Risks of Co-Employment
When an employer hires a temporary worker through a staffing company, both the employer and staffing company exert control over the worker. The employer determines the duties to be performed, the skills required and the duration of the assignment, but the staffing company should be responsible for recruiting, hiring, training, payroll, discipline and firing of the worker.
Often, the line can be blurred regarding which party is exerting more control over the worker—if it is the employer, then the worker is likely entitled to the rights of an employee, such as benefits, comparable pay, workers’ compensation, etc. Also, if the temporary workers are treated like employees in certain ways (eligibility for 401(k), benefits, inclusion in company events, etc.), then the employer could be charged with misclassification, and be subject to fines and retroactive employment taxes, workers’ compensation, benefits and more. Government officials have dramatically increased their oversight of employee classification, and penalties can be substantial for employers deemed to have misclassified employees.
Hiring independent contractors or temporary workers may be a smart business decision in certain circumstances, but it also poses significant risks—namely, the possibility of co-employment and misclassification of workers. Though it can be a tricky situation to navigate, employers should mitigate their risk by being diligent and preemptive in their handling of temporary workers.