When successful contingent workforce (CW) management programs grow beyond their initial borders, understanding risk issues like “de facto employment” is as critical as understanding the language differences and business cultures of the new global markets you are expanding into. Without that knowledge, expansion success is going to be hard to achieve.

But what does de facto employment mean? De facto is a Latin phrase meaning “as a matter of fact.” In other words, in some European jurisdictions, an indefinite engagement relationship will be presumed permanent employment in certain circumstances — especially one where the staffing agency client is demanding and executing a lot of control over the work service being delivered.

Other issues that will be taken into account in defining “de facto employment” are:

  • If contingent workers are used contrary to strict jurisdictional regulations as to the reasons for use of contingent labor. In some global markets, using contingent workers in specific talent categories/professions/trades is strictly prohibited.
  • Where the staffing provider lacks a license to supply contingent workers in the regulated market.
  • Where workers are engaged for longer than the legally regulated term limit in the marketplace.

Whereas the North American marketplace seems to require judicial case precedents to define co-employment and independent contractor status, many global markets have clearly defined market rules and prohibitions in the placement of contingent workers in specific marketplace operations — and they can differ from market to market. The European Union’s Agency Workers Directive actually attempts to eliminate restrictions on the use of temporary agency workers, in order to contribute to the development of the temporary work sector as a flexible option for employers and workers.

The risks associated with de facto employment are many and serious since the prohibitions are clear and legislated:

  • Employee claims for employment rights and benefits.
  • Headcount issues: Many publicly quoted companies have to report headcount, which may affect measures of profitability while budgetary constraints may influence whether agency workers are taken on to the payroll.
  • Government investigations and enforcement of regulations with civil and criminal penalties.
  • Insurance liability.
    • Health and safety liability.
  • Unanticipated financial liabilities: Compensation for unfair dismissal; severance pay.
  • Vicarious liability: An employer can be liable for the acts or omissions of its employees, provided it can be shown that they took place in the course of their employment.

In addition to de facto employment, other general global market risk issues can include:

  • Misclassification of workers as independent contractors;
  • Equal treatment rights for agency workers;
  • Work time length restrictions and break requirements;
  • Health & safety; and
  • Data privacy.

Global markets have multiple and sometimes unique CW program management business practices that are typically formed by the legislative rules and laws established in each marketplace. Understanding these market idiosyncrasies will make the global expansion of a CW program more productive and successful. Either way, these market-specific idiosyncrasies are out there lurking for the uninformed and changing constantly.