Protecting Your Firm and Client From Co-Employment

If you outsource the contract staffing back-office tasks or are considering doing so, it's probably because you are trying to avoid the liability associated with having contractors.

But without a properly established relationship between you, your back-office, your client, and your candidate, you could end up stuck with employment liability and responsibility.

Co-employment is when two or more parties share potential or actual employer responsibilities for an employee. If there is an employment law violation in a contract staffing situation, the liability could be shared by all of the "co-employers." 

You want to make sure this is not you . . . or your client. A key way to ensure that is to make sure your contract staffing back-office service has contractual documents in place with the end client AND the candidate (contractor).

Let's start with the master agreement between the back-office and the end client. A properly worded master agreement should leave no doubt who is the legal employer. In fact, it should specifically state that the back-office is the contractor's legal employer. It should also spell out the responsibilities the back-office will assume, including:

  • Payroll, including withholding and paying all applicable taxes
  • Complying with all federal, state, and local laws, including:
    • Title VII of the Civil Rights Act of 1964
    • The Civil Rights Act of 1966
    • The Equal Pay Act
    • The Americans with Disabilities Act of 1990 (ADA)
    • The Occupational Safety and Health Act (OSHA)
    • Wage and hour laws
    • Family and medical leave laws
    • Military leave laws
    • Immigration and naturalization laws
  • Offering Affordable Care Act-compliant benefits
  • Carrying the proper insurances policies (Commercial General Liability, Professional Liability, etc.)
  • Workers' Compensation

An employment agreement should also be in place between the back-office and the candidate. The contractor should acknowledge in this agreement that they are not, under any circumstance, the employee of the end client. The agreement should also have the contractor waive any right or claim to participate in the end client's benefit benefits or compensation plans.

The proper contractual agreements can go a long way to protecting you and your client from legal liability.  Make sure that your back-office has these contractual agreement with the end client and candidate so you don't have any surprises along the way.

Debbie Fledderjohann is the President of Top Echelon Contracting, Inc.

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