A Do & Don’t List for Co-Employment Concern

Driven by the prevailing strategy of so-called “light asset”, multinational companies are pretty busy with outsourcing everything not considered as their core competitive edges. Among others, outsourcing of human resohttp://pricecaolawblog.com/wp/wp-admin/post-new.phpurces gave rise to probably the most significant legal issues, commonly known as the “co-employment” issue.


Such terminology normally refers to the employee of a third party service provider (“3P Employee”) works so closely the company receiving such services (“Company”) that such 3P employees reasonably consider themselves the employees of the Company instead of the third party service provider and thus claims the same level of the benefit level of the Company.


To mitigate such co-employment risks, we have extracted our experience and set out below a do and don’t list from a practical perspective:


To-Do List


  • In general, the Company will consider the use of 3PL Employees only for the following scope of work:


  • Provide specialized services (i.e. construction, custodial, food services, low-skilled work, etc) that can be performed more effectively and at a better value to the Company by an external company that maintains that particular expertise.


  • Provide temporary incremental staffing or specialized skills for a short term business need which does not warrant hiring additional employees (e.g. temporary replacement, seasonal demand, special project, major start-up or organizational transition).


  • The third party service provider offering the work force shall be solely responsible for selecting workers, control of compensation, performance evaluation, discipline or discharge decisions and other managerial activities. Employees of the Company must refrain from these managerial activities for 3PL Employees. Third party service provider must supervise their own workers.


  • In the event that 3PL Employee performing work or services for the Company in its own facilities violates some common standard of conduct (e.g. non-harassment, general workplace decorum) as regular employees, such violations should be reported directly to the third party service provider.


Don’t Do List


  • Employees of the Company should not engage in activities with 3PL Employees which are typical in an employer/ employee relationship, including without limitation:
    • Selecting / hiring the 3PL Employee for the assignment;


  • Directing, supervising, or controlling the work of the 3PL Employee (except for temporary 3PL Employee);
  • Supplying the equipment or materials to be used (except for temporary 3PL Employee);


  • Setting the compensation to be received by the 3PL Employee;
  • Paying or reimbursing the 3PL Employee for expenses;
  • Disciplining, discharging or terminating the 3PL Employee;
  • Setting the hours / schedule of work of the 3PL Employee;


  • Training of the 3PL Employee other than orientation (safety, quality);
  • Providing benefits or other social security plans intended only for the employees of the Company.


  • 3PL Employee should not attend department meetings, social events, or Company celebrations, or be given recognition awards as this could imply an employer/employee relationship where one is not intended.




Please note that this article is not contemplated to exhaustive or be relied upon as formal legal advice. Should you wish to know more about the details of this particular area of law, please send an email to j.cao@pricecao.comand we would be more than happy to hear from you.



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