Legal Issues – Staffing

Are Temp or Contract Workers Eligible for Overtime?

by Jeanne Knutzen | April 18, 2016

4 Flexible Staffing Strategies-Best Practices, Human Resources Staffing, Legal Issues - Staffing, Managing People. Team Leadership, Resources for Employers, Hiring Managers, HR Professionals

Ask PACE Q: One of our accounting department team members has worked over 40 hours in one work week. I just learned our staffing agency has not paid them an overtime rate for the additional hours, is this legal? Is my company at any risk for back wages and penalties? - Submitted by a Worried HR Manager. Redmond, Washington … Read More »

First Steps in Tackling the Year of the FLSA

by Guest Author | September 9, 2015

0 Legal Issues - Staffing bellevue staffing, Employment Agency Bellevue, Federal Fair Labor Standards Act, FLSA, PACE Staffing Network, Seattle Staffing, Seattle Staffing Agency

Under the proposed rule, an employee will need to earn a minimum of $970 per week (or $50,440 per year) and meet the duties test in order to be exempt from overtime wages, increasing from $455 per week ($23,660 per year). … Read More »

Smartphone Usage After Hours

by Guest Author | July 14, 2015

0 Legal Issues - Staffing

Many of our employees have smartphones. Do we have to pay them for every time they use it outside of regular working hours? While I tell them not to, many still respond to emails and texts outside of work hours. What do I do? … Read More »

New Rules to Expand Overtime Pay!

by Jeanne Knutzen | July 13, 2015

0 Legal Issues - Staffing

After months of speculation, the US Department of Labor has just published its proposed changes in the regulations that govern how employees become eligible for overtime (time and a half) pay. Their proposal, released June 30th, changes the “level” of pay that mandates NON EXEMPT status, in effect extending mandated overtime pay to nearly 5 million wor … Read More »

How You Use Background Checks Can Make a Big Difference!

