You are a co-employer. There. I said it. Co-employment is unavoidable in most contingent labor situations. In fact, that’s not a bad thing. Nevertheless, the very term causes many a staffing executive and procurement professional to pale. Believe it or not, however, there are benefits to being a co-employer. Here’s something I have learned from Eric. H. Rumbaugh, attorney with Michael, Best & Friedrich LLC and contributor to our CWS 30 newsletter.
In a co-employment situation, one of the employers of record — typically the staffing firm — will have workers’ compensation coverage in place. If that contingent worker were to become injured on the job, he or she cannot sue for damages. The worker’s claims will be limited to the caps established in its state workers’ compensation law.
Imagine if there was no coverage, though. There are no statutory caps on damages when you are hit with a common law bad faith law suit. When workers’ comp is involved, though, there are limits, and the nature of the co-employment relationship precludes the contingent from seeking further damages from the buyer. There are exceptions, such as in the case of gross negligence, but most companies are protected by their co-employer status.
What is also true in the contingent arena is that under the Fair Labor Standards Act (the federal law covering wages and overtime), in almost all cases, contingent labor suppliers and their clients are both jointly liable for violations. And adopting term limits is not a solution. If you are adopting term limits to avoid co-employment, you are chasing the wrong law.
How long a contingent worker has been engaged is not important in deciding whether co-employment exists in a particular case. The most important step you can take to avoid unintended co-employment liability is to understand what laws and policies apply. So make sure you have the benefit of good counsel.