Using contingent workers to limit labor- and employment-law liability.

• Author: Petesch, Bruce A.

Faced with labor shortages and increasing labor costs, many businesses have turned to alternative employment relationships. Part-time employees, casual or seasonal employees, volunteers, interns/externs, temporary employees, leased employees and independent contractors, commonly referred to as "contingent workers," can provide employers additional workers in a tight labor market, special skills, scheduling flexibility and, when properly managed, significant cost savings.

Unfortunately, employers also assume, sometimes incorrectly, that using contingent workers will alleviate some of the burdensome legal obligations that arise under federal and state employment laws. Indeed, contingent workers often will not be "employees" as that term is defined in labor and employment statutes or cases. However, many laws will still cover contingent workers if employers use them, or treat them, like employees. A failure to recognize this danger can cost employers the flexibility and cost savings they anticipated and can lead to significant unanticipated legal liabilities.

Employers or independent contractors?

Most labor and employment statutes, including the National Labor Relations Act, Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act of 1990, limit their coverage only to employees. Independent contractors ordinarily are not covered by these laws. In determining whether an individual qualifies as an employee or contractor, the courts generally look at the factual realities of the relationship. Among the factors considered are:

* Whether the worker has assumed entrepreneurial risks and stands to gain from the risks undertaken.

* Whether the worker is paid by the job or by the amount of time worked.

* Whether the individual supplies his own facilities, tools and necessary equipment.

* The understanding and intent of the parties.

* The local business practice regarding supervision of the activity. * The degree of skill the job requires.

* How the company treats the worker compared with how it treats those who are clearly employees.

In essence, the more control an employer exercises over a contract or free-lance worker, the more likely it is that a court will recharacterize the worker as an employee. Where an employer asserts supervisory authority over these workers and/or uses them to perform jobs or tasks that are virtually identical to those traditionally done by employees, the employer can expect problems.

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