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Contract StaffingThe Affordable Care Act (ACA), the healthcare reform law often referred to as Obamacare, is being credited for a spike in contract staffing, which is at its highest level since 2006 and is outpacing traditional, direct hiring.

The Bureau of Labor statistics reported that 2,679,800 workers were employed in contract/temporary positions in May, inching ever closer to the all-time record of 2,767,300 contractors working in October 2006, according to

Moreover, year-over-year contract staffing growth was 7.5%, which is five times the growth of the overall economy’s jobs increase of just 1.56%.  The contractor penetration rate (the percent of workers who are contractors) has hit 1.98%, close to all-time high of 2.03%.

Investors Business Daily is pinning some of this contract staffing growth on what are being called ‘Obamacare-Dodgers’ — employers trying to get around the employer mandate portion of the ACA by utilizing contractors instead of direct hires.  The employer mandate, which begins in 2015, will require employers with 50 or more employees to provide healthcare insurance to their employees or pay a per-employee penalty.

Utilizing contractors who are W-2 employees of a contract staffing back-office is a legitimate strategy for reducing or eliminating an employer’s responsibilities under the employer mandate.  Basically, companies are outsourcing the employer responsibilities to the back-office.

Recruiter Joell Iskander of Select Hire Resource is seeing more of her clients go the contract staffing route as a result of Obamacare.

“When clients utilize contractors, benefits and other employer issues are no longer their problem,” Iskander said.  “If they put someone on as a contractor, it’s something the recruiting firm or back-office handles.”

This is a safer alternative to another popular Obamacare avoidance strategy — classifying workers as 1099 Independent Contractors.  Companies may use this technique to reduce their number of employees that must be counted to determine if they fall under the employer mandate.  However, simply calling a worker an independent contractor doesn’t make it so.

They must meet the IRS guidelines for independent contractors.  The Obama administration has been very diligent in targeting companies that misclassify W-2 employees as 1099 independent contractors because the proper employer taxes are not being paid on those individuals.  This is not an issue when companies utilize contractors employed through a back-office because that back-office classifies the workers as W-2 employees, pays the employer share of payroll taxes, and takes responsibility for Obamacare compliance.

The continued growth of contract staffing in light of Obamacare presents a huge opportunity for recruiters willing to place W-2 contractors.  Unfortunately, some recruiters will pass up this opportunity because they are reluctant to delve into contract staffing due to the misconception that it is more difficult than direct hire.

But contract staffing does not have to be any more difficult than direct hire placements when you utilize a contract staffing back-office.  The back-office becomes the legal W-2 employer of the contractors and handles all of the financial, administrative, and legal details of the contract placement.  This leaves you to handle the traditional recruitment tasks: get the job order, find the candidate, and negotiate the rates.

Additional placements are yours for the taking IF you are willing to stretch a little outside of your comfort zone.  Not only can you increase your sales, but you can also become a valuable partner by providing clients with a viable solution to one of the most challenging staffing issues they’re facing.

(Editor’s note: this article is for informational purposes only and should NOT be considered legal advice.)

New York City has become the latest area to pass a law banning what has been called “unemployment discrimination.”

Unemployment DiscriminationSo just what is unemployment discrimination?  It refers to denying candidates employment based solely on the fact that they are not currently employed.

It’s no secret that companies have probably always preferred actively employed candidates, but some companies took it a step further in the wake of the recession by stating in job postings that unemployed candidates would NOT be considered.

The practice had people crying foul because many workers on the employment lines were victims of the recession’s mass layoffs and were not necessarily poor performers.

As a result, three states have passed laws against unemployment discrimination.  In general, these laws prohibit companies from posting ads stating that current employment is a job requirement or that unemployed candidates won’t be considered.

New York City has become the first city to pass such a law, which took effect on June 11.  The law makes it illegal to base employment decisions (hiring, compensation, terms, etc.) on a person’s employment status.  According to the Associated Press, NYC’s law is the most far-reaching of the unemployment discrimination laws, since it is the only one that allows applicants to sue for damages.

While it may not be spelled out in writing, many companies have a strong preference for currently employed candidates.  They might even go as far as to tell recruiters not to present any unemployed candidates.

Recruiters should make clients aware of the laws against unemployment discrimination and of the drawbacks of arbitrarily discounting the unemployed.

Even if it’s not illegal where your clients do business, overlooking candidates based solely on their employment status is not the best business strategy.  There are a number of reasons a candidate could be laid off that have nothing to do with their quality of work.

If you have a candidate you feel strongly about, but who is being overlooked due to their employment status, you may want to consider offering that candidate on a contract-to-direct basis.  This allows clients to “try-before-they-buy.”

