by: Rebecca Blankenship, Vice President Human Resources


Reducing Gray Areas in Co-Employment

Some say there are 101 distinct shades of gray. A computer offers up 256 variations on gray. Scientists say the human eye can actually distinguish more than 500 different shades of gray. If you are responsible for your organization’s workforce, any gray area can be problematic. One of the biggest gray areas for HR managers is the ambiguity—and the potential risk—around co-employment when part of your workforce is contingent.

Where Is the Ambiguity?

If you are coloring inside the lines, it is easy to lay out who is responsible for what in a contingent workforce scenario:

  Staffing Agency Employer   Joint Responsibility   Client
  • I-9 Verification
  • Employment Taxes
  • Employee Benefits
  • Wage and Hour
  • Workers’ Comp
  • FMLA
  • EEO
  • ADA
  • Workplace Harassment
  • Communication
  • Workplace Safety
  • General Work Direction


Pretty clear, right? Yet when staffing agency employees are placed on assignment with a client organization, confusion can arise about who the actual employer is?.

The “formal” relationship between the contingent worker and their employing staffing agency and between the contingent worker and the client they support may be clear as glass, but the more informal, real-world workplace can cloud the picture.

While the workers are employed and paid by the staffing agency, the work they do is for the client. From the very first day on the job, through their on-boarding process and introductions to the client team and the work assignment, they are made to feel welcome in the client workplace. The people with whom they work are client employees. The supervision of their work is usually provided by client managers. They often work onsite at the client’s facility; they carry a badge with the client’s logo; they drink the client’s coffee; they eat in the client’s employee cafeteria; they receive email via a client email address; they attend meetings with client employees and business leaders. It’s easy to understand why there is confusion. That lack of clarity can be equally applicable to independent contractors who pay themselves, based on statement of work contracts they enter into with a client.

What Is the Risk?

That is the question painfully answered for Microsoft about a decade ago, when it was fined $100 million over co-employment issues. As the size and strategic value of the contingent workforce has grown in recent years, so too have state and federal resources been expanded to root out co-employment and misclassification issues. Beyond the additional tax dollars that might be captured by various government agencies (estimated several years ago by the Government Accountability Office at nearly $3 billion annually for the federal government alone), a negative ruling in court can carry a hefty price tag. In addition to legal fees and court costs, a company might have to lay out funds for repayment of lost wages, overtime or benefits.

What is most clear about the difference between employee and non-employee is that it is definitely a blurred line, making it important to know when and when not to include contingent workers in client initiatives.

Mitigating the Risk

The need to carefully distinguish who is responsible for what, beyond basics such as wages and workplace safety can help alleviate joint employer responsibility. For example:

  Staffing Agency Employer   Client
  • Communicates assignment, reassignment, etc.
  • Conducts employee orientation
  • Handles temp worker related issues
    • Attendance
    • Complaints
    • Investigations
  • Handles performance management, coaching and disciplinary action
  • Counsels on issues relating to career development
  • Releases from assignment
  • Provides Client specific training
  • Furnishes tools, materials and equipment necessary to perform job
  • Controls general working conditions


Additional guidelines to cover in any contingent labor contract might include:

  • Contingent workers cannot act as supervisors who approve contract worker time and expense.
  • No contingent worker can participate in client-sponsored employee programs.
  • No contingent worker can be issued a client credit card or business card with the client logo.
  • Any company announcements or directives that affect contingent workers should be communicated to this population separately from employed staff.
  • Contingent workers should report anticipated late arrivals and absences to the staffing agency, who should, in turn, inform the client supervisor.
  • Any reimbursable expenses should be paid to the staffing agency, never directly to contingent workers.

Ensuring Competitive Advantage Rather than Compliance Risk

Keeping all of this straight is a chore when you deal with a single staffing agency or independent contractor. The opportunity for miscues is huge when you partner with multiple staffing agencies and independent contractors, and with many contingent workers reporting to client supervisors in different areas of the business—all of whom must not only know the rules of engagement but how to apply them appropriately in the everyday workplace. The need to mitigate this potential risk is one of the most compelling reasons that so many businesses partner with a managed service provider (MSP). When an MSP manages your contingent workforce program, rules are clearly and comprehensively communicated and compliance tracked, so that your use of contingent labor creates competitive advantage rather than compliance risk.

Still Have Questions?

Contact Bartech to learn more about contractor risk mitigation, or to explore whether an MSP is right for your organization.