With the rise of the gig economy, the Millennial workforce, and the ever present need for companies to manage overhead and headcount, the use of non-employee workers is more prevalent than ever. Non-employee workers include both independent contractors and other companies’ employees, such as staffing agency workers.
Both types of relationships create legal risks and hidden liabilities. The determination of whether a worker is your employee (or your joint employee) depends on the facts of the relationship and the legal test being applied — not on what the parties agree in a contract.
Different laws use different tests. A worker can be your employee under one test and an independent contractor under another.
Why does it matter?
Well, there are a lot of employment laws. (And employee benefit laws, and employment tax and withholding laws, and union organizing laws, and unemployment insurance coverage laws, and workers compensation laws. You get the picture.)
Employment laws generally apply only to your employees. These laws generally do not apply to legitimate independent contractors and outsourced labor. But if these workers are deemed to be your employees under the applicable legal test, then all of a sudden the whole list of employment laws that you thought did not apply, well, they apply. And presumably, since you thought they didn’t apply, you haven’t been complying with them.
The Internal Revenue Service (IRS), the Department of Labor (DOL), the National Labor Relations Board (NLRB), state governments, and the plaintiffs’ bar have made it a priority to attack the legitimacy of independent contractor relationships, claiming that many of these workers are really employees.
The use of staffing agencies and other companies’ employees poses another set of risks. If the worker’s primary employer fails to properly pay the employee, you can be held liable. Under the NLRB’s new expanded definition of joint employment, companies may be forced to bargain with employees of their staffing firms — or with mixed units containing employees of staffing firms and a company’s regular employees.
The risks of misclassification, and of joint employment, can be staggering and unexpected. Massive fines, penalties, and operational snafus can result, costing millions of dollars and threatening entire business models.
What Can Be Done?
Usually, there are steps companies can take proactively to avoid many of these risks, while still retaining the business benefits of using non-employee workers.
On this website, we will explore the various legal standards used to determine Who Is My Employee? We will examine new developments, trends, changes in the law, strategies, tips, and whatever else comes to mind.