(FICA) and federal and state unemployment taxes, as well as withhold the
employee’s share of federal income and
FICA taxes. The employer also will incur
costs related to pensions, health insurance, vacation pay, sick pay, and workers’
compensation insurance. In addition,
employers face federal and state regulations regarding working conditions and
The rules governing worker classification are complex and, at times, have led to
confusion about how temporary workers
should be classified. In the great majority
of cases, the individuals assigned by these
firms really are employees because of the
nature of the work they perform and their
relationship with the staffing firm or client.
Determining Employer Status
There are various tests—under various
laws—to determine whether a worker is an
independent contractor or an employee.
The IRS and federal courts examine
multiple factors for federal employment
tax purposes, many of which also are used
to determine employer status under other
especially in the information technology
field—most assigned workers can prop-
erly be classified only as employees under
If a staffing firm misclassifies an
employee as an independent contractor, the
firm can face significant fines and penalties
for, among other things, failure to withhold and remit taxes, pay Social Security,
provide insurance coverage, and pay overtime. Moreover, if the staffing firm fails to
pay, the firm’s client may be held liable for
those costs as a joint employer. Misclassification thus poses significant risks to both
the staffing firm and its clients.
To protect Right1Staffing’s clients
and mitigate the competitive harm due
to worker misclassification, Deransky
considers sending clients a letter alerting
them to their potential liability if they use
the services of independent contractors
who are really employees. Sample language
is included in the ASA issue paper “What’s
in a Name? Misclassifying Employees as
Independent Contractors Can Be Costly,”
available at americanstaffing.net.
The letter is designed to cause clients
to examine how the workers assigned to
them are being classified, and to challenge
staffing firms they believe may be improperly classifying workers. This in turn could
prompt staffing firms that may be misclassifying to pay closer attention to their
practices and ensure compliance with the
law, thus leveling the competitive playing
Deransky plans to send such letters to
all of his clients, and also re-reads the 13th
edition of Employment Law for Staffing
Professionals, published by ASA, to learn
even more about the proper classification
of workers. n
Stephen C. Dwyer, Esq., is general counsel for the
American Staffing Association. Send your feedback
on this article to email@example.com.
Engage with ASA on social media—go to
This material is not intended, and should not be
relied on, as legal advice. ASA members should
consult with their own counsel about the legal
matters discussed here.
laws affecting workers, at both the federal
and state level. The more factors that are
present in a staffing firm’s relationship
with its worker, the more likely a worker
will be an employee and not an indepen-
dent contractor. These include whether
n The staffing firm or client has the right to
instruct or direct how work is performed.
n The worker undergoes training.
n The work is integrated into the client’s
n The client hires and supervises assistants
to help the worker.
n Services must be rendered personally.
n There is a continuing relationship with
n The worker works set hours.
n The worker must devote his or her full
time to the assignment or task.
n The worker works on the client’s or
staffing firm’s premises.
n The worker must perform tasks in a
n The worker must submit written or oral
n The worker is paid hourly, weekly, or
n The staffing firm or client pays the
worker’s business and travel expenses.
n The staffing firm or client provides tools
and materials for work.
n The worker does not have a substantial
investment in facilities used to work.
n The worker can realize a profit or suffer
a loss in connection with the services.
n The worker works only for the staffing
firm or client.
n The worker does not make his or her
services available to the general public.
n The staffing firm or client can discharge
n The worker can terminate his or her
relationship with the staffing firm or
client without incurring liability.
Most workers assigned through a
staffing arrangement perform their work
under the supervision and control of either
the staffing firm or the client, and the
work performed generally is of a nature
that does not require the worker to exercise a substantial degree of independent
judgment. While exceptions do exist—
If a staffing firm
employee, it can face
significant fines and
penalties for, among
other things, failure to
withhold and remit
taxes, pay Social
and pay overtime.
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