by Jeanne Knutzen | May 29, 2015

0 Hiring - Best Practices, Legal Issues - Staffing

background-check-2Your Background Checking Process Is Under Increased Scrutiny…. …..and some employers are already paying the price for processes that don’t line up with Fair Credit Reporting Act (FCRA) regulations. Last November, staffing company, Aerotek and their parent company Allegis, received notification of a class action suit filed by employees claiming adverse impact stemming from Aerotek’s failure to inform them of the adverse employment action they were taking based on the results of a criminal background check. In this particular case, Aerotek removed an employee from an assignment with United Healthcare based on information obtained in a Criminal Background check obtained ten days after the employee had begun work. In early April, 2015, Amazon Inc. received a similar notice of a proposed class action suit, accusing them and their staffing agency, Staff Management Solutions (SMX), for a similar issue - in this case failing to provide prospective employees with the results of a criminal background check before making decisions to assign them to an Amazon facility. In the Amazon case, the employee was denied the opportunity to begin work based on the results of a criminal background check that unfortunately contained false information. Here’s the details: In November 2013 Gregory Williams filled out an SMX form giving SMX the authority “to obtain his consumer report for employment purposes.” The form stated that if anything was found in the background check that could affect his employment, he would be given a copy of the report in addition to an explanation of his rights under the FCRA to dispute the accuracy of the report. So far so good! Williams interviewed via SMX for a seasonal job assignment at Amazon on Nov. 30, 2013 and was immediately offered the assignment. He came into the SMX office on Dec. 2, and was told the job would start on Dec. 5, 2013. In the meantime, SMX initiated a background check which showed that Mr. Williams had a felony conviction for cocaine possession which, according to Amazon rules, “disqualified” Mr. Williams working at Amazon. He was told of this disqualification, but was not given a copy of the adverse report or advised of his rights to contest its accuracy. Mr. Williams believed this failure to follow FCRA mandates, violated his rights, and he initiated a class action lawsuit on behalf of himself and all applicants similarly treated in the last five years. As a staffing company we know that background checks are commonly used by many of our client companies – particularly companies doing retail, manufacturing, or proiding healthcare services. We are typically asked to assign or not assign temporary staff to these employers using the same internal policies these client's use to hire (or not hire) candidates for core employment. We work closely with our clients in all situations involving placement decisions based on background checks, knowing that the EEOC has significant interest in avoiding any situation where there is disparate impact on a protected class of employees based on an unneeded element in the employment process. Scrutiny under the Fair Credit Reporting Act mandates is a relatively new scenario for us, as until recently most of the FCRA based lawsuits have been based on some overlooked technical aspet of the law. For example, FCRA requires that the authorization to do a background check be “clear and conspicuous” - it must stand out from the rest of the application process. In the last 3 years, class action lawsuits have been filed against Whole Foods, Publix, Chuck E. Cheese, and Panera because their disclosure forms did not meet the stand alone requirement - in our minds a bit of a nit picky issue, easily fixed by keeping the "disclosure notices" separate from the application form. The Aeroteck, Allegis, Amazon and SMX lawsuits on the other hand appear to go beyond technicalities and are signaling a new landscape in how the disclosure components of FCRA laws are likely to be enforced on the go forward. Current Recommendations to PACE Clients….. 1. Make sure that in your application process, your disclosures and authorization documents are stand alone documents. Don’t intermingle these documents with your application form or other employment related documents. 2. Check out the full scope of your legal responsibilities under BOTH EEOC and FCRA requirements. Here’s the link to the EEOC website that discusses the employers role in conducting background checks http://www.eeoc.gov/eeoc/publications/background_checks_employers.cfm 3. In your service agreements with staffing vendors, state clearly who will be conducting a background check and describe how you want that information used. Keep in mind that if an employee is denied the opportunity to be assigned to your company based on information discovered in a background check conducted by your staffing agency, both you and your staffing company are subject to claims of unlawful adverse impact. You cannot ask your staffing agency to make employment decisions on your behalf that are not legally defensible. 4. Make sure your staffing agency as a matter of policy and practice are complying with all FCRA administrative requirements a. Find out if they are informing candidates of the possibility that an investigative report will be conducted and how it will be used - in particularly make sure they indicate there could be "adverse action" taken based on the discoveries. b. Find out how they are informing candidates of an adverse action and their internal procedures for handling those scenarios. By law they are required to disclose the adverse report, provide a statement of the candidate’s rights to contest the accuracy of an investigative report, and instruction on how to contest that information . You need to make sure that your staffing agency follows all these steps. 5. Re-review any “across the board” policies regarding how candidates will be handled based on background check discoveries. “No arrest" policies are specifically precluded. “No felony” policies are suspect. Both you and your staffing agency are accountable to ensure that all employment actions are made in ways that do not discriminate against any class of protected class candidates based on factors unrelated to actual job performance.   jeanne knutzenThis article was written by Jeanne Knutzen, the CEO and Founder of the  PACE Staffing Network, a full service staffing company focused on  delivering talent to the Northwest employer community. PACE regularly  uses third party professionals to conduct criminal background reports  on their client’s behalf and is committed to managing all steps of that  process in legally defensible ways – complying with FCRA regs and the  spirit and intent of EEOC guidelines. While we cannot provide you with legal counsel we can provide you with basic information on how to work with your staffing agency on their background check policies and procedures. For personal consult, contact Jeanne at jeannek@pacestaffing.com .

Seattle’s NEW Minimum Wage Goes Into Effect April 1!

by Jeanne Knutzen | March 27, 2015

0 Human Resources Staffing, Legal Issues - Staffing

Beginning April 1, both large employers (501 employees or more) and small (500 or fewer employees) located in SEATTLE must pay their employees no less than a hourly rate of $11/hr. – or a base of $10/hr. and make up the difference with an employer contribution to a medical benefits plan. And if you’re an “outside of Seattle employer,” don’t assume this wage increase isn’t relevant to you! While the minimum wage mandate does not yet apply to most employers other than those in SeaTac and Seattle metro, you’ll likely need to watch some employees who may be willing to drive a few miles north or south just to put an extra $1/hr. in their pocket. To learn more about Seattle’s Minimum Wage go to minimumwage@seattle.gov.

