Labor and Employment

What Are Contingent Workers?

By Lisa Guerin, ​J.D., Boalt Hall at the University of California at Berkeley
Whether you are a freelancer, temp, or contract worker, your workplace rights depend on whether you should be classified as an independent contractor or an employee.

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Are you a member of the contingent workforce? If you work as a freelancer, independent contractor, leased worker, or temp, the answer is yes. The contingent workforce gets its name from the non-permanent nature of the relationship between the worker and the company for whom the work is done. Although it’s increasingly rare for an employee to stay with the same company for an entire career, those relationships tend to last longer than the intentionally transient bonds between contingent workers and the companies for which they do work.

If you are truly an independent contractor, then you are not protected by a variety of workplace laws – and you are not entitled to a number of benefits available to employees. However, many employers automatically classify all contingent workers as independent contractors, even if they don’t fit the definition.

Examples of Contingent Workers

A contingent worker is someone who does work for a company, business, or person on a temporary basis. The worker may be a student who needs to pick up temporary work during the holidays, someone who is between jobs and wants to make some cash driving for a ride-share service, or an independent businessperson who works for a number of client companies (for example, designing corporate websites, providing accounting services, or doing landscape design).

If you work for a temp company, you might also be called a contingent worker. Typically, a temp is screened, interviewed, and hired by the temp company, which then provides employees as needed to other companies. For example, you might do three weeks of office work for a law firm while their regular receptionist recovers from surgery, then spend a few days helping an insurance office catch up on their filing, then move on to work for a month in a corporate library.

Employment Status of Contingent Workers

From an employment law perspective, it doesn’t really matter what you are called or whether you could properly be classified as a contingent workers. The distinction that matters is between employees and independent contractors.

Independent Contractors

An independent contractor is running his or her own business, typically providing specialized services on a project basis to a number of clients. The hiring company does not have the right to dictate and control how the contractor does the job, but only has the right to approve or disapprove the final product. A contractor often provides the tools, equipment, and facilities to do the job. And, a contractor generally cannot be doing work that is integral to the company’s business; instead, a contractor typically performs specialty work. Here are some examples:

  • A law firm hires an interior decorator to design and outfit its offices. The decorator dictates a price, uses his industry contacts and expertise to bring in suitable furnishings and workspaces, completes the job, and moves on to the next client. The decorator is an independent contractor.
  • A property management firm hires apartment inspectors, whose job duties include walking through apartments when tenants leave, noting any damage and necessary repairs, letting workers in to update and maintain the apartments, and walking through again when a new tenant moves in. These inspectors are employees. Although they work sporadically, they are doing the basic work for which the management firm is hired, according to the rules the firm gives them, at times and places of the firm’s choosing.

Employees

An employee, on the other hand, often works for only one company, doing the job in the way the company dictates. Even if you work as a temp or leased worker, you are still an employee. You may be the employee of the temp company, the company where you actually work, or both, depending on the circumstances. If the company you work for has the right to control how, when, and for how much you work, you are more likely an employee than an independent contractor.

What Your Job Classification Means

If you are an employee, you have a number of job protections and rights that independent contractors don’t share. For example, you are entitled to unemployment compensation if you lose your job and workers’ compensation if you are injured on the job. You are entitled to earn at least the minimum wage and overtime if you are eligible. You may not be discriminated against or harassed on the job. These protections mostly do not extend to independent contractors.

If you work for a company that provides temporary or leased workers to other companies, the temp or leasing company is responsible for making sure your legal rights are protected. The company where you actually do your work may also be responsible, if it counts as a “joint employer” – one that should legally be held liable because it is significantly controlling your work environment and acting as your employer. So, for example, if you work for a temp company and face sexual harassment in a company where you are placed as a worker, you may be able to sue both the temp company and the host company, depending on the circumstances.

Employees must also pay income tax, Social Security tax, and Medicare tax. Income tax is withheld from employee paychecks and paid directly to the government; for Social Security and Medicare, your employer pays half the amount due and you pay the other half, also through paycheck deductions. Independent contractors must calculate and pay their own income taxes, generally through quarterly estimated tax payments. They must pay their full Social Security and Medicare taxes (called “self-employment taxes), too.

More Information on Contingent Workers

To learn how the federal Department of Labor distinguishes between employees and contractors, see Am I an Independent Contractor Under Federal Wage and Hour Laws? For federal rules on the distinction between independent contractors and employees, see IRS.gov. For articles on working as an independent contractor, including how to write a contract that will protect your rights, check out Nolo’s page for Self-Employed Consultants and Contractors.

Questions for Your Attorney

  • I'm registered with three different temp agencies, but I haven't heard anything from them in quite a while, and they won't return my calls or emails. Can they "blacklist" workers and refuse to send them on jobs?
  • While on a temporary assignment at XYZ, Inc., I was injured when I slipped and fell on some ice in the parking lot. The human resources department there told me that I wasn't eligible for workers' compensation. Is that right?
  • I'm a contingent worker in a company's engineering department; I got the job through a staffing agency. I just found out that the company is paying the agency $45 per hour for my services, but the agency is only paying me $32 per hour. Can it do that?

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