Reminder: Those Staffing Agency Workers Are Likely Your Employees Under PPACA

This is from Mark Weisberg and Linda Lemel Hoseman, partners at Thompson Coburn, LLP:

... Many companies contract with staffing agencies to provide workers in a variety of situations. In many of these contracts, the workers are often characterized as employees of the staffing agency or jointly employed by the staffing agency and the company client. The IRS has indicated the terms used by the parties to such a contract are only one of many facts that will be examined to determine who is the common law employer for ACA purposes. ... 

An employer who has authority over workers supplied by a staffing agency may be at risk for having those workers characterized as its employees for purposes of the “play-or-pay” rules. Because employers do not offer health coverage to workers supplied by staffing agencies, classification of these workers as common law employees could trigger liability for the ACA penalties. For example, an employer who offers coverage to 96 out of 100 full-time employees would not owe a penalty under the 95 percent rule. But if five workers provided by a staffing agency are later determined to actually be common law employees of the employer, the employer could owe a penalty of $156,300 ($2,084 multiplied by 75 – the number of full-time employees less 30). 

The final regulations under the “pay-or-play” rules permit an employer to take credit for an offer of coverage made by a staffing agency, but only if the employer pays the staffing agency more for a worker who accepts the offer of coverage than the employer would pay if the worker did not accept the offer of coverage. The typical staffing agency contract prior to the enactment of the final regulations contained no such provision for distinguishing offers of coverage. The contracts were considered to spread the cost of any benefits among all the workers used under the contract, as opposed to distinguishing them. Since this is a new provision for many contracts, it is important to make certain your contracting team understands the importance of providing for a distinct coverage line item. ...