1099 Worker Classification Audits on the Rise!

by Jeanne Knutzen | February 4, 2015

0 Legal Issues - Staffing 1099 Worker, 1099 Worker Classification, Employer of Record, Employer of Record Service, W2 worker, Worker Classification Audits

PACE Purple Banner with Quote 3 A Special Alert for PSN Clients and Friends! By Jeanne Knutzen, CEO, Founder As we have discussed on multiple occasions, the misclassification of workers continues to be an audit target for federal and state unemployment agencies, impacting any employer who uses 1 or 20 independent contractors as a way of doing business. When workers who are essentially treated as W2 workers, but who are misclassified as 1099 independent contractors, both federal and state agencies lose payroll tax revenue along with their ability to protect and insure the individual from workplace accidents and claims of unemployment. These issues have gotten their attention for some time, resulting in the passage of new legislation in 2014 that will provide additional funding for 2015 audits and new ways of syncing up federal and state tax authorities to identify potential offenders. Although Worker Classification Audits are not new and have been in play for decades, third-party administrators everywhere are putting their clients on notice to expect a significant increase in the number of employee classification audits. Targeted audit strategies will be able to focus on employees most likely to be misclassified, making it increasingly important for employers to make accurate determinations of “worker type” at point of hire—going thru all details of the 20 point test suggested by the IRS as an acceptable classification process. States who have already volunteered to be a part of the new audit process include Alabama, California, Colorado, Connecticut, Florida, Hawaii, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New York, Utah and Washington. We wanted all our clients and friends to know that we are in one of the states who will be increasing its “watching”…plus, to also let you know the PSN team has a solution! The PACEjeanne Staffing Network has been providing “Employer of Record” services for companies with “suspect” 1099 workers since 2000. Our Employer of Record Service Packages can include a quick audit of your current 1099 workers, but most importantly provides an easy and low cost remedy for any exposure to unpaid taxes or penalties you want to avoid NOW. For more information on Employer of Record Services and to put them to use quickly, contact our Partnership Development Team at 425-637-3312 or by emailing infodesk@pacestaffing.com. This article was written by Jeanne Knutzen, founder and CEO of the PACE Staffing Network.   

Final Rule Issued for OSHA Recordkeeping Requirements

by Jeanne Knutzen | December 23, 2014

0 Legal Issues - Staffing

By Nickole C. Winnett In a press release issued September 11, 2014, OSHA announced the final rule for Occupational Injury and Illness Recording and Reporting Requirements. For Federal Plan States, the regulation will go into effect on January 1, 2015; State Plan States will announce their dates independently but are encouraged to meet the same deadline. This regulation brings some major new changes for employers. Dr. David Michaels, assistant secretary of labor for occupational safety and health, cited the most recent Bureau of Labor Statistics (BLS) report stating that 4,405 workers were killed on the job in 2013 to emphasize the importance of this new rule. Establishments in certain low-hazard industries are partially exempt from routinely keeping OSHA injury and illness records. Under the new rule, there will be a shift in the number of industries which are partially exempt from keeping these records. Previous regulations used the Standard Industrial Classification (SIC) system to categorize industries. The new rule now relies on the North American Industry Classification Systems (NAICS) along with injury and illness data from BLS from 2007 through 2009 to categorize the industry as low-hazard and exempt employers from OSHA recordkeeping requirements. As a result of this update, employers in several new industries are now required to keep OSHA injury and illness records. A list of these new industries can be found here. The new rule maintains the exemption for any employer with 10 or fewer employees from the requirement to routinely keep records of worker injuries and illnesses. The rule expands the list of severe injuries, which all OSHA-covered industries must report to OSHA regardless of size or partial exemption status. The current rule stipulates that when there is a fatality or three or more hospitalizations, the employer must inform OSHA within eight hours of the occurrence. Under the new rule, a fatality (within 30 days of the work-related incident) must still be reported within eight hours of the death. However, employers will now have a 24 hour window in which to report to OSHA all work-related inpatient hospitalizations that require care and treatment of a single employee, all amputations, and all losses of an eye which occur within 24 hours of the incident. The available methods of reporting by the employer have also been expanded. In addition to calling OSHA's confidential number (1-800-321-OSHA) or calling the local OSHA Area Office, employers will be able to go to the web portal, which OSHA is developing, and make a report electronically. OSHA has stated that not all reported incidents will lead to an inspection. OSHA noted, however, that hospitalization and partial body loss are significant events that indicate serious hazards are likely to be present at a workplace and that an intervention is warranted to protect the other workers at the establishment. OSHA said in its press teleconference that it sees a report as opening a dialog with the employer and that its decisions regarding whether an investigation will be opened will be case-specific. OSHA is most interested in knowing what caused the injury, what the employer intends to do as a result of the incident, and putting the employer on notice–all of which it expects will make an employer more likely to take the necessary steps to rectify the situation. Based on OSHA's conversation(s) with an employer, OSHA indicated that it may decide to take no further action, roll the employer straight into a consultation program, or conduct an inspection. Significantly and most troubling, OSHA also stated during its press teleconference that it will make an employer's report of all fatalities, hospitalizations, amputations, and/or eye losses publicly available on the OSHA website. OSHA stated that it believes that public disclosure will incentivize employers to ensure a safe workplace for their employees.


