Whitepaper - Complying With Regulations Regarding Temporary Workers

7/30/2019 Whitepaper - Complying With Regulations Regarding Temporary Workers

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Complying with regulations for temporary worke

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Complying WithRegulations RegardingTemporary Workers

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COMPLYING WITH REGULATIONS FOR TEMPORARY WORK

The use of temporary workers is growing in the United States, now represenng 22% of the total workforce. Temporary workers

referred to as freelancers, non-employees, indirect workers, agency contractors, consultants, interns, independent contractors,

many other terms. They include all Individuals who take on an assignment bounded by me or by compleon of a deliverable, andtypically ulized to ll gaps in a companys skill set or to cover for temporary vacancies. Temporary workers may be hired as self-emplo

freelancers or as individuals placed through a stang agency, but they are not employees of the client company that uses their servi

These individuals may work part or full-me, and assignments may last from one day to several months.

The Department of Labor (DOL) administers and enforces more than 180 federal laws that govern employment in the U.S., and ne

all of these apply in some manner to temporary workers. Employment laws regulate hiring, wages, hours and salary, discrimina

harassment, employee benets, paid me o, job applicant and employee tesng, health and safety, privacy and other workplace

employee rights issues.

Unfortunately, many federal and state employment laws were passed during a me when the predominant working relaonship was

in which a worker was a full-me, permanent employee of a company. The applicability of secons of each of these laws to tempo

workers is oen unclear, challenging companies to properly interpret the law as it pertains to all of their workers.

The rst challenge is to determine whether an individual is viewed by the government as a temporary worker or as a perman

employee.

The IRS and many individual States specify criteria to be used to make this determinaon. If the independent contractor tend

work under minimal supervision, using tools and experse applicable to other organizaons, invoicing for goods or services rather t

straight hours of work, and providing a funcon extraneous to the organizaons core operaons, the contracng company is less li

to be viewed as an employer.

The governments focus on this issue has never been greater, and companies found to have misclassied workers face severe pe

es. Why? A great deal of the tax revenue that funds ongoing state and federal government funcons comes from employer collec

income taxes. The government has an ongoing interest in increasing and speeding up the income tax collecon process. Self-emplo

workers (i.e., freelancers or independent contractors) are required to pay taxes quarterly rather than during each pay period, slow

the governments receipt of funds. In addion, independent contractors do not contribute to unemployment, workers compensa

and state-funded disability programs. Chronic and high unemployment has reduced the overall tax base, and has largely drained s

unemployment insurance (UI) funds and most states are borrowing from the federal government to meet benet needs.

As a result, during the past few years the U.S. Department of Labors Wage and Hour Division (WHD) has spearheaded

employee misclassicaon iniave, partnering with other Federal and State agencies to bolster its enforcement of independ

contractor compliance. Hundreds of addional inspectors have been hired to uncover misclassied workers and recover taxes, fees

nes. To date, 14 states have joined the misclassicaon iniave.

If a court decides that an individual designated as an independent contractor is really a regular employee, the worker must receive

benets he would have received had he been classied correctly. This could include health insurance, life insurance, rerement beneeligibility for leaves of absence, and stock opons. In addion, the employer faces heavy nes.

The Compliance Challenge

What constutes a permanent employee vs. temporary worker?

he 50 Employee Ruleompanies that reduce their permanent headcount below 50 while increasing the number of contractors may be targeted by the DOL. Aud

e used to determine whether the reducon is to avoid compliance with the Family and Medical Leave Act (FMLA) and Paent Protecon

ordable Care Act (PPACA).]


