U.S. Employment Rights Legislation and the Legal Theory of Co-Employment as Constraints on the Use of Contract Labor

Douglas Rebne
Randall Jarmon

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DOI: 10.2190/QBAU-ENGV-V08T-J6YD

Abstract

This article examines the implications of U.S. individual employment rights for secondary employment under the contract labor mechanism. Based on an analysis of common law and regulatory agency tests and the evolving legal theory of co-employment, it is argued that employment rights management is fundamentally problematic for firms using contract labor. Factors which make it difficult to externalize employment management through contract labor agencies include 1) moral hazard problems associated with such agencies, 2) costs of monitoring rights compliance, 3) rights violations involving third-party liability and 4) related problems associated with the extension of contract labor to professional occupations. Anticipated managerial responses (in terms of refinements to contract labor practice) are discussed, together with their limitations. Also considered are the implications of such refinements for dual labor market configurations involving primary workers under the human resources or "salaried" model.

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