Security Act) should also consider whether they are affected by the IRS rule that requires temporary employees to be in their "headcounts" after the employee is on assignment for 1,500 hours to determine whether their plans meet legal requirements.
Additionally, having temporary workers on site, using client equipment, participating in company meetings and receiving reimbursable expenses directly from the client, all could lead to client co-employment liabilities.
The IRS also has guidelines it uses to determine whether there are co-employment issues. Outlined below are the three primary examples that they use.
Behavioral Control - These are facts that show whether the business has a right to direct and control. These typically include instructions given to an employee as to when, where and how to work; what tools or equipment to use; what workers to hire or to assist with the work; where to purchase supplies and services; what work must be performed by a specific individual; and what order or sequence to follow.
Training - An employee may be trained to perform services in a particular manner.
Financial Control - Facts that show whether the company has a right to control the business aspects of the worker's job include:
- The extent to which the worker has un-reimbursed expenses
- The extent of the worker's investment
- The extent to which the worker makes services available to the relevant market
- How the business pays the worker
- The extent to which the worker can realize a profit or loss
For a worker who is considered your employee, you are responsible for:
- Withholding Federal income tax
- Withholding and paying the employer social security and Medicare tax
- Paying Federal unemployment tax (FUTA)
- Issuing Form W-2, Wage and Tax Statement, annually
As companies continue to demand a skilled workforce to provide high quality services, co-employment issues can arise if clients aren't careful in defining their outsourcing requirements and understanding the benefits of utilizing external vendors for staffing and functional outsourcing solutions.
There are no clear cut answers to co-employment issues between the client and staffing company. However, TSG recognizes these issues and provides a variety of services that will alleviate many of the concerns surrounding co-employment issues.
Staffing Solutions to Co-Employment
- TSG adheres to all labor laws and follows the IRS guidelines for contract personnel. The employees (contractors) that we contract out to clients are managed by a TSG individual through one of our offices.
- TSG provides compensation to our contractors every week in the form of direct deposit. Health benefits are not offered which will differentiate them from permanent employees.
- If their assignment ends TSG will employ them elsewhere.
- While at TSG, contractors are encouraged to attend training classes or user group conferences in their specific discipline.
- TSG provides the employment umbrella that clients should expect as it relates to co-employment issues.
- On occasion, a client may request our cooperation in implementing on site staffing time limits for individual contractors. Although this doesn't directly address any of the employment issues outlined previously, it is a common practice, especially among large companies.
- TSG works closely with our clients to accommodate their specific needs. Some of our clients whom have hiring time limits of 11 months to 24 months. The issue with an 11 or 12 month timeframe for some clients has been efficiency and production. It is difficult to maintain a cohesive unit for delivering if the contractors, once orientated to the client, have to leave 4-6 months later.
- Over the years, TSG has worked with many companies, in all cases of successful solutions; a stable work force played a significant role. If the employment umbrella isn't met by the staffing company, then it doesn't matter whether the length of stay is 11 months or 24 months. The client, in this case, could be at risk for co-employment liabilities.
In conclusion, TSG provides solutions that allow our clients to focus solely on delivering quality work. Co-employment issues are eliminated when TSG provides outsourcing or staffing services for its clients.TSG has never been part of any co-employment litigation.