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Dos & Donts When Using Independent Contractors

Have the Purchasing department drive the selecon

process

Issue a Request for Quote (RFQ) and have potenal

independent contractors submit bids

Require copy of business or professional license, copy

of insurance cercates, copies of the independent

contractors adversing, and copy of the contractors

business card and staonery

Require the contractor to complete a W-9

Establish a wrien Statement of Work specifying scope

of work for a specic duraon. Include appropriate

indemnity, aorneys fees, and liability clauses

Pay pre-negoated fees for tasks or projects

Require the contractor to supply his or her own workers

compensaon insurance

Retain records of all transacons with the contractor, suchas contractors invoices for billing

Require the contractor to supply his or her own equipment

and tools

Provide training specic to job or company procedures

Periodically review contract compliance

Require independent contractors to show evidence that

they are serving other clients

Retain W-9 for four years for future reference in case of any

quesons from the worker or the IRS

Have Human Resources or Line Managers drive the

selecon process

Ask the independent contractor to complete an

employment applicaon

Allow independent contractors to enroll in any

company-sponsored benet plans

Require the contractor to complete a I-9

Have contractors perform similar work of employees

or perform roune work

Pay by the hour, week or month unless a at fee is

agreed to be paid at regular intervals

Pay independent contractors from a payroll account

Pay contractors for any company holiday

Pay contractor expenses

Provide an employee handbook or oer connuing

educaon training

Conduct performance evaluaons similar to

employee evaluaons

Transion employees to independent contractors,

especially if the work remains largely the same

Retain unneeded records that have met the four-year

retenon requirement unless pares are involved in adispute that has not yet been reconciled

DOS DONTS


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The risk of misclassifying a worker as an independent contractor can be reduced by hiring temporary workers through a sta

agency, where the agency is the workers employer of record. However, under many laws the employees are treated as having

employers the stang agency and the client that ulizes their services and both companies can be liable under Federal and St

equal employment opportunity laws.

Courts will consider who exercises the most control over the employee(s), examining who has authority to hire and re, make

assignments or placements, make payroll, and provide benets. The primary employer is responsible for communicang required noce

the employee, providing leave, maintaining benets, and restoring the employee to employment aer leave, while the secondary employ

responsible only for refraining from discriminang, retaliang, or otherwise interfering with an employees FMLA rights.

The courts have seen a surge in the number of temporary workers ling ligaon against companies, claiming to have b

permanent employees rather than conngent workers. Federal laws state that employees who log over 1,000 hours in a 12-mo

period are entled to parcipate in the employers pension or rerement program. By reaching that me served threshold, w

ers may also be entled to medical or other benets. In response, many companies believe that by seng tenure limits they are

tected from co-employment claims. While this acon may help in defending against such a claim, it is not sucient to prove a tempo

worker status.

Who is the Employer of Record, and is there a secondary employer?

Safeguard Against Co-Employment ClaimsDocument all agreements

Establish eecve policies and

processes

Train your sta employees

Consider using a managed services

provider

Establish clear contractual terms with suppliers which indemnify you in the event of any worker viola

Make sure that the supplier can be held responsible for failing to meet the various employer obligaons,

workers compensaon insurance and the misclassicaon of workers

Have suppliers acknowledge their understanding of roles and responsibilies

Ensure that suppliers provide signed acknowledgement of the companys non-discriminaon pol

armave acon plan, and sexual harassment policy, and that they in turn have all contractors sign th

versions of these documents

As a condion of assignment commencement, suppliers should have workers acknowledge in wring t

the supplier is the sole employer of record and that the non-employee is not entled to and will not seek benets of the company

Specify that the supplier is solely responsible for candidate screening, negoang the oer, onboarding a

ooarding the worker, and dealing with any performance issues

Establish an issue resoluon process in which the supplier solely addresses contractor performance issues

Audit suppliers screening, oer negoaon, onboarding and ooarding procedures to verify complian

with your processes

Do not include contract workers in standard company reward and recognion programs. Have the suppl

host separate events for them

Create a detailed process that delegates which pares within the company are responsible for which tasAppoint a single individual responsible for touching base with the stang agency regarding contract detai

Assign a single individual to train managers and internal employees on appropriate business relaonsh

with non-employees

Highlight the types of interacons and conversaons that are appropriate to have with contract employ

and those that open up the company to co-employment risks

Having a single point of contact for vendor management, processes and procedures will help ke

communicaons clear and provide an addional level of visibility and risk migaon. A managed servi

provider can also monitor compliance, quality and vendor performance

COMPLYING WITH REGULATIONS FOR TEMPORARY WOR


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Beware of the Shades of Grey

Once your workforce has been properly classied as independent contractors, agency contractors or permanent employees, what other issues

must be addressed to minimize risk of legislave non-compliance? Consideraon must be given to each major regulaon to determine potena

areas of liability. To further confuse maers, employment ligaon case history is also inconsistent, as the outcome of many legal challenges has

been based on the interpretaon of how companies interact with temporary workers and their suppliers.

