The Patient Protection and Affordable Care Act), commonly known as the Affordable Care Act (ACA), makes it imperative for nearly all employers to offer health coverage to their workers as a valued benefit. As many companies have historically offered healthcare benefits to their permanent employees, ACA will perhaps have greatest impact on the contingent workforce industry. However, this complex piece of legislation is least clear when specifying how staffing agencies that employ workers to be placed on temporary assignments with “staffing buyers” should determine whether an employee qualifies under the ACA. Over the past two years, DCR’s blogs have chronicled the numerous amendments made to the ACA in an attempt to address this confusion. With the January 1, 2015 deadline behind us, we will attempt to summarize what must be done by staffing agencies and their staffing buyers to ensure compliance.
The ACA has many employers struggling with confusion with issues like “joint employment” and “co-employment”. Abundant caution is necessary, as a mistake here could have far-reaching repercussions and carry a double jeopardy – for ACA non-compliance as well as liability for misclassification.
Compliance with the ACA
To avoid possible pitfalls, staffing buyers should review their existing contracts with staffing providers to ensure that any possibility of exposure is eliminated. Responsibility for ACA compliance needs to be clearly assigned to the staffing supplier, serving as Employer of Record, for providing required coverage to workers. . The number of workers who become eligible for health coverage depends solely on the individual staffing agency and its usage of workers.
The number of eligible workers is not expected be very high, mainly because:
Staffing suppliers can determine the most appropriate course of action to comply with the ACA’s mandate:
What should Companies using agency-supplied workers do?
A staffing client should verify supplier compliance with ACA by answering the following questions:
– Does the contract between staffing services buyer and staffing agency supplier articulate an understanding of the tenets of the law and clarify the coverage that will be offered to the workers?
– Can every staffing provider demonstrate that it has started to maintain a record of their full time employee transactions and coverage status beginning Jan 2015? Is each supplier prepared to submit the reports in Jan 2016?
– Has the supplier used the recorded hour information to figure out the eligibility for benefits as per the ACA’s mandate?
Address co-employment issues: A worker employed by a staffing company may qualify as a ‘common law employee’ depending on the level of supervision and direction provided by the buyer of staffing services on a daily basis. A similar liability may arise from having workers on multi-year assignments with the same client, while being on the rolls of a staffing company. If considered a common law employer, the client company would be a co-employer along with the staffing agency, having equal responsibility for all aspects of the worker’s compensation.
Put some safeguards in place, like:
Avoid Misclassification: When the ACA’s penalties become applicable, staffing agencies and their clients need to be sure that they have not made any mistakes in the classification of their workers. If guilty of misclassification, an one or both parties could be held liable for two separate counts of non-compliance – misclassification and non-compliance with the ACA. Both of these carry the threat of heavy penalties.
Validate the contingent worker:
Documentation: Maintain records of every assessment process and decision, with supporting information, in case of an audit.
Who pays the incremental costs associated with ACA? Almost all staffing agencies which come under the purview of the ACA will find their direct costs increasing, either because they provided the required insurance coverage or because they paid the penalties for not providing any coverage. Will these costs inevitably be passed on to their clients? Let us look at the various aspects of this issue in our next post.
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