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United States General Accounting Office: 
GAO: 

Report to the Honorable Edward M. Kennedy and the Honorable Robert G. 
Torricelli, U.S. Senate: 

June 2000: 

Contingent Workers: 

Incomes and Benefits Lag Behind Those of Rest of Workforce: 

GAO/HEHS-00-76: 

Contents: 

Letter: 

Appendixes: 

Appendix I: Scope and Methodology: 

Appendix II: Characteristics of Contingent Workers: 

Appendix III: Key Laws Designed to Protect Workers: 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

Bibliography: 

Related GAO Products: 

Tables: 

Table 1: U.S. Workforce by Category of Worker, 1999: 

Table 2: U.S. Workforce by Category of Worker, 1995, 1997, and 1999: 

Table 3: Workers With Annual Family Incomes Below $15,000, 1999: 

Table 4: Health Insurance Coverage for Workers With Annual Family 
Incomes Below $15,000, 1999: 

Table 5: Pension Benefits for Workers With Annual Family Incomes 
Below $15,000, 1999: 

Figures: 

Figure 1: Categories of Workers Who Could Be Considered Contingent: 

Figure 2: Workers With Health Insurance, 1999: 

Figure 3: Workers With Employer-Provided Pension Benefits, 1999: 

Figure 4: Key Laws Designed to Protect Workers: 

Abbreviations: 

BLS: Bureau of Labor Statistics: 

DOL: Department of Labor: 

ERISA: Employee Retirement Income Security Act: 

IRA: individual retirement account: 

[End of section] 

United States General Accounting Office: 
Health, Education, and Human Services Division: 
Washington, D.C. 20548: 

B-283273: 

June 30, 2000: 

The Honorable Edward M. Kennedy: 
The Honorable Robert G. Torricelli: 
United States Senate: 

The nature of employment for many Americans is changing. Millions of 
workers are no longer in traditional work arrangements—full-time, year-
round jobs in which employers usually provide workers with benefits—
but rather in temporary, part-time, contract, and other types of 
nonstandard work arrangements. These arrangements are often referred 
to as “contingent” work. In recent years, researchers and groups such 
as labor organizations have raised concerns about whether this segment 
of the labor force is growing and how these workers are treated 
compared with the rest of the workforce, particularly in the areas of 
health care and pension benefits. Moreover, these concerns have gained 
greater visibility as some groups of contingent workers have sued 
major companies for better treatment and benefits. 

Because of your concerns about the status of contingent workers, you 
asked us to provide information on (1) the nature and size of the 
contingent workforce; (2) the extent to which contingent workers have 
access to health insurance and pensions; (3) the protections afforded 
these workers under laws regarding family and medical leave, 
retirement income, hourly wages, labor relations, civil rights, and 
health and safety; and (4) options available for providing contingent 
workers increased access to employee benefits and increased coverage 
under laws designed to protect workers. To address these questions, we 
analyzed data from the Department of Labor’s (DOL) Bureau of Labor 
Statistics’ (BLS) Current Population Survey, which is used to 
periodically survey people about their work and benefits, and a 
supplement developed to collect information on the contingent 
workforce. We also talked with labor experts and representatives of 
worker groups and employer associations about the nature of contingent 
work and the options available to increase workers’ access to benefits 
and worker protections. We conducted our work from July 1999 to June 
2000 in accordance with generally accepted government auditing 
standards. Appendix I contains a detailed discussion of the scope and 
methodology of our review. 

Results in Brief: 

The contingent workforce comprises many categories of workers, ranging 
from highly paid management consultants who are satisfied with their 
work arrangements to low-paid service sector workers who receive no 
benefits and would rather have full-time, permanent jobs. The size of 
the contingent workforce, however, cannot be precisely estimated 
because no consensus exists on which categories of workers should be 
included. Labor experts and others generally agree that workers who 
lack job security and have unpredictable work schedules, such as 
temporary and on-call workers, should be included in the definition of 
the contingent workforce. However, there is less agreement on whether 
workers such as independent contractors, self-employed workers, and 
part-time wage and salary workers should be included. Many of these 
individuals work in relatively permanent employment arrangements; 
however, they may have less job security and less predictable work 
schedules than workers in traditional, full-time work arrangements. 
Estimates of the size of the contingent workforce range from 5 percent 
of the total workforce, when only the categories of temporary and on-
call workers are included, to almost 30 percent when workers in the 
other categories are added. Workers in most of these categories are 
more likely than workers in more traditional full-time work 
arrangements to have low family incomes, and many have incomes below 
the federal poverty threshold. 