The vast popularity of web technology and social media provides companies with unprecedented levels of publicly available and readily

accessible informaon about a prospect or employee. While this enables companies to beer screen applicants, track employee

producvity, and create online corporate communies, companies are at increased risk of running afoul of internaonal, federal and state privacy

and informaon security regulaons.

To avoid lawsuits alleging discriminaon or violaon of the Fair Credit Reporng Act or State laws prohibing acons that can result in failedcondenality measures and alleged discriminaon, companies should take the following steps:

The Occupaonal Safety and Health Act (OSHA) is intended to make companies take the right precauons and provide a sasfactory working

environment to prevent people from being harmed at work or becoming ill.

Who is covered under OSHA? The government interprets the term employee to include supervisors, partners, corporate ocers, forme

employees, applicants for employment and employees of other employers. In essence, it applies to everyone who has conducted, is conducng

or may conduct work at each facility.

Who is held responsible? The Occupaonal Safety and Health Review Commission (OSHRC) stated that an employer remains accountable

for the health and safety of its employees, wherever they work, and cannot divest itself of its obligaons under the Act by contracng its

responsibility to another employer. As the Employer of Record, a stang supplier is jointly liable for the safety of its contract employee

when they are assigned to a client site.

To minimize this liability, many stang agencies parcularly those that place light industrial workers will conduct a safety walk-through o

each hiring locaon prior to subming a bid to source workers.

Safety training, conducted by the contract workers employer of record and/or company safety ocer, should be a mandatory component of any

onboarding process prior to the commencement of the engagement.

Areas providing the greatest pialls include:

Complying with safety requirements

Protecng worker privacy

Avoiding discriminaon

Downsizing iniaves

1. Provide copies of your discriminaon, harassment, and condenality policies to suppliers and independent contractors.

2. Develop policies that clearly idenfy the informaon sources that will be used in the applicaon screening process, the

standards for evaluang that informaon and the procedures that will be followed for obtaining the informaon.

3. Have all suppliers and independent contractors acknowledge in wring their understanding of your policies and their

commitment to adhere to the stated processes.

4. When using VMS technology, select systems that provide role-based informaon access and that serve as a repository

for needed documentaon but only provide required levels of informaon (e.g., drug tests should be pass/fail, with

no specics provided).

5. Make certain that the company does not receive any unnecessary informaon about conngent workers.

6. Maintain worker informaon for the required period of me, and then purge data.

OSHA Safety Standards Apply to ALL Workers

Protect Worker Privacy



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Temporary workers will oer some protecon from discriminaon liability to the extent that hiring, ring, salary determinaons, discipline, and

discharge are made by the stang agency. In fact, current EEOC guidance recognizes that a stang company is responsible for compliance with

the Americans with Disabilies Act (ADA) since the employee is completely under the control of a stang company.

All companies should have a company-wide andiscriminaon policy. However, requiring that suppliers and their contract workers comply with

a companys an-discriminaon or harassment policy may increase the likelihood that the company can be viewed as a joint employer with the

stang agency.

When entering into contractual arrangements for conngent labor, avoid co-employment claims while ensuring compliance with discriminaon

policies by following these guidelines:

The approaches used to downsize permanent sta can violate the Federal Worker Adjustment and Retraining Nocaon Act (WARN). This Act

requires 60 days prior noce (some States require 90 days noce) if a site terminates a certain number of employees. While on the surface this

Act would not appear to impact the temporary workforce, risks occur when

When the DOL issued its WARN regulaons, it spulated that advance noce is required when a company subcontracts part of its operaons

to a service provider, transfers employment of employees from itself to the service provider, even though the employees involved do not lose

a days work (they just change employers, and essenally connue doing what they did before). However, there have been many challenges to

the DOL interpretaon of the Act and the issue remains unseled.

Companies contemplang the transfer of a substanal part of its workforce to a service provider should build sucient me into the

process for giving a formal WARN noce.

