The Problem

An independent contractor has been working for a company onsite for three years. The worker is denied a full-time position, and then files suit claiming that he has actually always been an employee of the company.

What is the issue here? And why are the courts saying that Microsoft might now be liable for millions of dollars in benefits that were previously denied to its perm-a-temps?

The Solution

The courts have tended to follow the premise that temps are common-law employees of the client company, even if a temp agency is the employer of record. However, there are measures that executives can take to guard against claims by would-be employees. But you have to know what you're doing.

First, it's a good idea to review -- with experts -- your agreements with all staffing agencies and independent consultants. It's vital to establish exactly what the relationship isžand exactly what it isn't.

Secondly, examine your ERISA and other pension benefit plans to ensure that you have taken care to properly exclude non-employees. Remember: It is in your power, legally, to exclude populations of workers, even common-law employees. However, you must be sure to do so using appropriate language. The best way to do this, again, is to engage experts who understand this very complex relationship.

After you've put into place good controls on how you've engaged your temp workers, and how you've interacted with them, the last big issue is one that many firms, particularly in light of the tight labor market, have avoided confronting. How long can they stay?

"Length of stay" is an issue that many companies believe doesn't really apply to them, if the relationship they have with their temps is otherwise managed well. Others have instituted policies restricting temps to 1000 or 1500 hours a year, with a mandatory 90-day break in service before they are allowed to return.

In choosing a "primary" or Master Vendor staffing partner who can help you navigate the co-employment minefields, it's important to work with a firm that offers solid benefits programs for their workers assigned to you, and which is also actively involved in managing the employee-relations aspects of their employees on assignment. Make sure, also, that this firm maintains good internal controls on their staff's interaction with their temp workers on assignment.

In addition to a demonstrated capability to recruit the best workers, you should expect them to prove expertise in FLSA, ADA, state labor laws, and project management. Your staffing partner should also be on the cutting edge technologically -- they should be able to demonstrate proprietary technology that would enable you to access data on your temp workforce online and in "real time."

As in many other business decisions, choosing the proper partner can often make the crucial difference.

How to Face the Future

In a recent report, the Department of Labor confirmed the trend toward a "temp" workforce. Unfortunately, it also noted that this trend would be causing increasing legal difficulties for companies that use these workers.

If you follow the rules noted here, however, you won't have to worry -- even if your temporary workers are with you for several years.

The core issue here is a very simple one: Take control of the process yourselfžbefore it takes control of you.

Andrew E. Schultz is the president of PrO Unlimited, a Florida-based consulting and outsourcing firm specializing in helping companies address procurement, management, and compliance issues associated with the use of contingent workers. He has spoken at more than 300 seminars and conferences on these issues, in addition to presenting in-house workshops at many large and fast-growing companies. You can reach PrO Unlimited, with offices nationwide, by calling (toll-free) 1-877-PRO-1099, or at www.prounlimited.com.

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