Contingent workers are also less likely than the rest of the workforce 
to receive health insurance and pension benefits through their 
employers. Many of these workers either are not offered benefits by 
their employers or do not qualify for benefits because they do not 
work enough hours or have not worked for their employers long enough. 
Furthermore, when their employers offer health insurance and pension 
plans, many contingent workers do not participate because of the cost 
of the plans. Contingent workers who have low family incomes are even 
less likely to be included in employer-provided health insurance and 
pension plans or to participate in the plans when they are offered. 

Most contingent workers who are employees are covered by key laws 
designed to protect workers. However, workers who are not employees— 
independent contractors and other self-employed workers—are generally 
not covered by the laws, and some workers who are employees are not 
covered or may not be able to take advantage of the protections 
afforded by these laws. For example, the Family and Medical Leave Act, 
which allows workers to take unpaid, job-protected leave, contains job 
tenure and minimum hours requirements that result in some temporary 
and part-time workers not being covered by the law. Moreover, because 
it can be difficult to determine whether workers are employees or 
independent contractors, and because employers sometimes misclassify 
workers as independent contractors, contingent workers who should be 
covered sometimes are not. In addition, because many contingent work 
arrangements involve more than one company, such as a temporary 
employment agency and a client firm, it is sometimes difficult to 
determine which company is the employer that should be held 
accountable for compliance with the laws. 

Since contingent workers are less likely to receive health insurance 
and pension coverage through their employers than the rest of the 
workforce and many of them are not covered under key laws designed to 
protect workers, advocates for these workers have proposed a range of 
strategies to expand coverage for contingent workers. Each strategy 
involves tradeoffs in terms of costs and benefits. Some proposals seek 
to build on the current employer-employee relationship by assuming 
employers will continue to serve as the primary vehicle for providing 
health insurance, pension coverage, and worker protections. One 
proposal, for example, calls for legislation that would require 
employers to offer comparable benefits and compensation to all their 
workers regardless of the number of hours they work each week. 
Although this proposal would extend benefits to many contingent 
workers, employers might reduce employees’ salaries or hire fewer 
workers to cover the increased costs of providing benefits to more 
employees. Other proposals seek new approaches outside the traditional 
employer-employee relationship. One such approach would create 
associations of people in similar jobs that could purchase insurance 
as a group, which might make their coverage more affordable and 
provide an option for contingent workers who do not have access to 
employer-provided benefits. A number of other proposals are designed 
to increase workers’ access to health insurance and retirement 
benefits, for example, by providing tax breaks to individuals for the 
cost of health insurance premiums and retirement-related savings 
accounts. Opponents of these proposals, however, cite the costs of 
these programs, their administrative complexity, and the possibility 
that the programs might not benefit the individuals targeted. 

DOL generally agreed with our findings and provided technical comments 
on the report, which we incorporated. 

Background: 

The term “contingent” has been used for many years to describe a 
variety of nonstandard work arrangements. It was first used in 1985 to 
describe the impermanent nature of certain work arrangements, such as 
the practice of hiring workers only when there is an immediate and 
limited demand for their services, without any offer of permanent or 
even long-term employment.[Footnote 1] Consistent with this concept, 
some definitions of contingent work have focused on work that provides 
a relatively low level of job security. The term contingent has also 
been expanded by some labor experts to include work arrangements with 
more variable or less predictable hours, as well as arrangements that 
reflect a change in the traditional rights of workers and the benefits 
offered to them. This expanded definition can include such varying 
employment arrangements as independent contracting; part-time work; or 
any work arrangement that is not long-term, year-round, full-time 
employment with a single employer. Under this definition, the term 
“contingent” is used to describe a broad range of work arrangements; 
however, some labor experts prefer terms less linked to job security, 
such as “nonstandard,” “flexible,” or “alternative” work arrangements. 

Until recently, no nationally representative data on contingent 
workers existed. In 1995, BLS introduced a supplement on contingent 
workers to the Current Population Survey, a monthly survey of some 
50,000 households whose answers to a set of questions are the primary 
source of nationally representative data on the U.S. labor force. BLS 
developed a series of supplemental questions—-the Contingent Work 
Supplement-—to identify workers whom BLS considered contingent. 
[Footnote 2] The supplemental survey has been used three times: in 
1995, 1997, and 1999. 