When a contract renewal period is approaching, and the service provider may receive less than 60-days noce of non-renewal before the

end of the contract term, a condional noce can be issued specifying the possible occurrence or nonoccurrence of the event. Because

condional noces oen result in increased unplanned arion, many suppliers insist on more than 60-days noce for a non-renewa

decision.

WARN nocaon requirements can be virtually eliminated if it is clear that both the employment and the project for which the workers

are engaged are temporary:

Avoid Discriminaon

Why Is Downsizing a Temporary Workforce Issue?

Review the an-discriminaon, harassment, and equal opportunity policies of each stang supplier. Verify that these policie

adequately address potenal danger areas and are consistent with those of your company.

Incorporate an-discriminaon and an-harassment language in contractual agreements with independent contractors.

Ensure that the agencies providing contract workers have established procedures in place to address ethics obligaons an

whistleblowing protecons.

Require that all contract workers provide wrien acknowledgement of receipt and understanding of these policies, and th

the penalty for non-compliance is assignment terminaon.

Periodically audit each suppliers onboarding procedures to ensure compliance.

The worker was inially sourced by a company and payrolled by the supplier

The worker does not have a previous history of having been placed by the supplier at dierent customers

The company has used the temporary worker for an extended period of me

A company transfers its own employees to a service provider

A company decides to change its suppliers, transferring workers on assignment to another supplier

Contracts between a company and its independent contractors and/or stang suppliers must clearly state that the wo

assignment is temporary, and a temporary facility will be closed and assignment terminaon will be the result of th

compleon of a parcular project.

Workers must clearly understand and acknowledge at the me of hire that their employment is temporar

Acknowledgement is determined by reference to employment contracts and collecve bargaining agreements.



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Most companies believe that recordkeeping requirements when using temporary workers are signicantly less than for permanent employ

However, proper documentaon is crical in successfully surviving an audit or defending against a co-employment or other employment

suit. When working with independent contractors, the most crical document is the Statement of Work. For agency-supplied contractors

the job descripon. For stang companies and service providers, its the Master Service Agreement. These documents establish the basis

the relaonship. These documents cure a number of ills by:

Most employment legislaon requires the employer to provide up to three years of detailed records, including source documents, reecevery step in the workforce procurement and management lifecycle. Supplier and worker credenals must be maintained. Informaon on

complishment of deliverables, payments, and hours worked must be captured and maintained. Informaon must be available on demand

must also be compiled into a number of government-specied formats.

Some regulaons require even more rigorous recordkeeping and reporng. For example, for government workers under a McNamara-OH

Service Contract Act (SCA) & Walsh-Healey Public Contracts Act (PCA), complex wage determinaon tables establish pay rates and bene

These tables are updated annually. When a contract transfers to a dierent supplier, the successor supplier must ensure that wages, ben

and vacaon accruals of all workers connue uninterrupted and unchanged.

Documentaon is the Best Protecon

The need to extensively document terminaons may be reduced, as the work assignment was designed as temporary, w

with no expectaon on anyones part of long-term employment.

Processing of fringe benets, such as health insurance, rerement benets and unemployment insurance shis to

suppliers and/or the individual workers.

Companies are not obligated to provide medical and personal leaves of absence to temporary workers.

Demonstrang that an engagement is temporary in nature

Establishing that the company is not oering employment, and will not serve as the employer of record

Helping organizaons defend their sourcing, screening and tesng pracces under Title VII, the ADEA, and ADA

Establishing a basis and source of payment



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Technology Enables ComplianceTradional responses to emerging employment legislaon introducing new policies and training managers, then conducng periodic compli

ance checks typically results in compliance systems that are inially eecve, but erode over me. In order to keep pace with Federal employ

ment regulaons, compliance pracces and technology must connue to be inextricably interconnected.

One of the most eecve ways to deal with all these requirements and emerge unscathed is to have an eecve Vendor Management System

(VMS) to handle these maers. A VMS serves as a procurement and labor management system which automates crical compliance steps,

issues non-compliance warnings and alerts, analyses performance, and coaches hiring managers, enabling companies to ensure ongoing

regulatory compliance while realizing the benets of a dynamic, blended workforce of regular and temporary employees.