Nickole Winnett is a senior associate in the Washington, D.C. Region Office of Jackson Lewis P.C. and is a member of the Workplace Safety and Health practice group. She heads the Workplace Violence sub-specialty practice group and is a member of the Process Safety Management sub-specialty practice group. Winnett is also co-author of Jackson Lewis' OSHA Law Blog.

What’s New in Staffing and ACA Compliance?

by Jeanne Knutzen | November 24, 2014

0 Affordable Healthcare – ACA Smart, Legal Issues - Staffing

A Complimentary Webinar for the Clients and Friends of PACE Staffing Network! MARK YOUR CALENDAR – December 10, 2014 @ 9 AM (PST) After compliance, learn what comes next! Featuring nationally acclaimed ACA attorney, Alden Bianchi. The Affordable Care Act radically restructures how heath care is funded. In 2014, its mandates impacted individuals. In 2015, its mandates impact employers. For the staffing industry and its customers, Obamacare represents the biggest compliance challenge our industry has ever faced. It impacts all of us who do or utilize staffing services—agencies and customers.   The PACE Staffing Network, in conjunction with the Affiliated Staffing Group, has arranged for Alden Bianchi, a nationally recognized expert on the ACA and the Group Practice Leader for Mintz Levin’s Employee Benefits & Executive Compensation Practice to present a complimentary webinar for PACE customers and friends on Wednesday, December 10 from 9am-10:15am PST. Click here to register! Webinar topics will include:

  • The increased costs of the ACA mandates and what they are likely to mean for your 2015 staffing budgets.
  • Staffing company costs and price adjustment strategies. What’s going on in the staffing services marketplace?
  • Risk Management – things to do to protect yourself from unforeseen fines and penalties
  • The “Variable Hour Employee” and what that classification means to the customers of staffing agencies
  • What are the strategy “don’ts” under the ACA? When might the IRS come calling?
  • Getting ready for the ACA’s discrimination provisions, and the next round of ACA impact.
  • Staffing Strategies you can use to contain the high costs of ACA compliance while focusing on your business needs
  • The ACA and your 1099 Workforce
  • And More!
If you have any questions regarding this webinar, please email infodesk@pacestaffing.com or contact Reilly Smith at 425-637-3312. Click Here to sign up for this complimentary webinar

Countdown to ACA Compliance – Part III

by Jeanne Knutzen | October 28, 2014

0 Affordable Healthcare – ACA Smart, Legal Issues - Staffing, Managing People. Team Leadership ACA and Temporary Staffing, ACA compliance, Affordable Healthcare – ACA Smart, Employment Agency Bellevue, Employment Agency Everett, Employment Agency Kent, Employment Agency Seattle, Employment Agency Tacoma, Employment Agency Washington State, Hiring Bellevue, Hiring Everett, Hiring Seattle, Hiring Tacoma, Temporary Staffing Bellevue, Temporary Staffing Everett, Temporary Staffing Kent, Temporary Staffing Seattle, Temporary Staffing Tacoma, Temporary Staffing Washington

The PACE Staffing Network has been preparing for the employer mandates of the ACA for well over two years. As members of the American Staffing Association (ASA), we provided input into several areas of proposed regulation, and attended countless hours of ACA related training. With the ACA’s employer mandates ready to launch January 1 2015, we wanted to share information on the specifics of how the ACA impacts your use of temporary/contract employees. For ideas on how to better manage your needs for staff in light of new ACA mandates, contact a member of our Partnership Development team by contacting infodesk@pacestaffing.com or calling 425-637-3312.

In what ways has the ACA already impacted your temporary and contract workers?  

