Tenure policies and the length of the assignment as a means to protect against co-employment risk is a byproduct of past court cases in which the length of the assignment was a consideration in the final decision but not the sole reason (e.g.: in the US Supreme Court’s decision in Nationwide Mutual Insurance Co. v. Darden, tenure was a limited supporting factor in determining its decision). After this and similar rulings, organizations started to implement limits on how long a contingent worker could be engaged, thinking this would eliminate or reduce co-employment risk.
Co-employment risk. The specific legal and financial risk to employers arising from co-employment situations. These risks can include, but are not limited to, pay, benefits or unemployment claims; discrimination claims; harassment claims; and, within the United States, workers’ compensation claims.
Although length of the assignment is something to consider, I am surprised by the number of CW programs that due to their legal team’s concerns or misinformed leadership have had to implement what I would call “inhibiting” tenure limits. If the length of an assignment had a correlation to co-employment in the world of contingent labor, there would be no contingent labor industry. Why? Because co-employment starts the second we engage a contingent worker, not after 12 months, 18 months or whatever the tenure policy states — and yet we still have them. Many experts view co-employment risk as a fact of life, particularly in dealing with contingent workers and staffing agencies.
Holding you back. Tenure policies can be inhibiting and costly usually for the same reasons most engagement managers dislike them or creatively work around them. They are costly in the sense that if the work is not completed by the end of the tenure, a new resource must be engaged, trained and brought up to speed. Time and training are expensive. Although not all contingents use the length of the assignment as their only decision criteria, it may be the deal-breaker. For some CWs, a longer assignment provides more security and means less time required looking for their next assignment. This can take a program from inhibiting to appealing. It’s also costly in that tenure limits can be time-consuming for a program office to monitor. Although vendor management systems have helped with this, there is still time spent on communication to all parties to prepare for the end date, including with the engagement manager to determine if another resource will be needed and to the supplier to prepare their employee to find their next assignment.
So does this mean tenure policies have no value or should not exist? Absolutely not, when used for the right reasons they can bring great value to the contingent workers, the program and the organization. A tenure policy can be valuable as a time to stop to revisit the role and work being done. Is the project almost complete and possibly just needs a few more months? Then an extension of the current assignment makes sense and saves time and money. If it’s determined the work will not be done for a long time or it’s evolved to something more, then moving it to a project-based outcome makes good business sense. How many times has a contingent role become critical to the project’s completion or to the organizations core business? Having this “stop” time to realize this before possibly losing the resource could allow the case to be made to convert the worker to a full-time employee role. Not having a “stop and revisit” time identified could possibly cost an organization to lose critical resources, intellectual property or inadvertently misclassify who and how the work should be done.
Refocus on benefits. Instead of focusing on the length of the assignment, a critical area an organization should focus on for co-employment risk mitigation is their benefits plans. Ensure that your corporate “benefits plan” document clearly defines non-employees and specifically eliminates them from full-time employee benefits and profit plan share rights. This is the area that if confronted with a co-employment challenge, having clearly stipulated that contingent workers have no rights to your organizations full-time benefits plans is critical. Why? If a contingent worker is ever deemed a co-employee in an adjudication process, the next step is examining how the corporate benefits plan documents define who has benefit rights, and who does not. Consider the Microsoft v. Vizcaino, in which independent contractors were deemed eligible for company benefits — nearly $100 million — because Microsoft’s plan documents did not exclude them. This corporate benefits plan document rules, unless there is a benefits plan qualification dispute, in which case a tenure policy might then have an impact.
So, should your program and organization have a tenure policy? Only if it is for something more than an effort to eliminate co-employment risk.
This article does not constitute legal advice. It is recommended that you consult with counsel prior to entering into any agreement or establishing program policies.