Contingent Staffing and the Economy: Do Regulatory Smoke Signals Suggest Trouble? (Part 3)

In the first two posts in this series (Part 1 and Part 2), we examined some of the trends highlighting the movement to contingent workforces as well as how the current state of the economy ties to just that -- not to mention some of the trends in the advice companies are turning to MSPs for in terms of administering their overall contingency hiring programs. Yet the Worforce Management article that inspired this analysis in the first place suggests that things might be different this time around -- and that we might not be paying as much attention to existing and new laws (federal and state) that are increasingly regulating this market and raising employer risk. In fact, if you haven't yet read this story and are involved either indirectly or directly in contingent workforce management, you should.

The article succinctly sums up the changing situation, noting that "Expanding the contingent portion of the workforce may have served employers well in other cyclical slowdowns, but the current wave of contingent hiring and the broader trend it represents may not survive the new regulatory environment. Federal and state enforcement agencies are shining a bright light on the use of contract workers." Why? The article suggests that one of the reasons is that misclassification of workers could cost "more than $7 billion in lost payroll tax revenues over the next 10 years."

Yet I also believe that the labor motivations of a democratic Executive and Legislative branch bent on payback to many of the unions -- nearly always standing diametrically opposed to contingent over non-contingent hires, except in the construction trades -- that helped bankroll their campaigns has quite a bit to do with it as well. Moreover, I think that the average elected Democrat cares more about the typical worker than most Republicans, and there's a general view (correct or incorrect is in the eye of the observer) that employees are better off under W-2 than 1099 employment (this is debatable, however, based on how workers value flexibility, price premiums for contractors in certain job classifications, etc.).

Regardless of motivation, we can count on the Democrats to take enforcement of existing and new Federal labor laws more seriously. Even the non-partisan GAO is voicing its own analysis which, in a recent report, "called on the Internal Revenue Service and the Department of Labor to share information with each other and their state counterparts and to coordinate enforcement efforts that target misclassification." And in this regard, you might be curious to know that "the Department of Labor has made the proper classification of employees and independent contractors one of its top priorities."

We're not alone in the US with a government that is taking a more activist stance in policing labor practices. "Some European nations are tightening controls on contract work and temporary staffing agencies," Worforce Management also notes. The contingent bottom line is that if you're not thinking through all of the potential policies, regulations and liabilities of existing or planned contingent hiring programs in your organization, perhaps you should be. Certainly your MSP will not do it alone for you.

Jason Busch

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