The Individual Mandate has been in effect since 2014, requiring all temporary and contract workers to purchase ACA qualified insurance for themselves and their dependent children. While we do not know what percentage of temporary/contract employees complied with these mandates in 2014, we suspect that number will increase in 2015 as penalties for non-compliance increase.

What changes go into play in 2015?

The Shared Responsibility component of the ACA, known as the Employer Mandate, goes into effect on January 1, 2015. This provision requires that all staffing companies employing 100 or more employees offer affordable and ACA qualified insurance to 70% of its eligible employees or pay significant fines and penalties. The taxes/fines/penalties for not offering insurance are $2K/year ($167/month) per eligible full time employee—excluding the first 80; if the insurance offered does not meet ACA requirements or isn’t affordable, the fine/tax penalty is $250/month (up to $3K annually) for any employee going to the exchange for insurance and receiving a subsidy. This mandate will impact most but not all staffing companies in 2015.

Are most staffing agencies already offering insurance?

The short answer is YES. PACE along with most staffing agencies has been offering some form of health insurance for well over a decade. Unfortunately these health insurance products do not meet ACA requirements, so new products for our industry had to be developed over the last year.

What requirements must be met in order for a temporary or contract employee to become eligible for ACA benefits on January 1st, 2015?

There are several ways an employee can be qualified for coverage as of January 2015. Using a look-back period, any temporary or contract worker of a “large” staffing agency who has been on assignment through their staffing agency for at least 1560 hours during 2014 must be offered insurance. These look-back periods will continue on through 2015 so that all employees meeting the full-time requirement must be offered insurance within 30-days of the end of their look-back. For all full-time employees hired after October 1, 2014 they will become eligible for insurance on the first day of the month following the completion of their administrative period—no later than the first day of the fourth month from date of hire. Full-time employees are considered any employee intended to work 30-hours per week or more at the point of hire.

What must a staffing company contribute to the employee’s insurance costs in order to ensure “affordability?”

Staffing firms must contribute to the employees’ premium so that no employee is required to pay more than 9.5% of their base pay for their own personal coverage. For example, if an employee earning $10/hr. is offered an ACA compliant insurance plan that costs $400/month, the employee cannot be required to pay more than $123.50/month for their own coverage, requiring their staffing firm employer to pay $284.80.

How will newly assigned temporary and contract employees become eligible for coverage in 2015?

Starting in October, 2014, PACE will categorize all new hires as one of the following:
  • Full-time – working 30 or more hours per week and projected to work at least 1560 hours in the coming 12 months,
  • Part-time – working less than 30 hours a week, or
  • Variable hour – employees whose status as either full- or part-time can’t be determined at point of hire.
  • Seasonal – employees working 6 months or less at specific times throughout a calendar year.
While you might assume that all the employees we hire are either Variable Hour or Seasonal, there are very specific rules staffing companies must follow to put an employee into those categories. What’s at stake is that for employees categorized as Variable Hour, they are allowed to work for their employer for a defined “measurement period” (typically 12 months) without the benefit offer requirement. The IRS is not going to give this classification away easily.

How will most staffing companies decide to become compliantwill they pay or play?

To be ACA compliant, a staffing agency can either offer benefits or pay the $2000 per employee “did not offer” penalty. They can also offer a qualified benefit but not participate in its costs, running the risk of incurring the $3000 per subsidized employee penalty for not making their plan “affordable.” Each approach to ACA compliance has offsetting costs and risks, requiring each staffing agency to choose a strategy that meets their customer’s needs for cost containment and their positioning in the marketplace.  The American Staffing Association commissioned a study by Towers Watson (2014) which provides insight into the choices likely to surface over the next 60 days. According to the TW study, 54% of staffing companies will be offering some level of insurance to its eligible temporary and contract workers. The remaining 46% are either planning to pay penalties or are too small to be covered during the transition year. A popular compliance strategy used by many staffing agencies, including PACE, will be to offer two insurance options:
  • A plan that meets both the “minimum value” (MVP) and the “minimum essential coverage” (MEC) definitionswith a 60% actuarial value covering core services. This plan will meet all the requirements of the employer mandate.
  • A plan that meets only the “minimum essential coverage” (MEC) definition – A less costly plan that meets only individual mandate requirements.
This strategy provides a low cost way for our employees to become compliant with the individual mandate (avoiding their own fines and penalties), while protecting PACE from penalties stemming from employees taking subsidies because our plans don’t meet ACA requirements or are unaffordable.