Under current laws, employers are generally required to provide their 
employees with a basic set of protections against loss of income—both 
during retirement and because of disability.[Footnote 3] For example, 
employers are required to collect, pay, and report taxes for Social 
Security and Medicare benefits.[Footnote 4] Although the employer 
collects and remits taxes for Social Security and Medicare hospital 
insurance, employers and employees contribute equal amounts.[Footnote 
5] Self-employed workers and independent contractors generally must 
pay these taxes themselves, contributing both the employee and 
employer shares. Employers are required to pay an additional tax for 
unemployment insurance for their workers.[Footnote 6] Most employers 
are also required to provide workers’ compensation insurance for their 
employees.[Footnote 7] In most states, self-employed workers and 
independent contractors are not eligible for unemployment insurance or 
workers’ compensation benefits. 

In addition to these mandatory protections, employers may offer 
benefits such as health insurance and pensions to workers. Employers’ 
decisions to offer these and other benefits, and the type and breadth 
of the benefits offered, depend on a complex set of gains and costs 
that each employer must regularly consider in light of current 
business needs. Benefits such as health insurance can help employers 
attract and retain valuable employees, which can be particularly 
important during periods of low unemployment and increased competition 
for skilled workers. Moreover, the federal government offers employers 
a variety of tax incentives to provide certain health and pension 
benefits because it has an expressed interest in expanding health and 
pension coverage. However, providing these benefits is not without 
cost. Employers may decide to pay all of the costs of health insurance 
and pension plans; however, they may do so in lieu of higher pay. 
Alternatively, employees may be required to pay all or a portion of 
the costs.[Footnote 8] In addition, employers incur costs in 
administering benefit programs, and these costs can be significant 
enough to inhibit employer decisions to form or expand benefit 
programs, according to employer groups. Workers may also obtain 
benefits through other vehicles, such as unions or employee 
associations. In some cases, employers may contribute to these benefit 
plans. 

Concern surrounding contingent work arises because, in many cases, the 
nature of the arrangement implies that no formal, long-term link 
exists between the employer and the employee. Because the link to 
their employers is often tenuous, many contingent workers may not be 
covered under employer-sponsored plans. As a result, some government 
officials and labor analysts are concerned that contingent employment 
relationships may have long-term adverse consequences for workers and 
government programs. To the extent that contingent workers do not 
receive health or pension benefits or qualify for unemployment or 
workers’ compensation, these workers might turn to needs-based 
programs such as Medicaid[Footnote 9] or Supplemental Security Income. 
[Footnote 10] To the extent that this occurs, costs formerly borne by 
employers and employees may be shifted to federal and state public 
assistance budgets. 

A recent survey of employers shows that employers use contingent work 
arrangements for a variety of reasons.[Footnote 11] According to the 
survey, employers hire contingent workers to accommodate workload 
fluctuations, fill temporary absences, meet employees’ requests for 
part-time hours, screen workers for permanent positions, and save on 
wage and benefit costs, among other reasons. However, some worker 
advocacy groups contend that employers use contingent workers for 
other reasons, such as to avoid paying benefits, reduce their workers’ 
compensation costs, prevent workers’ attempts to unionize, or allow 
them to lay off workers more easily. 

Data from the BLS Contingent Work Supplement indicate that workers 
take temporary and other contingent jobs for a variety of reasons, 
both personal and financial. These reasons include workers’ preference 
for a flexible schedule due to school, family, or other obligations; 
need for additional income; inability to find a more permanent job; 
and hope that the position will lead to permanent employment. 

Contingent Workers Are a Diverse Group but Are More Likely to Have Low 
Incomes Than Other Workers: 

Many different categories of workers could be considered part of the 
contingent workforce, and labor experts and others do not agree on 
which categories should be included. As a result, it is difficult to 
generalize about this workforce as a whole. Depending on which 
categories are included, the size of the contingent workforce can 
range from 5 percent to almost 30 percent of the total workforce. 
Nevertheless, workers in most of the categories that could be 
considered part of the contingent workforce share a common 
characteristic: they are more likely to have low incomes than similar 
workers in traditional full-time work arrangements. 

