Is Co-Employment Illegal?

Legally, co-employment simply means that companies share the responsibility of hiring and employing their workforce. Typically, there are defined roles within these processes to help keep companies following the letter of the law. Is co-employment illegal? However, the answer is “no,” but there are some rules and best practices that should be followed. 

Co-Employment Designation of Duties 

Typically, the staffing company that is the employer of record (EOR) is responsible for HR functions in a co-employment arrangement. This means they handle, payroll, benefits, personnel records, workers’ compensation insurance, or any terminations or post-employment processes. The client or business where the co-employment worker resides should handle providing day-to-day oversight of basic tasks as well as on-site safety and security. They should also designate the length of the contract itself. 

When these two areas mesh together well, there’s not much risk involved with a co-employment relationship. Problems can arise if the EOR didn’t pay the employee properly or if the employer created a difficult or unsafe work environment. The goal is for both the EOR and the company to fulfill these legal obligations for the worker, so that neither are in default of the rules of co-employment.  

State laws vary for co-employment rules. Some states hold both co-employers responsible if one of them defaults on the arrangement. That makes it extremely important that the employer partners with a co-employer that they fully trust and that has a track record of offering these services in a variety of industries. 

Generally, there are five key areas to watch to ensure that the co-employment relationships don’t fall into a risky grey area for candidates: 

  1. Work with a reputable, experienced EOR like FoxHire. 
  2. Consider having the staffing firm or EOR provide on-site supervision of employees in addition to the other services they offer. 
  3. If you’re using temporary workers, minimize contact and have the employee take any HR issues directly to the EOR, who is their primary employer. 
  4. Maintain a safe site for your entire workforce. 
  5. Avoid any discriminatory or otherwise unethical conduct. 

Avoiding Co-Employment Risk 

Following these rules reduces any risk of establishing and maintaining a co-employment relationship with your workforce. Co-employment then becomes a very effective way to engage independent contractors without the added hassles of HR and tax responsibilities. One way to run afoul of these rules is when contractors believe they are working enough hours to become a full-time employee. If this happens, both parties in the co-employment arrangement are at risk. Make sure you don’t require the independent contractor teams to work with full-time employees in the same types of jobs, for the same number of hours, and performing the same functions on-site at your company just like a full-time worker. This could lead to the contract employee feel as if they are being taken advantage of, and this could result in a lawsuit or non-compliance of the co-employment relationship. 

Avoiding co-employment risks starts with FoxHire. We’ve worked with organizations like yours for years to ensure positive co-employment relationships for your teams. Get to know us and find out how co-employment could benefit your organization.