These slides are from the 9/10/08 Webcast:

Co-employment: Risks and Rewards

This webcast was sponsored by Aquent

Aquent is the only global staffing company dedicated to marketing and creative services organizations Our customers are industry leaders

90 of the Fortune 1002/3 of the Fortune 500

Other ServicesConsultingTrainingOutsourcingTranslationIT Solutions

Offices to help you across the globeNearly 70 offices in 17 countries40 offices in major metros across North America

Contact usaquent.com877 227 8368

Co-employment:How to Minimize Your Liability

Edward A. LenzSenior Vice President and General Counsel

American Staffing Association

The information in this presentation should not be relied on as legal advice. Experienced legal counsel should be consulted on specific matters relating to the issues covered.

Co-EmploymentCo-Employment

Economic advantages of flexible staffing outweigh co-employment risks—which can be minimized with proper management

Co-Employment DefinedCo-Employment Defined

A commercial relationship between two or more employers in which each has legal rights and duties as an employer with respect to the same employees

Allocation of ResponsibilityAllocation of ResponsibilityStaffing Firm’s Duties:

Pay wages and employment taxesDetermines wage rates and benefitsProvides workers’ compensationRight to hire, fire and reassignHandles employee complaints

Co-EmploymentCo-Employment

Client’s Duties:

Determines length of assignmentDirects employees’ day-to-day work activities

Co-Employment IssuesCo-Employment Issues

• EEO (Title VII, ADA, Workplace Harassment)

• Wage and Hour• Workplace Safety• Workers’ Compensation• Employee Benefits• Collective Bargaining

Other IssuesOther Issues

Employment Taxes Family and Medical LeaveI-9 VerificationAffirmative Action (EEO-1 report)

Equal EmploymentOpportunity

EEO - Protected ClassificationsEEO - Protected Classifications

Race; Color; Religion; Sex; National Origin; Age; Disability (plus others depending on state)

Title VII - Who’s Covered?Title VII - Who’s Covered?

Employers with 15 or more employees in each of 20 or more calendar weeks in current or preceding yearStaffing firms and clients generally must count regular staff plus assigned employees...but some courts have ruled otherwise

Title VII - Who’s An Employer?Title VII - Who’s An Employer?

Anyone who exercises right of control over the workerAny firm that can affect a worker’s job opportunities can be liable even if not an employer

EEO - Joint Duty Not To Discriminate EEO - Joint Duty Not To Discriminate

Staffing firms and clients should assume that both have a duty not to discriminate against staffing firm employees

EEO - Handling Discriminatory Orders EEO - Handling Discriminatory Orders

Staffing firms have a legal duty to refuse to assign employees to clients that discriminate

EEO - Workplace HarassmentEEO - Workplace Harassment

Employers may avoid liability if they:• Have anti-harassment policy and

procedures• Notify employees of procedures• Take prompt remedial action

Harassment ComplaintsHarassment ComplaintsStaffing firms should:• Conduct investigation• Assure confidentiality• Not retaliate • Involve client when appropriate• Give employee option of reassignment• Not send replacement unless problem is

resolved

Americans With Disabilities ActAmericans With Disabilities Act

Staffing firms and clients are co- employers under the ADA and neither may ask medical questions before a job has been offered

ADA - Medical QuestionsADA - Medical Questions

Staffing firms can assign another employee if timely accommodation can’t be madeCan ask about accommodation if disability is obvious or if applicant voluntarily discloses

ADA - Reasonable AccommodationADA - Reasonable Accommodation

Staffing firms and clients should share accommodation costsFailure by one to contribute may cause “undue hardship” to the other

Wage and Hour

Wage and Hour—Record KeepingWage and Hour—Record Keeping

Staffing firms have primary responsibility for keeping wage and hour records

Wage and HourWage and Hour

US Department of Labor says clients generally are “joint employers” for overtime

WORKPLACE SAFETY

Workplace Safety— Utilizing Employer Rule Workplace Safety— Utilizing Employer Rule

Client is primarily responsible for workplace safety and training

OSHA Record keepingOSHA Record keeping

Worksite employer must keep records of illnesses and injuries of temporary employees it supervises

Workplace Safety— Record keeping Workplace Safety— Record keeping

Staffing firms may keep records for clients, but the records must be kept in the client’s name

Workers’ Compensation

Workers’ Compensation— General and Special Employers Workers’ Compensation— General and Special Employers

Staffing Firms are “General Employers”

Clients are “Special Employers”

Client is “Special Employer” if:Client is “Special Employer” if:

