Rather than employ practices like term limits etc. to contain the risk of exposure to retro-benefits, staffing clients would be well advised to put in place the necessary protection to shield themselves from claims of benefits with retrospective effect…
Define with Clarity:
Let us see if there are some ways and means through which an employer can ensure protection from claims of benefits from contingent workforces.
Such clear enunciation of policies usually leaves no weakness or loophole to be found by anyone interested in bringing a claim for compensation. Companies which have not earlier formulated such plans can also review them and bring in such definitions and clauses to ensure a water-tight distinction between the beneficiaries and non-beneficiaries.
The 1000-hour Rule:
Companies that have a vague knowledge and unclear understating of the ERISA’s (Employee Retirement Income Security Act) 1000-hour Rule also tend to get confused and try to end up safe with the imposition of a six month term rule. The rule is not meant to generally decide the eligibility of everyone who has put in 1000 hours of service. In fact, it only becomes applicable to all those who are considered eligible to receive the cover and does not endow anyone with the eligibility just because they had put in 1000 hours of service.
By strictly adhering to the various term limitation plans – companies may assure themselves of avoiding all exposure, but find it very counter-productive operationally to repeatedly lose trained hands and face flak from managers who would undoubtedly resist or try to circumvent such a move very strongly as it would impair their productivity. Some assume that a short 30 day break is sufficient to prevent exposure – but short breaks do not stand against the provisions of ERISA entitling one to benefits. Getting the worker to change the staffing agency and re-apply also does not reduce exposure in any way.
Coverage under many types of welfare and other benefit plans has no legal limits to exclusions, and allow for different types and levels of exclusion which could be easily extended to cover all of client’s leased employees. The plans also have varied participation waiting periods, with welfare benefit plans providing coverage on the first day of the flowing month (from date of joining), or have waiting periods of 30,60 or 90 days; while qualified pension and profit-sharing plans require one year of service for eligibility. It is necessary to review even the informal benefits and fringe benefits also to clearly establish their coverage with a clear distinction between direct employees and contingent workers. If, in spite of all such assessments, there is a real concern about possible exposure, a rotation policy could be considered as a means to mitigating the risk before adopting the term limit policy. It is necessary to maintain consistency of application if the policy were to be adopted or other risks could result.
It Pays to be Cautious
Some unwitting consequences of the term limit policy include a possible litigation for violation of EEOC norms for discrimination, inconsistency of application and exhibition of favouritism by managers (which invite the wrath of persons next in line to replace that particular employee right after the termination). So, it is for the management to decide if they want to fix the risk of exposure to retro-benefits or get into trouble with these other issues. Or regret in leisure about landing in the fire from the frying pan!
It may be a good idea to reiterate here that the real causes of exposure to co-employment claims lie in the way contingent workers are treated on par with the regular employees of the organization:
Then the broad guidelines managing the company’s benefit plans of which life, disability and health could result in exposure to really heavy retro-benefits claims rather than the term of employment.
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