Publication Date

Winter 2002

Document Type



Increasingly, American workers rely upon employers to provide employee benefit programs that include critical health insurance and retirement savings plans. However, employers are finding that providing benefits is a costly undertaking. As a result an increasing number of employers are making use of alternative workforce systems. These involve supplementing a core of full-time workers with contingent employees for whom no commitments are made other than payment for services rendered. Such contingent workers have no expectation of indefinite or continuous employment, and are generally excluded from whatever benefit programs the company may provide.

The increasing use of two-tier employment systems of traditional and contingent labor is fraught with danger. A lack of care in the design of the workplace environment can easily produce a personnel system that fails to incorporate the elements required to avoid the creation of an employer-employee relationship. If discovered, the result can be substantial financial liability. Even if properly structured, there are serious questions that arise from the successful creation of a two-tier personnel system that satisfies existing legal requirements. In such cases, the end product is to create a disfavored second-tier group of service providers who lack the job protections and benefits that are among the central goals of most workers.

This article addresses both the legal and public policy implications of two-tier employment systems that deny some workers the right to participate in employee benefit programs including the use of independent contractor agreements and benefit plan eligibility criteria to restrict benefit program coverage. It concludes with recommendations for how the legal system should respond to this problem. There is an obvious need to be certain that exclusion criteria are clearly stated and do not make artificial distinctions between those extended coverage and those excluded. While there is justification to separate out true independent contractors and supplied labor who have access to benefits from other sources, arbitrary categorizations that lack any real underlying distinctions between worker groups should not be permitted. Artificial benefit program eligibility standards should not remain a device employers are free to use in order to frustrate a worker's right to participate in otherwise available workplace benefit programs.

Publication Title

Rutgers Law Journal





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