If the candidate doesn’t work out, they can simply end the contract and try someone else.  But if they have found a great worker, they can extend the direct hire offer, and in most cases

Recruitment Legal IssuesAs the number of wage-and-hour lawsuits under the Fair Labor Standards Act (FLSA) hits an all-time high, recruiters can help clients avoid what one attorney calls “one of the top threats to U.S. employers.”

Human Resource Executive Online recently reported that 7,764 FLSA lawsuits were filed between April 2012 and March 2013, which is the reporting year that is used by the Federal Judicial Center.

“With no clear catalyst during the past 12 months, this strong spike and new high for FLSA claims makes them one of the top threats to U.S. employers,” Richard Alfred, chair of Seyfarth Shaw’s wage-and-hour litigation practice, told Human Resource Executive Online.

While there is no obvious reason for the spike, Alfred largely blames the economy.  As the economy improves, he believes attorneys are targeting new companies with growing workforces.

On the flip side, the long, stretched out recovery has put increased pressure on existing employees who might be looking more closely at their employer’s pay practices as a result.  Social media has also made employees more aware of the FLSA and the rights that they have under it.

As a recruiter, clients often look to YOU as an employment expert, so it’s important that you are familiar with the FLSA and counsel your clients on the proper application of the law to help them avoid this fate.  Below are six key points to remember:

  1. Overtime (1.5 times the regular pay rate) must be paid to most employees for any hours worked over 40 in a workweek.
  2. Your clients also need to be aware of state laws that may be more generous to employees.  For example, in California, employees must be paid overtime (OT) for any hours worked over eight in a work day.
  3. Your clients MUST prohibit off-the-clock work.  They should require that employees get pre-authorization before working overtime and that they keep accurate records, Alfred told HRE Online.
  4. Some employees may be considered exempt from OT, but they must fall into the Executive, Administrative, Learned Professional, Computer-Related, or Outside Sales classifications.  They must meet speific requirements to fall under these categories. Please see the exempt requirements provided on the Department of Labor website.
  5. Exempt individuals must also be paid on a basis of at least $455 a week on a salary, not hourly basis.  There are a couple of exceptions to this rule.  Computer-Related professionals may be paid at an hourly rate of at least $27.63 per hour ($39.90 per hour in California). Additionally, the salary requirements do not apply to those under the Outside Sales exemption.
  6. DO NOT let your clients misclassify W-2 employees as Independent Contractors to avoid the overtime rules.  Doing so is just asking for Internal Revenue Service audits and FLSA lawsuits for back OT wages.

(Editor’s note: This article is intended for informational purposes ONLY and should not be considered legal advice.)

Debbie FledderjohannAccording to a recent Society for Human Resource Management (SHRM) article, I-9 audits are on the rise (SHRM membership may be required to access this article).  In 2004, only three audits were conducted compared with 3,004 in 2012.  Simple paperwork errors can cost employers up to $1,100 per violation.

If you serve as the W-2 employer for your contractors, YOU are responsible for I-9 compliance . . . and any fines assessed in an I-9 audit.  Here are some tips for making sure your I-9s pass muster.

  1. The newest version of Form I-9 must be used exclusively starting May 7, 2013.
  2. Make sure the employee completes Section 1 on their first day of work.  Inspect it to be sure that all the required information is provided and that Section 1 is signed and dated.  If anything is incomplete, don’t fill in the missing information.  Only the employee can complete or correct Section 1.
  3. Be sure that you complete Section 2 within three days of the employee’s start date.  So if a contractor starts an assignment on a Monday, Section 2 must be complete by Thursday.
  4. Remember that you must physically view each original document the employee presents in order to complete Section 2.  So what if you are too far from the employee to meet them?  The I-9 does allow for an “authorized representative” to complete Section 2 instead of the employer.  You could ask the client or a Notary Public to serve as the authorized representative.  If you encounter a lot of reluctance, you may want to work with an attorney to draw up a disclaimer that assures them they will not be held liable for I-9 penalties.
  5. Conduct annual I-9 audits and make corrections where needed.  But remember, don’t white out mistakes.  Cross them off, initial, and date any changes.  Don’t make changes to Section 1—again only employees can make changes there, so if you find a mistake, ask the employee to make the correction.  And be sure not to back date anything.  While correcting I-9s may not eliminate penalties, they could reduce them.
  6. U.S. Immigration and Customs Enforcement (ICE) normally audits companies that are connected to the nation’s “critical infrastructure,” such as power plants, food-service businesses, airports, etc., according to SHRM.  But complaints to ICE from disgruntled employees can also now initiate an audit, so don’t assume that your firm is flying under the radar.

Disclaimer: This article is for informational purposes only and should NOT be construed as legal advice.