A Vendor Management System, opmized to ensure regulatory compliance, must include the following features:



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Technology Enables ComplianceClassicaon Guidance The determinaon of which workers fall under dierent Federal guidelines can be complicated, typically requiring

an examinaon of the work, the individual and the locaon in which the work is to be performed. Embedded business rules should provide

assistance in determining a posions exempt status, evaluang conformity with independent contractor classicaon, and assessing job classicaons for wage determinaon.

Compliance Firewall An online repository of best pracces, legislave updates and acve guidance at each step of the workforce procuremen

and management process can form a rewall of protecon against inadvertent acons that can result in non-compliance.

Risk Calculaon In classifying employees, the VMS should evaluate each individual against a dened set of criteria to assess alignment with

requirements, providing scorecards that indicate areas of highest potenal risk of non-compliance. The system should also quanfy the level o

risk by examining the degree of compliance with the requirements of each Act.

Compliance Tesng An embedded compliance tesng system should examine the individual proles and compensaon history of all aected

workers as well as the companys total workforce results to evaluate the compliance level. Evaluaon must include reviews of all related busi

ness documents. Since government contractors are required to ensure complete compliance not only for their own workers, but also for the

employees of any sub-contractors that they may employ, a VMS system must provide regular visibility into the labor compensaon pracces and

policies of each sub-contractor.

Detailed Record Management The VMS system should have the ability to track and store all data in the system, to retain that data for

extensive periods of me, easily update dynamic data such as wage tables, and maintain an audit trail of all changes made to employment

records. A dependable VMS program will enable complex wage determinaon tables to be easily uploaded, will idenfy workers whose wages

are not within the required range, and simplify the schedule and process for wage adjustments.

Prole Maintenance A prole of all candidates and workers should be maintained, providing a detailed historical record of credenals, work

history, screening acvies, and compensaon. By assigning a unique idener to each worker, personnel records should accurately portray

policy compliance throughout the individuals tenure, including periods of breaks in service. Companies with a diversied porolio and many

divisions must be able to transfer employees between the divisions, instantaneously changing applicable compensaon to reect shis in work

assignments that may suddenly cause the employee to be re-categorized.

Tracking & Alerts The system should automacally issue alerts to everyone in the approval chain when tenure limits approach, documentaonrenewal is required, mandatory acons are not completed, and/or non-standard acons are taken.

Reporng and Analycs The VMS should include the ability to report on all data captured in the system, providing complete visibility at the

individual and enterprise level. The report generaon capability embedded into the system should enable creaon of custom reports withou

the use of programming skills. Reports should be available in a variety of formats.

COMPLYING WITH REGULATIONS FOR TEMPORARY WORKE


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Smart Track Vendor Management Soware

Smart Track, DCRs innovave Cloud-based suite of workforce supply chain management applicaons, redenes the role of

vendor management systems expanding from conducng transacons to supporng crical interacons and decision-ma

ing. Through Smart Track, we forge networks of business managers, suppliers and indirect workers, creang an instuonamemory of best pracces, and a means of sharing them.

Unlimited Visibility into Workforce Lifecycles

Forecasng Tools and Wizards

On demand Reconguraon Capabilies

Advanced Compliance Support

Automated Administrave Processing

Device-Independent Access

Pre-built Connectors

Robust Management Reporng

Embedded Business Analycs

Highly Reliable, Scalable, Cloud Compung Plaorm Always On Technical Support

About Us

DCR Workforce is an award winning, best-in-class service provider of vendor-neutral Managed Services Programs and Vend

Management Soware to help clients maximize the contribuons of their agency contractors, freelancers and project team

Smart Track, our proprietary cloud-based talent management plaorm, supports Managed Services Programs to manag

procure and analyze your talent with complete transparency, real-me control, high performance and decision-enabli

business intelligence. In addion to MSP and VMS soluons, DCR oers workforce intelligence soluons, payroll services, a

compliance services.

DCR is a cered woman-owned, minority owned company.

For more informaon call +1-888-DCR-4VMS

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Whitepaper - Complying With Regulations Regarding Temporary Workers