SI Review: February 2012

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Research Report: Out of time

By Craig Johnson

More than half of large buyers say they let go of contingent workers because of assignment limits, according to a new survey from Staffing Industry Analysts, the publisher of this magazine.

Buyers cited several reasons for time limits. They included workforce planning issues as well as other matters that ranged from “union agreements” to the “historical decision of previous managers.” However, a majority of buyers cited “legal/co-employment risk” concerns.

Typically, a term limit means a temporary employee can no longer work at a staffing buyer after a set amount of hours on the job. Workers may be allowed to return after a set period of time away, in some cases.

The American Staffing Association released an issue paper aimed at dispelling legal myths over the need for time limits. Opponents of time limits also say they may cause buyers to lose good contingent workers. In addition, they say the limits impose extra costs in the form of recruitment and onboarding of the new workers.

On the other hand, we see a significant percentage of large staffing buyers follow time limits, citing reasons from their own legal counsel — 66 percent, according to the survey.

“We have a defined separation in order to reduce co-employment issues,” one buyer wrote in the survey. “The policy is set by our legal department to reduce co-employment risk to the organization,” another buyer wrote.

The specter of the lawsuit Vizcaino v. Microsoft also lingers. In that case, from more than a decade ago, independent contractors sued Microsoft after an IRS audit ruled they were common law employees. The workers sued the company for unpaid benefits, although they had agreed in writing that they would not be eligible for such benefits, explains Eric. H. Rumbaugh, an attorney with Michael Best & Friedrich LLC who advises employers on employment and benefits law matters. Microsoft ended up settling the “retrobenefits” case for $97 million.

Still, Rumbaugh goes on to say that concerns that arose in that lawsuit can, in most cases, be resolved through thoughtful benefits plan design.

More than Half Do

Regardless of the reason, 66 percent of buyers say they let go of some portion of their contingent workforce in 2011 because of time limits, according to the survey, which included 236 staffing buyers from large firms that employ more than 1,000 people.

Twelve percent of buyers reported they let more than three-quarters or more of their contingent workforce go because of time limits.

More than half of buyers say they cut loose between 1 percent and 75 percent of their contingent workforce because of time limits. Just 34 percent say they didn’t let any contingents go because of time limits.

Abundance of Caution

R. Matthew Cairns, an attorney with Gallagher, Callahan and Gartrell in Concord, N.H., says time limits can be used out of an abundance of caution.

“The longer the temporary worker is there, the harder it is to try to distanceyourself from them and say they are not really your employee for benefits or liability purposes,” Cairns says.

Also, for smaller firms that are staffing buyers, bringing on board temporary workers who work more than set periods of time may bring them under the purview of laws such as the Americans with Disabilities Act and the Age Discrimination in Employment Act, he says.

The survey by Staffing Industry

Analysts covered only large firms, and a lion’s share of the legal concerns stemmed from co-employment concerns.

With long-term contingent workers, some have questioned if a temporary worker on the job for several years is really a temporary.

However, time limits are one thing. A report by employment law firm Littler Mendelson says the level of control an employer has over the worker is a more important factor to the IRS in determining employment status.

Level of Control

“Determining whether joint employment relationships exist for the purpose of legal liabilities is a fact-specific inquiry,” according to the report “Term Limits for Contingent Workers: Urban Legend or Necessary Fix,” by George Reardon, William Hays Weissman and Neil Alexander of Littler Mendelson. “Certainly, working engagements lasting many years will be scrutinized by courts and by federal and state agencies. However, for most employment claims, it is the level of control exercised over the worker that is determinative of liability, not length of relationship.”

Potential liability under the Family and Medical Leave Act and benefits plans are the most common explanations for time limits, according to the report. However, term limits won’t insulate buyers from the vast majority of employment law claims, it says.

The most effective way for staffing buyers to avoid retro benefi ts is to modify their benefits plans and employment policies to clearly distinguish between direct employees and contingents and exclude all but the direct employees, according to the report.

Also, the myth that contingents would need to be hired directly after a period of time has no basis in the law, according to the report.

Not All About Legal Risk

Not all staffi ng buyers in the survey cited legal risks as a concern, though. Workforce planning ranked as another reason for term limits.

“Proper resource planning and budgeting — to distinguish between true temp work and full-time ongoing long-term demand,” was cited by one buyer in the survey among reasons for term limits. “We should be able to replace the temporary worker with a traditional worker within a certain time frame and/ or evaluate cost,” wrote another buyer.

Time Limits Here to Stay?

Regardless of the reason for time limits, surveys suggest their use is increasing.

The number of buyers saying they let temporary workers go because of time limits in 2011 — 66 percent — was up from 55 percent who said they had assignment limits in 2009, according to a survey of staffing buyers in that year by Staffing Industry Analysts. Fifty-one percent reported having time limits in 2006.

Craig Johnson is managing editor, staffing publications, at Staffing Industry Analysts. He can be reached at cjohnson@staffingindustry.com. For more information on staffing buyer research, contact memberservices@staffingindustry.com.

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