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Legal to have different benefits for employees in same job code?
Benefits & Compensation
Legal to have different benefits for employees in same job code?
Exchange ideas about health plans, retirement, work/life benefits, and employee assistance.
An employer is hiring some employees as "contract" employees but the employer does not use the term in the way you are probably accustomed. These "contract" employees are actually on the company's pay
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Forums » Topic Forums » Benefits & Compensation » Legal to have different benefits for employees in same job code?
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Legal to have different benefits for employees in same job code?
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Legal to have different benefits for employees in same job code?
posted at 2/26/2010 11:18 AM EST
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Posts: 4
First: 2/26/2010 Last: 2/26/2010 |
An employer is hiring some employees as "contract" employees but the employer does not use the term in the way you are probably accustomed. These "contract" employees are actually on the company's payroll, act as employees, and are in no way consultants. Usually these positions are created as "contract" because they are grant funded, but not always. These contracts can be ended at any time but are often continued each year.
In terms of benefits, these contract employees may or may not be provided with vacation time, or the option of participant in the health insurance plans, but usually are provided with these benefits. Unlike "regular" employees, they do not receive sick time, or jury duty pay. They perform similar duties to other regular employees. Do you think this is legal as the difference is not based upon age, sex, or disability status? |
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Legal to have different benefits for employees in same job code?
posted at 2/26/2010 11:25 AM EST
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Posts: 562
First: 11/12/2009 Last: 9/14/2011 |
You can run into severe legal issues on this. You might want to review the MicroSoft case from the mid - 90's in which "contract" employees sued on the basis that they performed the same work as regular employees yet did not receive benefits (health, 401k, etc). Many worked for as long as 2 years.
They successfully sued, and if memory serves it cost MicroSoft over $200MM. The real kicker came when, after winning that case, these same employees sued for the stock options they would've gotten had they been regular employees. And won that one, too. Check the summary plan descriptions of your benefits. Look at what the definition is of an employee eligible for benefits. If the description of these "contract" employees matches that definition, you need to provide them with benefits. As an alternative, you might want to consider having a 3rd part payroll these employees. |
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Legal to have different benefits for employees in same job code?
posted at 2/26/2010 11:39 AM EST
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Posts: 4
First: 2/26/2010 Last: 2/26/2010 |
Thanks Nork4. I remember that case. You have made me thinks of other pertinent facts you probably should have mentioned. This is a public employer (which doesn't mean things aren't done wrong sometimes) and the contract employees are included in the retirement plan. I will have to check the health SPDs - good catch. But since most of these contracts are provided with the insurance plan option, I think it will come down to the issue of different treatment related to sick time benefits, and perhaps that the positions are excluded from some other employee rights. Any other thoughts? |
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Legal to have different benefits for employees in same job code?
posted at 2/26/2010 11:42 AM EST
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Posts: 4
First: 2/26/2010 Last: 2/26/2010 |
Sorry - fixed typos -
Thanks Nork4. I remember that case. You have made me think of other pertinent facts I probably should have mentioned. This is a public employer (which doesn't mean things aren't done wrong sometimes) and the contract employees are included in the retirement plan. I will have to check the health SPDs - good catch. But since most of these contracts are provided with the insurance plan option, I think it will come down to the issue of different treatment related to sick time benefits, and perhaps that the positions are excluded from some other employee rights. Any other thoughts? |
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Legal to have different benefits for employees in same job code?
posted at 3/8/2010 5:56 AM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
You definitely need to check eligibility under all ERISA plans (health, 401k, etc). I am not so sure you can class this group out of eligibility...especially on the 401k, unless you do it by service length and even then there are maximums under the law -- but that service amount would have to be the same for all employees.
As for non-ERISA plans (like vacation time, etc), you can definitely have a different set of rules. But often times there are issues like morale issues if the two groups know they are being treated differently. You also need to make sure those different sets of rules aren't leading to disparate impact issues (say most of the grant/contract employees are women for example). |
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Legal to have different benefits for employees in same job code?
posted at 3/9/2010 5:48 PM EST
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Posts: 1047
First: 4/11/2002 Last: 9/14/2011 |
What if your employer didn't call this class "contract" employees, but came up with a different term? I would imagine one of the caveats of calling this class of employees "contract" would be conotation vs. denotation, as well as prudent or lay person understanding. |
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