This is a nice reminder of the legal challenges that employers will have in determining whether they are properly classifying employees for purposes of the employer mandate under PPACA. This is from Monique Warren of Jackson Lewis:
... An employee, for employer shared responsibility penalty purposes (as for other purposes considered by the IRS), means a “common law employee” of the employer as explained under Treasury Regulation § 31.3401(c)-1(b). A common law employment relationship exists “when the person [entity] for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished.” Whether a common law employment relationship exists obviously turns on a subjective “facts and circumstances” test and the IRS gets to decide whether the relationship passes or fails that test. The IRS considers whether the employer has behavioral and financial control as well as the nature of the relationship. Important among the facts and circumstances the IRS considers is whether the employer has the right to hire and fire the worker. The IRS also considers things like whether the employer gives the worker the tools, equipment and place to work, among other facts and circumstances. The IRS does not consider as relevant how the employer refers to the worker (e.g., independent contractor, consultant, etc.). For employers that have misclassified workers as independent contractors who should have been treated as employees, the IRS’ Voluntary Worker Classification Settlement Program remains open, enabling those employers to reclassify workers as employees who’ve been misclassified as independent contractors in prior years for a fraction of the cost (in penalties) that otherwise could be incurred.
An individual paid by a staffing firm, but working under the direction and control of another entity is the common law employee of the entity for whom the individual performs the work. Thus, using a staffing firm to hire workers will not reduce the number of employees an employer has. However, for purposes of avoiding employer shared responsibility penalties, the employer will be treated as offering affordable minimum value coverage to those workers if the staffing firm offers such coverage to the workers and the employer pays a higher fee for those workers who enroll in coverage than for those who don’t. ...
The added emphasis is mine.
