(Updated from 09/14/2017)
After Nance lost her Director of Marketing position, she worked for a major healthcare company through a temporary staffing agency. She was in her 20s and had limited work experience. She certainly had no legal training back then, and she didn’t think much about who her technical employer was. On her resume, she listed the healthcare company as an employer, but the employment agency issued her paycheck. In retrospect, the staffing agency was her employer, not the healthcare company. The two organizations were presumably on equal footing at the time they formed the contract under which the staffing agency would provide various services to its client, the healthcare company. So, there were not concerns about worker misclassification. That is not always the case today.
As she told Geoff Williams for an article on American Express’ blog, “Far too many businesses are hiring through agencies that they think will be the employers of record, when in fact the agency is nothing more than a matching service for 1099-MISC contractors—other business owners—to meet clients. In states like New York, when the relationship is not clear at the outset, I often see them fall apart and end up in the Department of Labor, entangled in an unemployment insurance claim that leads to a workers’ compensation inquiry and penalties in both agencies.”
This issue isn’t going away. The pandemic only fueled the fire.
Consider how much data the DOL, Small Business Administration (SBA), and tax departments gathered from applicants for pandemic assistance. For the first time, independent contractors were allowed to apply for UI benefits. Also, workers with multiple sources of income often listed clients as employers, much like Nance did back in the 1990s. It’s not always clear who is an employee and who is a true independent contractor. Some common signs of employment are:
- The workers’ personal social security numbers (SSN) are on their 1099-NEC or -MISC forms.
- They don’t own independent businesses offering the services they provide to the alleged client.
- They provide full-time service to the client’s business and have no other clients.
Read the full AE article for additional tips to avoid missteps when hiring temporary workers.