Contingent Workers Differ by Category: 

There are a number of categories of workers who are not in standard, 
or traditional, work arrangements—that is, these workers are not wage 
and salary workers who usually work at least 35 hours a week in 
relatively permanent jobs. Figure 1 lists and describes such 
categories of workers, who could be included in the definition of the 
contingent workforce. In developing these descriptions, we drew on BLS 
data and research on contingent workers.[Footnote 12] 

Figure 1: Categories of Workers Who Could Be Considered Contingent: 

[Refer to PDF for image: table] 

Agency Temporary Workers (Temps): 
Individuals who work for temporary employment agencies and are 
assigned by the agencies to work for other companies ("client firms"), 
such as temporary workers supplied to companies to fill in for full-
time workers who are on vacation or to work on special projects. 

Direct-Hire Temps: 
Temporary workers hired directly by companies to work for a specified 
period of time, such as seasonal workers and workers hired to work on 
special projects. 

On-Call Workers: 
Individuals who are called to work only on an as-needed basis, such as 
substitute teachers and construction workers supplied by union hiring 
halls. 

Day Laborers: 
Individuals who get work by waiting at a place where employers pick up 
people to work for the day, such as low-skilled construction workers. 

Contract Company Workers: 
Individuals who work for companies that provide services to other 
firms under contract, such as security, landscaping, or computer 
programming services. 

Independent Contractors[A]: 
Individuals who obtain customers on their own and provide a product or 
service (and who may have other employees working for them), such as 
maids, realtors, child care providers, and management consultants. 

Self-Employed Workers: 
Self-employed workers who are not independent contractors, such as 
doctors and individuals who own restaurants and shops. 

Standard Part-Time Workers[B]: 
Individuals who regularly work fewer than 35 hours a week for a 
particular employer and are wage and salary workers. 

Leased Workers[C]: 
Individuals who work for leasing companies (some of which are called 
"professional employer organizations") that usually handle payroll, 
employee benefit programs, and other human resource functions for the 
companies to which they lease workers. 

[A] This category includes all individuals who identified themselves 
as an “independent contractor, consultant, or freelance worker” 
regardless of whether they were wage and salary workers or self-
employed. Individuals’ categorization of themselves as independent 
contractors does not necessarily mean that they meet the legal 
definition of an independent contractor. 

[B] Although all of the other categories of workers listed may also 
work part-time, standard part-time workers have an attachment to a 
particular employer and are not in one of the other categories. These 
workers may work in long-term work arrangements. 

[C] Information on leased workers was not collected by BLS in the most 
recent Contingent Work Supplements; therefore, data on these workers 
are not included in our report. 

[End of figure] 

The characteristics of these individuals differ by category. For 
example, according to data from the BLS Contingent Work Supplement, 
direct-hire temps and standard part-time workers are likely to be 
younger (under age 25) than workers in the other categories, while a 
greater number of self-employed workers and independent contractors 
are older (aged 55 and older). A much larger proportion of contract 
company workers are male (71 percent) than of standard full-time 
workers (56 percent), while a larger proportion of standard part-time 
workers are female (70 percent) than of standard full-time workers (44 
percent). In comparing the percentages of contingent workers by race, 
the largest difference between contingent workers and standard full-
time workers is that the percentage of agency temps who are black (21 
percent) is higher than the percentage of standard full-time workers 
who are black (12 percent). Workers’ preferences for contingent work 
also vary by category, according to BLS. Most agency temps, on-call 
workers, and day laborers would prefer a permanent job, while most 
independent contractors, self-employed workers, and standard part-time 
workers prefer their current work arrangements.[Footnote 13] (Appendix 
II contains detailed information from the 1999 BLS Contingent Work 
Supplement on the characteristics of workers in each category, 
including age, gender, race/origin, education, geographic location, 
industry, and occupation.) 

Although contingent workers are employed in a wide variety of 
industries and occupations, the largest proportion of them are 
employed in service industries. Of contingent workers in services, the 
largest percentages of agency temps are in business services, such as 
data processing services, while the other categories of contingent 
workers tend to work in professional services, such as nursing, 
engineering, or accounting. Of those who work in professional 
services, a large percentage of direct-hire temps (over 33 percent) 
and on-call workers (over 19 percent) work in educational services-—
for example, as substitute teachers or college teachers with temporary 
contracts. 

