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April 20, 2000
Should Your Contingent Workers Be Eligible for Benefits?
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h the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act (ERISA) generally allow employers to exclude contingent workers from participation in benefit plans. However, it's not a good idea to assume that all contingent workers can be automatically excluded.

Employers should be vigilant about ensuring that workers are classified correctly, and that the language in each of their benefit plan documents is consistent with respect to eligibility requirements.

If a worker is, in fact, a common-law employee, it's unlikely you can exclude him or her from eligibility to participate in at least some of your benefit plans. Microsoft, where contingent workers said they had worked so long for the company they were being discriminated against, is just one company that has ended up in the headlines and courts over this issue.

Common-Law Employees

It's a good idea to look to the 20-factor test (hr.blr.com/infocenter/checklists/sumofirs20.html) adopted by the Internal Revenue Service Ruling 87-41, and by the U.S. Supreme Court in Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992) to determine whether workers are common-law employees.

Given these recent court cases, you may want to recheck your contingency worker classifications as well as your employment and benefit policies and practices.

This article is reprinted from "Best Practices in HR" with permission of the publisher, Business & Legal Reports, Inc. Copyright 2000, BLR. http://www.blr.com

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