How long can I keep a temporary or contract employee on assignment?

How long can I keep a temporary or contract employee on assignment?

by Jeanne Knutzen | March 1, 2016

15 All About Staffing. Hiring. Best Practices, Flexible Staffing Strategies-Best Practices, Resources for Employers, Hiring Managers, HR Professionals

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The short answer is, there are no “hard stop” boundaries for how long a temporary or contract employee can remain on assignment.   The “classification” of any employee as “temporary” is the responsibility of an employer.  Depending on how they set up their “temporary staffing program” as either an internal or more fully outsourced program, they have the right to define that classification any way they want.  The factors that must be weighed, in deciding how long a temporary employee should be assigned, are far more complex.       

To better understand this question and its roots likely requires a review of the history surrounding   “assignment limits”.  It’s an interesting set of events.

The assignment length issue became a serious topic of conversation in the late 1980s when the IRS announced their intent to re-class Microsoft contractors as common law employees and ultimately make them eligible for the same stock option and retirement benefits offered to regular MS employees.  The length of time Microsoft’s temporary and contract employees had been on assignment was part of that argument.  The employees in question had all surpassed the ERISA “year of service” rule, which requires that once an” employee” works 1000 hours they are automatically eligible for ERISA governed benefits.

After years of argument, the MS case turned into a 97 million dollar settlement that Microsoft paid to it’s temporary and contract workers who, after successfully re-classed as common law employees of Microsoft, became eligible for the same stock option benefits made available to MS core employees.  This was a costly, precedence-setting ruling, and got everyone’s attention, big time!

Many employers responded by creating policies limiting the length of time a temporary or contract worker could be on assignment.  They did this believing that the MS case established a 1000 hour assignment length requirement.

The American Staffing Association (ASA), on the other hand, took up the concerns of both the staffing firm and its interim employees who, because assignments could be terminated prematurely, would suffer hardship from the disruption.   In a series of white papers, ASA challenged  employers to assure their assignment limit policies were legally necessary, focusing  their argument around three points:   1) there is no law requiring non employees to be eligible for employee only benefits;  2) “assignment limits” is only one, of multiple factors which are important to establishing employee- employer status;  and 3) both the IRS and the courts allow for certain categories of employees to be specifically excluded from benefit coverage even though they must be included in the employee count.

In the end, the employer status issue was settled on the side of the ASA’s arguments.  A brief review of ERISA regulations reveal there is no requirement for an employer to provide benefits to non-employees.  Employers moved in significant numbers to use third party agencies to employ their temporary and contract workers, not themselves, therefore providing a safe harbor from being viewed as the common law employer.  The IRS has favored this third party agency’s employer status, even in situations where the employee worked at a client’s site more than the 1000 hour ERISA limit, provided the other factors establishing that “status” were intact.

Today, many employers have dropped their legal concerns around “assignment limits”, adopting other risk avoidance tactics:

  1. Making sure all benefit plans exclude third party (i.e. Staffing firm) employees.

Both the courts and the IRS expressly allow this “exclusion”.  The ASA claims this to be the one bulletproof thing employers can do to protect themselves from unanticipated benefit costs, a la Microsoft.   Most professionally prepared benefit plan contracts now contain these exclusionary provisions…but employers need to check their written plans to make sure.

  1. Creating contracts with their staffing suppliers to spell out who does what – making sure the majority of the “common law” employer responsibilities remain with the staffing vendor.

Your staffing agency contracts, for example, should outline the fact that your staffing agency, not you, has the responsibility of…

  1. Recruiting, screening and evaluating employees for basic skill requirements
  2. Determining employee wages, benefits and expense reimbursement
  3. Hiring, firing, and assigning employees
  4. Handling employee complaints and concerns
  5. Paying and distributing pay checks
  1. Training hiring managers and supervisors on the “little things” that are important to preserving the staffing agency’s “common law” employer status:   
    1. All communications to temporary employees need to go thru the staffing agency, not the hiring manager or supervisor.
    2. Allow staffing vendors to be on site as needed to deliver paychecks, speak with their employees, etc.
    3. Reference temporary and contract workers separately when communicating with “all employees”
    4. Stay out of issues between the staffing agency and their employee including conversations about pay checks, pay rates, access to benefits, etc.
    5. Participate in performance management or coaching programs by providing feedback, but not giving feedback/coaching directly.

