This article accompanies Contingency Plans
Not surprisingly, the biggest time bomb awaiting employers who hire contingent workers is potential litigation.
HR must make a clear distinction between permanent and contingent workers. If a temporary worker believes he or she is being treated as a company employee, the next step could be a lawsuit claiming the right to employee benefits.
Employers are still haunted by the memory of the class-action suit filed in the 1990s by independent contractors at Microsoft Corp. Despite signed agreements identifying them as independent contractors, they argued successfully that they did the same work as permanent workers and were entitled to the same benefits. They settled for $97 million.
"[If] companies are not mindful as to how they are using their contingent workforce, they could face significant legal and financial risks. Perhaps chief among these risks are costly claims for benefits filed by such workers that could range from a few thousand dollars to -- in the case of class-action suits -- millions of dollars," says Daniel Janich, an employee-benefits attorney with Greensfelder Hemker & Gale in Chicago.
Janich advises employers to clearly distinguish regular full-time employees from both independent contractors and leased employees "with respect to the type of work being performed, how it is performed, what support is provided for performing the work and how the worker is supervised."
Talk with a benefits lawyer to make sure the company benefits plan spells out exactly who is entitled to what benefits, no matter how long he or she is on the job. A waiver of benefits won't protect the firm in a lawsuit, warns Jodi Johnson, an employment attorney with Monroe Moxness Berg in Minneapolis.
Then, read the staffing-agency contract for hidden fees and liabilities. Even though the staffing agency is the employer of record, the hiring company must comply with federal and state laws that cover hourly wage and overtime, discrimination, disabilities, equal opportunity and job safety, as well as the Family and Medical Leave Act.