EMPLOYERS TURN to staffing companies to locate temporary workers with increasing frequency. Staffing companies generate savings for their employer/clients by locating temporary workers to fill employers' needs. There are, however, several key components to the three-party relationship formed between the employer/client, the staffing agency and the temporary worker. Resolving these issues, usually by contract, is crucial to managing the risks inherent in utilizing temporary workers.

One important question to resolve is whether the temporary worker will be an employee of the client, the staffing agency, or neither. Some staffing agencies hire the temporary workers as employees and contract them out to complete discrete tasks. Other staffing agencies treat the temporary workers as independent contractors, in which case the staffing agency acts as a middle-man connecting clients and temporary workers. It is important for the client to know which model the staffing agency has chosen. It is equally as important to understand whether an employer-employee relationship will be formed with the temporary worker. Even if a contract expressly states that the temporary worker is an independent contractor of the client, the law might still treat that temporary worker as an employee. Getting the classification right could impact important issues, including tax withholdings and payments, workers compensation premiums, and minimizing liability for the acts of the temporary worker. Employee status turns on whether the client exercises control over the day-to-day functions of the temporary worker, the times the services are performed, and the manner in which the temporary worker performs them. The contracts must address these control issues and the client must tailor the ways in which it interacts with the temporary worker to avoid an employee classification.