Today, concerns about “assignment limits” are focused more on the pragmatics of workforce management than on legal concerns.  While it remains true that employees classified as “temporary” are considered part of headcount when determining the application of a particular law, because most employers have outsourced their contingent staffing operations to “third party” employers, they have mitigated their exposure to certain laws that could otherwise impose significant hardship, including an unintended expansion of benefit eligibility.

Other more practical or business related reasons for establishing assignment limits, even for third party employees, continue to surface.   Microsoft, for example, recently established “assignment limits” for its contractors based on their concerns about the integrity of MS intellectual property, uncomfortable with the notion that a temporary or contract worker would have long term access to information and systems considered proprietary to Microsoft.

Other companies impose assignment limits as a way to optimize the productivity of their flexible workforce.  While higher wage temporary and contract workers tend to accept, and in many cases prefer, “longer term assignments”, for many lower wage temporary workers  “assignment limits” can offset potential issues with worker morale, attendance and performance.  Particularly in scenarios where the decision to hire a temporary employee directly is part of a larger recruiting strategy, but the temporary employees who are passed over for direct hire and are asked to remain in the workforce for long periods,  are often prone to issues with attendance, performance or teamwork.   Placing limits on the length of assignment can reduce or eliminate these issues, before they surface.  (NOTE:  The right staffing partner can help you determine the optimal length of assignment for your temporary workers.    Depending on the type of work and temporary employee you are engaging, they will have statistics to show when that “engagement curve” is likely to wane. )

Another consideration in play around “length of assignment” decisions is the increased exposure to claims of discrimination as length of assignment increases.  While employers may discriminate in the administration of their benefit programs on the basis of job classifications (temp or perm etc.) other decisions such as which work assignment to give to which temporary employee, or which temporary employee is hired permanently and which not, often place both the staffing agency and their client at risk.  The law requires that employees doing similar jobs be treated similarly.  The longer a “temp” is in your workforce, the more risk a perception of disparate treatment will surface, making a case for limiting the length of assignment as a matter of policy, not supervisory or managerial discretion.

 

Jeanne Knutzen

 

This article was written by Jeanne Knutzen, founder and CEO of the PACE Staffing Network, a leading Northwest staffing company who has been helping  local employers find and hire high talent employees for over 40 years.  For additional ideas and information on how you can tackle the current marketplace in terms of temporary, contract or permanent employment solutions – contact the PACE team at 425-637-3312 or email us at  infodesk@pacestaffing.com

 


15 thoughts on “How long can I keep a temporary or contract employee on assignment?”

9 months ago Reply

Joe Leonard

I work for this steel company in cincinnati ohio I’ve been a temp worker here since may 4 2016 today is march 7 2017 i been promised a full term position the second month i was on the job im still a temp till today .I only recived 1 raise since i been here just a few weeks ago the company hired 3 guys fulltime straight into the company over me and i already been on the job for 10 months and work much harder and do more work then hired on full tim workers is there something i can do about my situation.

8 months ago Reply

Saam Phelps

Hi Joe,

You bring up a great question that many others have asked as well – we actually published an article on this very topic last week. The situation you are currently in is clearly very frustrating and unfortunately there is no easy way to resolve it. There is regrettably no law that states an employer has to hire you, but there also isn’t a law requiring you to work for them. Take a look at our blog post “How Long can a Temp to Hire Assignment Last” for some valuable advice when it comes to temp assignment length. https://www.pacestaffing.com/how-long-can-a-temp-to-hire-assignment-last/

6 months ago Reply

Steven Trubey

I have been employed by a non-profit organization as a full-time, contract employee since 1/2/17. I had been “semi-retired”, and collecting Medicare benefits before accepting this paid position. I wouldn’t mind staying on as a contract employee for good, but the employer says that after a certain time of being a full-time contract employee the government states that the employer HAS to take on the contract employee as full-time and pay benefits. Thereby making Medicare the secondary insurance provider. My nonprofit employer can’t afford the $12K it would take to sign me up as a FT employee. Do they HAVE to hire me and pay benefits after a certain amount of time?

