Side-Stepping the Co-Employment Trap 3: Benefits

Contracting offers employers the flexibility they need in this economy to easily adjust their workforce to their business needs. But some employers are gun-shy about utilizing contractors out of fear of co-employment issues. In this series, we will examine the co-employment risk and how your client companies can reduce that risk when utilizing contractors.

Contractor benefits, or more specifically, the lack thereof, was the driving force behind one of the most famous co-employment lawsuits.  In Vizcaino v. Microsoft, it was determined that workers originally hired as independent contractors and later converted to temporary/contract workers employed by a third party were eligible for the company's 401(k) and Employee Stock Purchase Plan, despite the fact that the workers signed agreements acknowledging that they were not eligible for the company's benefits. Microsoft settled the case for $97 million!

How can your clients avoid a similar fate when utilizing contractors? Well, if the recruiter or contracting back-office that is employing the contractors offers a full menu of benefits, contractors will have little reason to go after the client company for those benefits. For example, Top Echelon Contracting offers the following benefits to its contractors:

  • Health insurance through Anthem Blue Cross and Blude Shield
  • Dental insurance
  • Vision Insurance
  • Life Insurance
  • Accidental Death and Dismemberment Insurance
  • 401(k)
  • Paid time off (if the recruiter negotiates this for their placements)

The Vizcaino v. Microsoft has made a lot of companies wary of contracting arrangements.  But ensuring that contractors can access the benefits they want through their Employer of Record can go a long way to helping them avoid Microsoft's fate.

This article is for informational purposes only and should not be considered legal advice.


Debbie Fledderjohann is the President of Top Echelon Contracting, Inc.

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Tags: Benefits, Compliance, Contracting, Legal

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