Magazine article Workforce

Are Time Limits the Answer to Liability?

Magazine article Workforce

Are Time Limits the Answer to Liability?

Article excerpt

The Microsoft "retroactive benefits" lawsuit and similar cases have companies worried about their potential liability for employees assigned to them by staffing firms. Many are asking, "How long can I use your employees before I become an employer?" Some impose time limits on temporary assignments. But time limits may not be the answer to companies' liability concerns.

There are no black-andwhite answers when it comes to determining who's an employer. Length of service is never the sole issue. It's one of many factors in a test often referred to as the common-law "control" test. (For a list of the factors making up this test, see American Staff-ing Association Coemployment Handbook.) To complicate matters, different versions of this test are used depending on what area of the law is involved.

Because this test is complicated, companies are looking for a foolproof way to avoid getting into disputes over whether they are employers. Many think placing a "bright line" limit on assignments is the best way to avoid liability.

However, such limits may protect companies from benefits liability, but not from other types of liability-for example, for violating EEO laws. Moreover, "churning" workers is an inefficient way to use temporary help and doesn't work for organizations needing long-term staffing assistance.

Fortunately, there are practical alternatives that will serve companies better than cutting back on their use of temporary help or placing arbitrary time limits on worker assignments.


Microsoft got off on the wrong foot by classifying the workers in question as "independent contractors." After the IRS reclassified them as employees, Microsoft tried to fix the problem by placing them on the payroll of staffing firms. The 9th Circuit Court of Appeals held that this didn't change their status as Microsoft employees for benefits purposes. To make matters worse, Microsoft conceded in court that the workers were their employees. On these atypical facts, the court ruled that Microsoft must pay benefits.

Limiting Contacts With Workers

Companies should be able to avoid Microsoft's fate if they limit their contacts with the assigned employees to the extent necessary to ensure that the job gets done and leave just about everything else to the staffing firm so it can fulfill its role as employer.

For example, organizations should avoid recruiting, making wage and benefit decisions and providing worker training (other than site-specific safety training). Likewise, workplace complaints and injuries regarding assigned employees should be promptly reported to the staffing firm for action.

A recent federal district court decision in California (Burrey vs. Pacific Gas & Electric, May 12, 1999) recognized substantial employer responsibilities of the staffing firm and held that it, not the company, was the employer for benefits purposes despite the company's day-to-day involvement with the workers.

Time Limits

HR can impose time limits if they have concerns that the assigned employees may be considered their common-law employees despite efforts to minimize contacts. ERISA allows employers to write their retirement and 401(k) plans to expressly exclude employees who work less than 1,000 hours in a year.

Companies whose plans contain such a provision can exclude staffing firm employees by holding assignments under 1,000 hours. But there is an alternative to time limits that avoids disrupting the worker's assignment and the company's operations. …

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