Staffing Industry Analysts recently asked me to reprise a decade-old article because the industry continues to put too much weight on term limits and their effect on co-employment risk. Last week, I discussed the oft-cited Darden standard and how staffing firms and buyers are in some ways both an employer and not, and that courts are free to apply as much weight as they wish to the factors at play in any given worker’s situation.

Here, I discuss the US Equal Employment Opportunity Commission’s stance on co-employment, as well as that of the US Department of Labor and other court decisions on co-employment. Then I discuss the benefits and costs of tenure limits.

The EEOC. The EEOC’s position on co-employment is: staffing firm workers “typically qualify as ‘employees’ of the staffing firm, the client to whom they are assigned, or both.” Further, “[t]he staffing firm and/or its client will qualify as the worker’s employer(s) if . . . one or both businesses have the right to exercise control over the worker’s employment.” Enforcement Guidance: Application of EEO Laws to Contingent Workers Placed by Temporary Employment Agencies and Other Staffing Firms, EEOC Notice, Number 915.002 (Dec. 3, 1997). The most important consideration in the co-employment analysis is “the right to control the means and manner of her work performance rests with the firm and/or its client rather than with the worker herself.” The EEOC goes on to state the entire working relationship must be assessed.

DOL guidance. The Department of Labor generally presumes co-employment: “joint employment will ordinarily be found to exist when a temporary placement agency supplies employees to a second employer.” 29 C.F.R. § 825.106(b)(1) (FMLA regulations).

Court decisions. After a diligent search, my team could not find a single court decision in which a term limit was the dispositive factor in finding that co-employment did or did not exist. It may be that such a case exists. As noted above, duration of the engagement is a factor in determining employment status. But, again, we have not been able to identify even one case in which duration was the tipping factor. And while courts will often recite duration as a factor, there are few cases in which duration is even referred to as a significant factor, let alone a deciding factor.

Weighing the Benefits and Costs

Term limits can be valuable when used correctly. For example, they are extremely useful in forcing a retention decision at a particular point in time. This can ensure that a contingent worker remains because of a conscious decision and not due to inertia. In some cases, however, the costs outweigh the benefits. A term limit on contingent workers’ assignments typically results in increased recruiting and training costs. This is due to losing a worker who is already trained and needing to get the replacement up to speed. Further, there is a chance the replacement worker is less skilled and less productive than the person they replaced. As a result, frequent turnover may reduce a company’s efficiency and competitiveness in its respective market.

Term limits are not irrelevant to the discussion. However, they will not change a company’s co-employment status.

Generally, co-employment is unavoidable in many contingent workforce contexts. Before imposing term limits, staffing firms and their clients must understand the laws applicable to their contingent workforces and review the totality of the working relationship. Staffing agencies and their clients should not rely on term limits as an affirmative defense to co-employment— unless there is an objective reason to believe co-employment likely does not otherwise exist. Rather, staffing agencies and their clients should carefully scrutinize their use of term limits and determine whether they add value to their relationship.

Co-employment is discussed in more detail in SIA’s Certified Contingent Workforce Professional (CCWP) Program. For more information, go here.