U.S. businesses spend more than $425 billion per year on contingent workers, according to the Staffing Industry Analysts Contingent Workforce Estimate of October 2009. Of that, independent contractors account for $243 billion, temporary workers from staffing firms make up $93 billion and other temporary workers add $89 billion. Economists and business leaders predict this trend will continue and expand.
Why do companies rely so heavily on contingent workers? Because they let employers expand their capabilities in focused areas where demand is great and contract their services where demand has cooled. The expectation is the transaction costs associated with variable staffing levels will be reduced. However, U.S. laws impacting the proper classifications of workers, and whether multiple entities should jointly be held responsible for compliance with worker rights are complex and wide-spread. Importantly, the consumers and providers of staffing and contingent worker services often assume radically different levels of legal risk depending on the nature of the contractual relationships, the degree of quality control and operational responsibility exercised, and the location of where the services are provided.
There are essentially four different ways a company can engage a worker through a third-party provider:
- the worker is an employee of both the provider and the client;
- the worker is an employee of the provider and an independent contractor of the company;
- the worker is an independent contractor of the provider and an employee of the company; or
- the worker is an independent contractor of both the provider and the client company.
Every major federal and state labor and employment law has distinct and unique methods for determining whether a joint employment or co-employment relationship exists. In general, courts will strive to find joint responsibility for compliance with worker rights and related tax and pay practice obligations. Similarly, many state legislatures are enacting new laws directly regulating the obligations and rights in these relationships in an effort to capture identified lost revenue streams. The consequence is a plethora of federal and state regulation, with often similar but rarely identical rules and obligations. This is particularly challenging for multi-state employers, PEO's and staffing companies.
Littler’s Staffing and Contingent Workers Practice Group has extensive legal experience in every facet of these relationships. We provide legal consultation and legal implementation of the initial work-force design, including legal risk assessments of business staffing options, drafting and revising associated contracts, and preparing model contractor and master service agreements. Littler can provide legal exposure assessments and audits of existing staffing and contingent worker relationships prior to the receipt of an audit or lawsuit. Littler also provides experienced legal representation defending clients in such relationships in lawsuits, arbitrations and governmental audits and assessments.
Littler has deep bench strength nationally representing both consumers and providers of staffing services or other contingent workers. Regardless of whether the legal issues involve: tax assessments, unpaid wages or overtime, bargaining relationship obligations, benefit plans, worker safety, equal employment violations, FMLA, ADA, WARN or any other employment issue – we have the experience to defend cases, help address client questions, and offer practical advice regarding the contingent workforce.