Infotech and the Law

Joint Employer Liability Poses Growing Risk Privacy

James Fontana

Your IT company is flourishing. You can afford to have an army of human resources professionals guarding the corporate gate against employment-related entanglements. You pin up all required equal opportunity posters. Your policy against any form of discrimination is second to none in detail and scare appeal. You conduct sexual harassment training at every opportunity. You even discourage any water cooler discussions about Monica and Bill that may create a hostile and offensive work environment.

But you get sued. Why?

There are many cases of a contractor getting sucked into a potential nightmare of employment liability or cases involving sexual harassment. But what's worse is when the customer gets dragged into the same predicament under the legal theory known as co-employment liability.

Generally, a co-employment relationship exists where two or more employers essentially control or have the ability to control the same employees. They jointly determine essential terms and conditions of employment so that those entities may be liable as employers to those employees.

The most common cases involve temporary employment and so-called staffing firms that refer employees to companies for particular tasks. These cases typically involve an aggrieved employee claiming the company is liable for some violation, but the employee sues the staffing firm as well.

The question turns to which entity is or is not the proper employer for purposes of determining such liability.

Why should the federal integrator care about all this? Because the government's outsourcing of its traditional functions is becoming more commonplace.

Many government contracts involve the contractor taking over entire tasks of an agency, to be performed at the agency's site with its own employees.

Whether these tasks involve desktop and network services at a NASA space flight center or data processing at an Air Force base, more contract employees are intermingled with their federal counterparts and subject to direct customer oversight.

And that brings us back to the co-employment liability issue. A customer that exerts too much control over the contractor's work force at the agency's location may also be considered an employer and partly, if not equally, as liable as the contractor in employment litigation brought by the contractor's employee.

Courts have held that federal procuring agencies are potentially liable in various discrimination actions filed by an individual contractor employee, where the agency essentially controls and directs that individual's work even if the agency does not formally employ the person.

The primary factor in determining the agency's employer status is the extent of its right to control the "means and manner" of the contractor's performance, including supervision of the contractor employee's day-to-day activities, authority to hire and fire such employees, issuance of work rules and operating procedures and direction of work assignments.

Additional factors include the extent of supervision (or lack thereof) by the contractor employer, especially those who simply send their employees to the customer's site to be supervised by the customer rather than the contractor.

The problem becomes more acute where, as is common in many federal contracts, the customer has the right to direct the removal of any contractor employee from the site. Again, it depends on who controls or has the ability to control the employee, even if the contractor and not anyone employed by the customer committed the employment violation.

There are, however, steps to minimize such liability on the part of the customer.

Start with specifying in any employment contract or offer letter that the employee is hired by the contractor, and the contractor has sole supervisory authority over the employee. This sets the tone of the employment as one with the contractor only.

More importantly, the contractor, not the customer, should have supervisory responsibility for employees working at the customer's job site. This includes everything from assigning individual tasks to approving time reports, even if the employee's supervisor is at a remote location.

Also, any employee relations issues should be directed to the contractor rather than to the customer in order to avoid the appearance of customer control over the employee's work activities.

Finally, should the customer wish to remove an employee from the site, it should do so through the contractor, who is the primary employer.

In today's environment, co-employment liability is a greater risk than ever before. Government contractors must take the necessary steps to ensure that they have complete supervisory authority over the employee.

James Fontana is vice president and corporate counsel of Wang Government Services Inc. of McLean, Va. His e-mail address is

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