6 months ago Reply

Saam Phelps

I’m sorry but I know of no law requiring that you be hired after a certain period of temporary employment. That said, I am not an attorney and I would go check with one first. There may be some nuance in a law that applies specifically to this situation that I would have no way of knowing about.

6 months ago Reply

Jessi

I manager the temporary employee agency/manager relationship for our company. We have a temp that has been on assignment for close to 1 year and we do not have an open position to convert her too. I now have another department asking if thesecond?y can get her on assignment once her term is up with the first department. Would that violate the 1 year rule? Would it help if there were a small gap between the end of the first assignment and the beginning of the

5 months ago Reply

Saam Phelps

Hi Jessi,
Thanks for your comment. We would recommend you seek legal advice on this as we are not attorneys. That said, our company does not use a one year rule either internally or in our feedback to clients who may, for any number of reasons, want to maintain a relationship with an employee in a temporary role for much longer than a year.

5 months ago Reply

Emma

hi, i have been a temporary member of staff for 3 years in August, there is clearly a job for me and surely there must be a limited amount of time that somewhere can keep a temp on?

5 months ago Reply

Saam Phelps

Hi Emma,

Thanks for reaching out to us to ask this question. Unfortunately, there isn’t a legal requirement to end a temp assignment – just a practical consideration – such as the possibility that you will quit your assignment and find other employment.

5 months ago Reply

dan romano

In New Jersey, we are being told a temp laborer can only be on site for 12 months, then they have to leave for 6 months before returning. If during the 12 month time period the person was hired full time by a consulting firm, the client wants to keep the person and convert to a consulting classification, does this person still have to leave the site for 6 months by law?

5 months ago Reply

Saam Phelps

Hi Dan,
Thanks for reaching out to us. Our work is in Washington state and we do not have familiarity with New Jersey laws. We are aware that many corporations have policies like that but didn’t know there were state laws.

4 months ago Reply

Jessie

Hi Dan, I’ve worked as a contractor for over two years in the same position. I have one team member working as a contractor for over six years. Furthermore the FTE’s within my department worked as contractors for a minimum of 5 years. Any advice available?

3 months ago Reply

Edwin Valle

After working full time for 29 years, I was able to retire and receiving a pension. The same company allowed me to work 39 hours per month immediately after my retirement date and it has been almost 4 years now that I have been working 1 day a week, 39 hours per month total. They still call me temporary employee even though I did not have any break in service from full time employee to temporary employee. I do not work for a temp agency. Is there a law that they cannot consider me a temporary employee after working almost 4 years for the company?

3 months ago Reply

Saam Phelps

Hi Edwin,

Actually, No. That would be an agreement you would need to negotiate with your employer. Your employment status in the company would be based on their company policies.

2 months ago Reply

Vivian Doolittle

I have it in writing (email) from my recruiter that I would be converted from my temp status after 30 days if I performed well. 30 days came and went. I have been here for a year now. I have asked my supervisor about it repeatedly and he keeps telling me that he wants to make me permanent but just doesn’t have the headcount or budget yet. I have gone above and beyond trying to make myself valuable. At one point he told me “within the next 2 weeks.” That was 2 months ago. Nothing. My question is about my recruiter (which is the company I actually work for). Do I have any recourse since they assured me that I would have a permanent position in an email and nothing has happened?

2 months ago Reply

Saam Phelps

Hi Vivian,
We would need to see what they sent you in writing, but in most states employment is at will, and promises can be broken if business conditions change.

You might consider giving notice and asking either your current agency or another to place you in a role where your efforts will be rewarded with a direct hire.

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