Do you need to know if and how a company providing temporary or contract staff to your organization is ACA compliant?

Theoretically no. Provided you have the right contracts and agreements in place you will have no responsibility for your staffing vendor’s decisions regarding how they will get and stay compliant with ACA mandates. Thinking more pragmatically, the expertise your staffing vendor brings to the table to not only ensure their own compliance with the ACA but to help you with yours, can be invaluable. First of all, a vendor who hasn’t prepared to become compliant can easily find themselves facing fines and penalties of a size that can end their business. Secondly, like most overly ambitious legal undertakings, the ACA contains opportunities for smart employers to use the provisions in the ACA to create new and more competitive ways of doing business. If staffing agency does not understand the ACA and its nuances, they likely won’t be able to offer fresh ideas on ways to lower your ACA related costs!

What will be the” added costs” for staffing agencies to become compliant with the ACA in 2015?

There are two categories of costs associated with ACA compliance:
  • The increased costs of ACA related administration which will be considerable—starting with changes in point of hire administration, monthly reporting, annual reporting to both employee and the IRS, etc.
  • The increase in direct costs associated with either offering the required insurance coverage or paying the penalties associated with not offering.
The direct cost increases will be agency specific, depending on several factors:
  • How many "full-time" employees they have in their workforce relative to their total workforce?
  • What percent of their eligible full-time employees will take the insurance once offered?
  • The eligible employees rate of pay to arrive at the costs the agencies will incur to make their plan "affordable."
  • The costs of the insurance products they are offering.
Based on the costs we are currently projecting, PACE is anticipating a 3-5% increase in our direct costs with another 15% increase in our current administrative costs.

For staffing companies who elect to “pay,” are they subject to taxes/penalties on all their temporary employees?

No. The application of taxes and penalties for “not offering insurance” only applies to full-time employees (minus 80 in 2015). Excluded from penalties for unaffordable insurance are employees who either reject an offer of coverage, elect coverage that isn’t affordable or delivering minimum value, or who are enrolled in state Medicaid programs.

What ACA related costs are still unknown/unclear?

Historically, the staffing industry has faced serious challenges finding a health insurance product that will serve their high turnover, low participation workforces. Six months ago there were no insurance products available to the staffing industry that would meet ACA actuarial standards. We now have insurance products, but it is not clear if these products will be attractive enough to our temporary and contract workers to incent their participation. We’ll all know much more in six months than we know now about what percent of the people being offered insurance will chose to take it.

How will the individual staffing company deal with their cost increases?

There are as many different pricing philosophies and strategies as there are staffing companies—with the key factors being geography, local business and government taxes, employee type, market positioning, and service offerings. While the pricing structures of staffing companies providing long term professional staff typically have room for premium level healthcare benefits, for staffing companies working in more competitive markets, there is little room to absorb any increased in direct costs. Some staffing companies will offer only the low cost MEC plans, taking the chance that the employees electing their insurance will not go out to the exchange and seek subsidies for better plans. We consider this strategy risky. The ASA study by Towers Watson study revealed that 91% of the staffing firms polled are planning on passing their ACA costs (penalties or insurance costs) back to their clients in the form of across the board increases in bill rates. Most (38%) are planning 2-5% increases. 9% are looking to increases of 16% or more. 19% are still not yet sure how much they will increase bill rates.

How will the price increase be handled?  

Most of the pricing programs we have viewed are designed to smooth out the costs of providing insurance to all eligible employees and spreading those costs across an entire workforce and customer base.
The Towers Watson study indicates that employers can expect their price increase to come in a number of forms. Some will simply do an across the board increase in bill rate; others will see increases in mark ups; some will be adding a line on each invoice for ACA Costs.

How will the increased costs of temporary and contract workers compare with the increased costs associated with the ACA for other types of employees?    

