Contingent Workers: Who is Legally Responsible for Them?
Generally speaking, there are two types of workers – regular and contingent. Regular employees can be part-time, full-time, or seasonal employees that work solely for one legal entity. By putting regular employees on payroll, companies are assuming liability and the role of legal employer. Contingent workers, also called temps or temporary employees, include any worker that is contracted, leased, or borrowed by another company, usually a staffing agency.
There are advantages and disadvantages to both types of workers, but data suggests that companies tend to utilize contingent workers more in times of economic downturn for two main reasons. First, companies ultimately pay less for each temporary worker compared to a regular equivalent, which helps cut fixed payroll and insurance costs. Second, temporary employees allow companies to maximize their flexibility and become fully responsive to market changes. However, contingent workers bring an added liability that many companies do not realize.
Temporary staffing agencies are responsible for complying with all federal and state employment regulations pertaining to employment taxes, worker’s compensation, personnel record keeping, and complying with federal reporting measures. Although temporary agencies assume most of the liability for contingent workers, companies also assume some legal responsibility and liability for the temporary workers they utilize.
When companies choose to utilize temporary workers, they are engaging in a triangular employment arrangement between the contingent worker and the staffing agency. Anytime there is not a defined relationship between an employer and an employee, the lines of accountability and responsibility are obscured, which makes it difficult to assign total liability to one party in particular. Although the staffing agency is financially liable for the contingent worker, companies assume any liability related to on-site safety and fair treatment because the staffing agency is not in direct control of its clients’ working environments.
The following list identifies the three common mistakes business make that increase their risk for legal action initiated by staffing agencies, contingent workers, or federal/state agencies.
- Companies fail to provide the same break and lunch opportunities to contingent employees that re
gular employees have.
- Companies fail to enlist the same safety precautions for contingent workers, which is especially true for businesses in service or labor industries.
- Companies fail to monitor treatment of contingent workers by regular employees or other contingent workers, which includes failing to act on complaints by contingent workers.
To reduce the risk a small business assumes by using contingent workers, owners and managers must evaluate the working conditions for all employees regardless of which legal entity is acting as employer in the eyes of the law. Small businesses must ensure all workers, contingent or regular, are subjected to a working environment that is free from physical dangers or threats. Furthermore, all workers are legally entitled to be treated equally and fairly with respect to age, gender, race, national origin, skin color, marital and parental status, veteran status, and disability status.
In summary, when considering the advantages and disadvantages of utilizing contingent workers, it is critical for small business owners and managers to realize they are, in fact, assuming a liability by employing a temporary worker. Although businesses are not responsible for the administrative aspects, they are solely responsible for the working environment that a contingent worker experiences while on company property. By keeping this in mind when deciding whether or not to utilize contingent workers, businesses are in a better position to thoroughly and realistically weigh the benefits and risks of engaging in a triangular employment arrangement.