Co employment laws can be a minefield for companies to navigate with the costs quickly escalating if companies don’t adhere to compliance. Court battles and fines await any company caught overstepping the mark when it comes to hiring contract staff. But employing contract workers is still a great way to scale your workforce quickly—if you do it correctly.
What is co employment? Co employment describes the legal relationship between two or more employers in which both have various legal rights and duties concerning the same employment. Co employment is common when companies use staffing agencies, like Sparks Group, to source, recruit, and employ talent that is placed at their company.
Here are four aspects of co employment laws not to be overlooked if contracting talent:
1. The Employer-Employee Relationship
There is nothing wrong with developing a good relationship with your contractors. But be aware of developing an employer-employee relationship. This means limiting the interactions you have with your contractors. Make it clear that all matters, such as pay, benefits and complaints, must go through the staffing agency. It’s also beneficial to have the staffing agency provide training for the work and to supervise performance where possible.
2. The Classification of Contractors
The first part of co employment laws companies need to get right is your classification of temporary and contract to hire staff. Use federal, state and government agency tests to ensure that contract workers correctly classify as contract workers. Go one step further, and have contractors sign documents, such as a W2 contract, that explicitly classifies them as contractors and not company employees.
3. The Exclusion of Benefits
Write all company benefit plans in a way that explicitly excludes all contract workers. Contrary to popular belief, it is legal to use exclusionary language in benefit plans, just as long as it isn’t discriminatory. Make sure legal counsel reviews these documents.
4. Extending Your Control
The most common pitfall for companies who employ contractors are extending their control. The IRS, along with many of the States, use a 20-factor common law test to determine the control a company has over their staff. If a contractor meets a majority of these criteria, the company is found to be their common law employer, and they will bear greater liability and responsibility for the contractor as a result. Revise these criteria and make sure that you do not fall foul of it.
Partnering with an experienced and trusted staffing and recruiting firm, like Sparks Group, is one way to alleviate co-employment concerns. At Sparks Group we have a wealth of experience assisting companies navigate the murky waters of co employment laws to ensure compliance and reduce the chance of any complex legal issues.
To learn more about co employment requirements or how to maintain compliance when working with a staffing agency, schedule a free consultation with a Sparks Group staffing and recruiting expert today.
***The information given in this post does not constitute as legal advice.***