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Minimize Liability By Implementing Policies

November 1, 1999
Related Topics: Contingent Staffing, Policies and Procedures, Featured Article
While employers benefit from the use of a contingent workforce, they must evaluate risks, and structure their policies to minimize legal liability.

Employers should consider "leasing" workers through a temporary service, or by dealing with independent contractors. From the outset, establish the relationship as a contingent one, rather than as an employer-employee relationship.

A temp service can recruit, select and refer a worker. When a worker is "leased" from an service, the service provides the pay and benefits to the worker. The decision to retain workers from such a service bolsters the employer’s decision to classify a worker as an independent contractor.

In addition, it’s wise, when possible, to retain workers from a temporary service that maintains a high amount of control over the day-to-day work of its employees. The more control the service retains, the less likely it is that a worker will be seen as a common-law employee of the leasing employer.

Companies also have the option of retaining independent contractors that aren’t "leased" from services, but be sure to contract with each potential worker on an individual basis, conduct background checks and secure and retain documentation to prove independent contractor status.

Companies should educate their managers about the type of relationship that should be maintained with contingent workers.

Each manager should be informed of the factors considered by the court in the Microsoft case to determine independent contractor status and should structure his or her relationships with independent contractors or contingent employees with those factors in mind.

Managers should remain cognizant of the amount of control they exercise over the work performed by contingent workers. Managers should be informed that if a temporary worker has been retained for a specific project, they shouldn’t be kept on once the project is completed. Rather, they should be rehired for a new project or as a regular employee.

Company policies and procedures should carefully distinguish the rights and obligations of contingent workers, the limits of those rights and obligations and their differences from the rights and obligations of regular employees. Pension plan documents should reflect that leased workers are not included in the definition of an employee and are not entitled to such benefits.

Vacation, health and other benefit programs should explicitly exclude independent contractors or contingent employees from eligibility.

Policies should also provide that the employer retains the discretion to interpret the plan provisions and benefits, and that such decisions are left to the employer’s sole discretion.

Workers must be informed of their status. Clear guidelines should be established that detail workers’ rights and obligations. Guidelines should also specify the type of project that a contingent worker has been hired for and the length of the project. Those guidelines must be strictly followed by the employer throughout the working relationship.

Workforce, November 1999, Vol. 78, No. 11, pp. 64-65.

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