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Side-Stepping the Co-Employment Trap 1: What is Co-Employment?

Debbie Fledderjohann November 7, 2013

August 22, 2011

Contracting offers employers the flexibility they need in this economy to easily adjust their workforce to their business needs. But some employers are gun-shy about utilizing contractors out of fear of co-employment issues. In this series, we will examine the co-employment risk and how your client companies can minimize that risk when utilizing contractors.

Co-employment exists when two or more legally separated employers share potential or actual employer responsibilities with common employees. Sometimes this is intentional, such as in PEOs (Professional Employer Organizations) where a company outsources the majority of the employment tasks to an outside agency but retains the right to direct and control its workers.

When a company wants to utilize contractors, they do not want to enter into a co-employment arrangement.  They want someone else to take on all of the employment responsibilities and liability.  But when done improperly, contracting can actually create a co-employment relationship in which the client company could end up retaining some of the liability for their contractors.

Case in point: Several years ago, Microsoft settled a case for $97 million in which a group classified by Microsoft as temporary workers claimed they were actually common-law employees entitled to benefits. This well-known case has become a cautionary tale for companies who utilize contractors. It has made some companies reluctant to utilize contractors for long periods of time because many of the workers involved in the Microsoft case had been with the company for years.

But contracting does not have to create co-employment issues if companies are careful about the way the contract assignments are structured.  We will discuss which factors really do create co-employment risks and how your clients can avoid those risks.

This article is for informational purposes only and should not be considered legal advice.


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