As your small business grows, your staffing to needs grow, too. Maybe you need more help answering phones, filling orders, etc., or seasonal help when your goods or services are in high demand. Often, small business owners like you don't hire permanent employees, but rather they get the services of "contingent workers," or temporary help. Using contingent workers is popular because of the advantages they give you, like reduced administrative work, such as payroll accounting.
Nevertheless, there are potential risks involved in using contingent workers. Even though you might not think that you're an "employer" of a contingent worker, it's possible that you could still be held responsible under various state and federal ant-discrimination laws, such as the Americans with Disabilities Act (ADA), which makes it illegal for you to fire an employee based upon his or her handicap or disability.
Before you enlist the services of contingent workers, it's a good idea to get an understanding of exactly who contingent workers are, where you can find them, and some of the pros and cons of using them.
Who Are Contingent Workers?
Contingent workers are individuals who do not have an implicit or explicit contract for ongoing employment; they do not expect their jobs to last and consider their jobs to be "temporary." Contingent workers go by various names, including:
- Independent contractors, who typically are people in business for themselves and who identify themselves as independent contractors, independent consultants, freelance workers, or something of the like
- On call workers, who are called into work only when they are needed
- Temporary or leased workers, who are sent to you by some other agency or company on your request
Finding Contingent Workers
With the possible exception for independent contractors (who you might find by a referral from a friend or by looking in a telephone directory or online), or someone you hire through placing a "want ad" in your local newspaper's classified section, contingent workers usually come from:
- Temporary help agencies or temporary staffing firms, which actively recruit workers and train them for a variety of jobs. When the need arises, you contact one of these agencies and they will send workers to your site. It's usually for a short time or for a specific task or project. Also, typically you'll pay the agency for the worker's services, and the agency in turn pays the worker.
- Professional employment organizations or employee leasing companies, which, for a fee, take your employees and place them on their payroll and then "lease" those employees back to you, usually for an unlimited period of time. In addition to the fee, you also pay the worker's wages to the company. It's common for such companies to
"bill" you periodically for the wages.
Some Advantages to Using Contingent Workers
There are many advantages to using contingent workers instead of hiring permanent employees, including:
- You are relieved of all administrative responsibilities with respect to these workers, so, for example, you don't have to include them in your payroll accounting, withhold state and federal taxes from their pay checks, or keep employment records on them
- You don't have to give them the same benefits that you give to your permanent employees, such as health insurance and pension benefits
- You don't have to provide worker's compensation coverage for them
The temporary agency or leasing company does all of those things for you, and by doing so, your business can save a lot of money, not only because you have to provide fewer benefits, but also because you'll need and use less human and accounting resources.
Some Disadvantages to Using Contingent Workers
Sometimes, even though a contingent worker technicallyis not your "employee," you can still be held liable under a number of federal (and state) labor and employment laws. The critical question here is, who is the employer?
The basic test is "control" over the worker: if you control things like how the worker has to do a job, when he or she has to work, how much he or she makes, and if you have the ability to fire the worker, then for many federal labor and employment laws, it's likely that you'll be considered to be the
worker's employer. In addition, it's possible that you and the temporary agency or leasing company both have "control," and so you can both be considered "
joint employers."
For employers and joint employers of contingent workers, there can be liability under the ADA, if, for instance, you discriminate against a worker based upon his or her disability, or if a temp agency or a leasing company discriminates against a worker and you took part in the discrimination or you knew or should have known of the discrimination and did nothing to stop it.
For example, if the agency or the company improperly asks all potential workers/new hires if they have a disability (which is a violation of the ADA), and you know that it asks that question routinely, then you both can be liable for violating the ADA.
The Equal Employment Opportunity Commission (EEOC), which enforces the ADA, can give you detailed guidance on how the ADA applies to contingent workers.
You might also be liable under the Fair Labor Standards Act ("FLSA"), which is the federal wage and hour law. If, for example, you think you're hiring an independent contractor, but in reality, because of your control over the worker, a court finds that he or she is your employee, you can be liable for not paying that worker the minimum wage and overtime pay required by the FLSA.
Protect Yourself
One way for you to make sure that a contingent worker is not your employee for purposes of state and federal anti-discrimination and labor laws is to get it in writing:
If you hire an independent contractor, have him or her sign a contract that states explicitly that he or she is an independent contractor and not your employee
Similarly, have temporary or leased workers sign an agreement that states that they are not your employees
Make certain that your employee handbook, if you have one, clearly states that things such as benefits and wage schedules apply only to your employees and not to temporary, leased, or contract workers
Questions for Your Attorney
- What happens if the temporary agency or leasing company that provides me with workers files for bankruptcy?
- If I ask a temporary employment agency not to send me a particular employee, is that raising any control issues regarding who is the employer?
- Right now I'm the only employee of my small business. If I get some temporary help, do I need to get any type of additional insurance?