Client supervises the work

Employee consents to relationship

Work done is that of the client

Immunity PrincipleImmunity Principle

In most states, staffing firms and clients are immune from tort liability if the assigned employee sues them for a work place injury

Clients May Not Be Immune If They: Clients May Not Be Immune If They:

Intentionally injure the workerDisclaim employer statusUse outsourcing services

Employee Benefits

Employee BenefitsEmployee Benefits

No law mandates benefits—except health insurance in Hawaii, Massachusetts, Vermont, and San FranciscoBut federal law requires that benefits be provided on a non-discriminatory basis to be tax qualified

Employee Benefits— Coverage tests Employee Benefits— Coverage tests

Employers must cover at least 70% of all lower-paid employees, OR

Cover a nondiscriminatory class of employees in which lower-paid employees get an average benefit at least 70% of the average benefit received by the higher-paid

Employee Benefits— Leased Employee Rules Employee Benefits— Leased Employee Rules

Clients must count “leased employees“ when applying coverage tests to their benefit plans, except group health plans

Definition of “Leased Employee”*Definition of “Leased Employee”*

Works under primary control of client, andWorks for client “substantially full-time” (generally 1500 hours) in a year

* Internal Revenue Code Sec. 414(n)

Leased Employees— Effect On Benefit Plans Leased Employees— Effect On Benefit Plans

Leased employee rules only require clients to count leased employees ─

not provide benefits to them

Leased Employees— Effect On Benefit Plans Leased Employees— Effect On Benefit Plans

Plans that continue to meet the coverage tests remain tax-qualifiedPlans that fail the coverage tests will lose some or all of their tax benefitsCould affect plan deferral ratios

What if Staffing Firm Provides Benefits? What if Staffing Firm Provides Benefits?

Clients must count leased employees even if staffing firm provides benefits

Client can take “credit” for staffing firm benefits when testing its own plans

Leased Employee Rules Have Had Little Impact Leased Employee Rules Have Had Little Impact

• Don’t require client to provide benefits• Don’t apply when leased employees are small

% (less than 5%) of client work force

• Don’t affect clients that cover large % of their employees

Vizcaino v. Microsoft Vizcaino v. Microsoft

Two issues presented:

Were the Microsoft workers independent contractors or employees?

If employees, whose were they?

Microsoft CaseMicrosoft Case

Involved 10,000 “independent contractors” and staffing firm employees assigned to Microsoft since 1987

Microsoft CaseMicrosoft Case

Court held Microsoft must provide benefits to any worker who: was a common law employee, and was not excluded from Microsoft 401(k) plan

Microsoft settled in 2000 for $97 million

Avoiding Benefits Liability— Clients should: Avoiding Benefits Liability— Clients should:

Minimize contacts with staffing firm employees to avoid common law employer statusExclude temporary, “leased,” or contract employees from their benefit plansConsider employee waivers

Minimizing Client Contacts— Staffing Firm Should Control: Minimizing Client Contacts— Staffing Firm Should Control:

Recruiting, screening, testing, and training (except worksite-specific safety training and orientation)Pay rates, benefits, and expense reimbursement Assignment and reassignmentWorkplace complaints and discipline

Benefit Plan ExclusionsBenefit Plan Exclusions

Clients should review their benefit plans with counsel to ensure that temporary, leased, and contract employees are clearly excluded

Employee WaiversEmployee Waivers

Courts have upheld temporary employee agreements to waive client benefits

Agreements should be tailored to particular client plans

Are Time limits the Answer?Are Time limits the Answer?

Length of assignment, alone, does not create benefits liabilityLimiting assignments does not reduce exposure in non-benefits areas, e.g., EEO compliance, workplace safety, wage and hour.“Churning” is not cost-effective and harms employees who need work

Union Issues

Union IssuesUnion Issues

Temporary employees, like other workers, have the right to join a union

Union IssuesUnion Issues

Job applicants should not be asked:

• If they belong to a union• If they plan to engage in union activity• Would vote for a union

Union IssuesUnion Issues

Employees should not be refused assignments based on union membership, activities, or sympathies

Temporary employees can’t be included in client bargaining units without staffing firm and client consent

Oakwood Care Center, 343 NLRB No. 67 (Nov. 19, 2004)

Collective BargainingCollective Bargaining

This webcast was sponsored by Aquent

Aquent is the only global staffing company dedicated to marketing and creative services organizations Our customers are industry leaders

90 of the Fortune 1002/3 of the Fortune 500

Other ServicesConsultingTrainingOutsourcingTranslationIT Solutions

Offices to help you across the globeNearly 70 offices in 17 countries40 offices in major metros across North America

Contact usaquent.com877 227 8368