Contract Laborers' Claims May Signal Red Flag for Industry

Human resources departments soon could be scrutinizing the length of time certain employment agency temporary workers and independent contractors spend at client job sites. A ruling by a federal appellate court that some Microsoft temporary workers were entitled to benefits they had been denied, could have far-reaching effects on staffing agencies and other providers of long-term temporary workers.

D. Richard (Rick) Creson, president of Meridian Technology Group Inc., Portland, said potential court-ordered benefits, primarily stock options for non-benefited W-2 and 1099 agency temporaries and contract employees could be a red flag for hundreds of technology companies. Meridian employs 100 full-time information technology consultants, often placing them at client sites for long periods of time. "We try to be very careful that they are highly compensated and get all of the benefits our company has to offer just to make sure we don't have this sort of situation on our hands," he says.

"In the nine years we've been in business, we've never hired a 1099 contractor and we've never encountered this issue, but it is an area where we are keeping a close watch," Creson notes.

Creson is keenly aware of the business and financial side as well as the technology aspects of the industry. He has a degree in accounting but also managed large data processing and technology projects for Ford Motor Co., and other prominent companies before forming Meridian in 1990. He says that many consulting and staffing firms place people at client sites for months, even years, and call them "temporaries." In the Microsoft case, some of those temporary people received extraordinarily high hourly rates, while others did not. In most cases, however, the people were non-benefited, 1099 contractors or W-2 employees placed by an agency. Consequently, some of the non-benefited temporary employees believe that they should be treated the same as company employees and share in the benefits.

"If Microsoft loses this case and the courts back the contract employees, it could be a serious problem for many consulting companies and many client companies. There are many benefits to hiring good temporary employees to handle extra work demands, supply special expertise and complete essential short-term projects," Creson says.

"We feel the implications of this issue are quite large and are hopeful that HR managers at client companies will not take a shotgun approach to the problem, meaning the elimination of all contract and consulting services to their companies. This is really a benefits issue and a temporary employee issue," he says.

Creson says that many of Meridian's larger clients have built into their contracts the requirement that only benefited, W-2 employees of the consulting firm can be considered for short or long-term temporary employment.

Meridian plans to incorporate information into hiring packets which clearly outlines for employees that no matter how long they are at a client location, they are still Meridian employees, earning their salaries and benefits from Meridian and no one else.