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One of  the most important things recruitment back-office solutions should do for you is take on the employment liability associated with having contractors. The back-office should become the W-2 employer of record for your contractors and assume responsibility for all legal compliance issues. However, if the relationship between you, your back-office, your client, and your candidate is not properly established, you could be leaving the door to co-employment issues wide open.

When Do Co-Employment Issues with Contractors Arise?

Co-employment can occur when more than one party shares potential or actual employer responsibilities for an employee. If there is an employment law violation in a contract staffing situation, all parties deemed to be co-employers of the contractor could share liability.

If you are using a contract staffing back-office, you are likely doing so in part so that you will NOT share in that liability.  In order to avoid co-employment law issues, the back-office should have contractual documents in place with both the end client and the candidate (contractor).

The master agreement between the back-office and the end client should explicitly spell out that the back-office is the legal employer of the contractor. Otherwise, the employment of the contractor is left in question. You don’t want to take the chance that a government agency or court will determine that the client, or worse, you are the employer or co-employer of the contractor.

Complying with Co-Employment Law

To avoid the risk of co-employment, the master agreement should state that the back-office is the contractor’s  legal employer. It should spell out the responsibilities the back-office will assume, such as:

  • Payroll, including withholding and paying all applicable taxes
  • Complying with all federal, state, and local laws, including:
    • Title VII of the Civil Rights Act of 1964
    • The Civil Rights Act of 1966
    • The Equal Pay Act
    • The Americans with Disabilities Act of 1990 (ADA)
    • The Occupational Safety and Health Act (OSHA)
    • Wage and hour laws
    • Family and medical leave laws
    • Military leave laws
    • Immigration and naturalization laws
  • Offering Affordable Care Act-compliant benefits
  • Carrying the proper insurances policies (Commercial General Liability, Professional Liability, etc.)
  • Workers’ Compensation

The back-office should also have an employment agreement with the candidate. In this agreement, employees should acknowledge that they are not, under any circumstance, the employee of the end client. The agreement should require them to waive any right or claim to participate in the end client’s benefit benefits or compensation plans.

Don’t put your client or firm at risk.  Make sure that your back-office is putting the proper contractual agreements in place for each of your contract placements.

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