Since the passage of the ACA, actuarial firms have been predicting increases in overall employee costs to be in the area of 5-8%. If this projection plays out, the per hour increase in costs for a temporary or contract employee may end up being much less than the increase in costs associated with the same employee, hired directly. For example, an employee earning $15/hr. hired directly may cost an additional $3.25-3.75/hr. in healthcare benefit costs in 2015 compared to 2014. The same employee provided by a third party staffing agency, might cost $.45-.70 more per hour than they did in 2014. For a more detailed discussion of ACA related “staffing math” and to compare the relative costs of employees hired directly with employees placed through a third party employer, contact our Partnership Development Team at 425-637-3312.

What other cost increases will employers experience in 2015?

We anticipate ACA related cost increases will touch just about every part of our customers’ businesses in 2015. Administrative cost increases alone could be staggering.
Part of the services and costs savings we are delivering to customers in 2015 and beyond is full administration of ACA related compliance.

When it comes to managing staffing providers, are there other elements of the ACA that employers should be paying attention to?

Yes. It may be time to review your staffing contract or agreements. The ACA has its own common law provisions, reinforcing the notion that it is the common law employer who is responsible to offer and pay for ACA mandated benefits. In most temporary or contract staffing arrangements, there is clear legal precedence for the staffing company to be the common law employer, accountable for ACA compliance. That said, we recommend that employers consider adjusting agency contracts to clearly spell out each party's respective roles in managing ACA mandates. PACE is happy to provide language recommendations upon request. For employers purchasing payroll services from their staffing provider, the law is less straight forward and the need for contractual adjustments more important. Again, we recommend that the role of your third party payroll service provider be spelled out clearly and contractually in any ongoing payroll services agreement. We recommend that specific indemnifications related to the ACA liability should become standard clauses of all payroll service agreements and contracts. NOTE: A nuance of the ACA regs specifically requires that if there is a chance or a reason for a payroll agent to not be considered the common law employer, the costs of providing insurance to an ACA benefit eligible employee should be passed back to that client as an increase in rate for the particular employee. Between now and early January, PACE will be speaking with all clients to ensure the proper ACA compliant contracts are in place.

Do we need to be concerned about “abuse” clauses?

The IRS has been very clear that it will be looking closely at staffing firms and their clients to ensure that ACA benefit requirements are not purposefully skirted. For example, an employer who turns their entire 50 person workforce over to a staffing firm, so as to avoid falling into the “large employer” category, would be highly suspect. An employer who employees 48 people and regularly uses a staffing company to provide 5-10 employees for its peak busy periods, on the other hand, is likely not suspect, even though their use of temporary staff keeps them below the 50 employee benchmark. The difference? Their temporary staffing strategy was designed to address a business need—not to avoid offering benefits. Splitting employees between a staffing company and their client or between two staffing companies so that no one “employer” reaches the 50 employee benchmark has been specifically prohibited. While PACE will continue to be strong advocates for all of the business reasons to use more flexible staffing strategies, we will only recommend changes that are based on business need, not ACA avoidance.

Is there future ACA stuff that we should be thinking about for 2016 and beyond?

Yes.
  1. Discrimination Issues. Current thinking is that all the ACA specific regulations related to discrimination will come out in 2015 and be implemented in 2016. The ACA is clear that any plan or employer contribution that provides a differential benefit in favor of highly compensated employees will be specifically disallowed. This means that once discrimination regulations have been written and put into play, employers will no longer be able to provide special plans or higher levels of contribution to their higher paid employees—short of making them available via post-tax dollars.
  2. Special tax on Cadillac Plans. In 2018, employers will be taxed on Cadillac benefit that cost more than $10,200 ($850)/month per individual. The tax on Cadillac plans is 40%—making these plans prohibitive for most employers. Employers with Cadillac plans will likely look for alternative approaches.
We hope you have benefited from reading this primer on the ACA and how it will impact your use of temporary and contract workers after January 1, 2015. For more personalized consultation, please contact our infodesk@pacestaffing.com or by calling 425-637-3312 to arrange an appointment with one of our ACA Specialists.
jeanneThis article was prepared by Jeanne Knutzen, CSC, the President and Founder of the PACE Staffing Network. PACE remains committed to full compliance with the ACA and offers a variety of staffing products and services designed to ensure that our clients have options for containing the costs associated with ACA compliance. For a confidential discussion of how these services might be applied to your workforce, particularly your temporary and contract employees, contact a member of our PSN partnership team at infodesk@pacestaffing.com or 425.6376.3312.