Coemployment concerns centering around an organization’s treatment of contingent labor isn’t a new concept. Public cases at Nationwide Mutual Insurance and Microsoft resulted in millions of dollars awarded due to negligent behavior. Those headlines caused companies to look at how they treat non-employee labor to ensure risk is minimized. The truth is coemployment is difficult to prove.
Many companies’ initial reactions to combat coemployment came via tenure limits, different colored badges, and ramping up the use of staffing firms to be the employer of record for contingent staff. Unfortunately, making up arbitrary contract length and other “separation” rules does little to protect them. Employment case law rulings in the past show these protections have minimal to zero impact on defending against coemployment.
The notion that coemployment is a risk to be avoided is a somewhat archaic notion. There’s actually nothing inherently risky about it at all. In most staff augmentation situations, you have coemployment regardless of badging or tenure. These workers are in your building, using your equipment, being recruited to the organization in a similar fashion, and getting work direction. This is the very definition of coemployment.
Today, companies need a more strategic and meaningful approach to finding and engaging candidates that goes beyond typical staffing agency relationships. Enter the rise of direct sourcing—when a company sources their talent directly and not through staffing companies or outsourcing the function—and the concern over coemployment that comes with it. Some organizations worry about the use of its logo or brand to attract candidates and create a talent community from which to recruit resources. Others lament about using similar hiring methods including job boards or sites that seek both contingent and full-time hiring together. But as attorneys at law firm Michael Best state, “Whether an enterprise end-client is leveraged in the recruitment process (or not) is largely irrelevant in determining employment or co-employment status.”
They continue: “Contrary to conventional wisdom, co-employment relationships in and of themselves do not create liability. In fact, co-employment is lawful, very common, and often beneficial to all parties involved. Direct sourcing, and how it is conducted, is not an element in determining employment or co-employment status. How talent is recruited is not a factor, and whether the worker is told where they will ultimately be working, are not factors, and neither is the use (or non-use) of the ultimate enterprise end-client’s logo or name in the recruitment process.”
In fact, trying to protect yourself from coemployment can expose your organization to discrimination lawsuits. Companies may be unintentionally creating situations that are discriminatory—inviting reputational risk and damage to their brand that can also impact future hiring initiatives.
At the end of the day, how much work oversight a company gives to a worker and how they are classified are the biggest threats to coemployment. Direct sourcing in and of itself does not increase coemployment risk. Co-employment is a complicated, often misunderstood subject, and companies often attempt to protect themselves by putting themselves at even greater risk.