Size Estimates Differ Depending on the Definition of the Contingent 
Workforce: 

Estimates of the size of the contingent workforce depend on which 
categories are included. Because there is a lack of consensus about 
which categories of workers should be included in the workforce, these 
estimates vary. While BLS’ Contingent Work Supplement provides the 
first nationally representative data on this segment of the workforce, 
it has been criticized by some as defining the contingent workforce 
too narrowly. BLS officials chose likely job tenure as a defining 
factor for contingent work and, therefore, excluded from two of their 
three estimates of the contingent workforce workers who had been in 
their current jobs for more than a year or who expected to continue in 
their current jobs for more than a year, albeit in temporary 
positions.[Footnote 14] For example, BLS included only 57 percent of 
agency temps and 28 percent of on-call workers in its estimate of the 
contingent workforce for 1997. 

Many labor experts agree that workers with employment arrangements 
that lack job security and workers with work schedules that are 
variable, unpredictable, or both-—such as agency temps, direct-hire 
temps, on-call workers, and day laborers-—should be included in the 
definition of the contingent workforce. Taken together, these 
categories constitute 5 percent of the total workforce. There is less 
agreement, however, that contract company workers, independent 
contractors, self-employed workers, and standard part-time workers 
should be included in the definition of the contingent workforce. For 
example, BLS does not include many standard part-time workers in its 
definition of the contingent workforce, arguing that many of these 
workers are as attached to their employers as full-time workers are. 
Many labor experts and others, however, include these part-time 
workers because they differ from standard full-time workers who have 
long-term, full-time employment with a single employer and who may be 
more likely to receive employer-provided benefits such as health 
insurance and pensions. Similarly, BLS does not include many self-
employed workers in the contingent workforce because many of these 
individuals have stable employment situations (for example, doctors 
and shop owners). Others, however, include self-employed workers, 
maintaining that some of these workers do not have the same level of 
job security as standard full-time workers or are less likely to have 
benefits or to be covered by laws designed to protect workers. If all 
of the categories are included, the contingent workforce makes up 
almost 30 percent of the total workforce. 

Table 1 shows the number and percentage of workers in each category. 
The number of leased workers is not included in these estimates 
because data are not available on the size of the group.[Footnote 15] 

Table 1: U.S. Workforce by Category of Worker, 1999: 

Category of worker: Agency temps; 
Number of workers: 1,188,000; 
Percentage of total workforce: 0.9%. 

Category of worker: Direct-hire temps; 
Number of workers: 3,227,000; 
Percentage of total workforce: 2.5%. 

Category of worker: On-call workers and day laborers; 
Number of workers: 2,180,000; 
Percentage of total workforce: 1.7%. 

Category of worker: Contract company workers; 
Number of workers: 769,000; 
Percentage of total workforce: 0.6%. 

Category of worker: Independent contractors; 
Number of workers: 8,247,000; 
Percentage of total workforce: 6.3%. 

Category of worker: Self-employed workers; 
Number of workers: 6,280,000; 
Percentage of total workforce: 4.8%. 

Category of worker: Standard part-time workers; 
Number of workers: 17,380,000; 
Percentage of total workforce: 13.2%. 

Category of worker: Subtotal; 
Number of workers: 39,271,000; 
Percentage of total workforce: 29.9%[A]. 

Category of worker: Standard full-time workers; 
Number of workers: 92,222,000; 
Percentage of total workforce: 70.1%. 

Category of worker: Total workforce; 
Number of workers: 131,493,000; 
Percentage of total workforce: 100%. 

[A] Percentages do not add up to subtotal because of rounding. 

Source: GAO analysis of data from the BLS February 1999 Contingent 
Work Supplement. 

[End of table] 

Contingent Workforce Has Not Grown in Recent Years: 

As measured by the BLS Contingent Work Supplement, since 1995, the 
percentage of contingent workers as a proportion of the total 
workforce has decreased—from 32.2 percent in 1995 to 29.9 in 1999. 
Over this period, no individual category of workers changed 
significantly, except that of self-employed workers, which also 
decreased from 1995 to 1999.[Footnote 16] Some labor experts attribute 
these changes to the strong U.S. labor market in the mid- and late 
1990s, which made the number of standard full-time jobs more 
plentiful. Table 2 shows the percentage of workers in each category 
according to the 1995, 1997, and 1999 February Contingent Work 
Supplements. 

Table 2: U.S. Workforce by Category of Worker, 1995, 1997, and 1999 

Category of worker: Agency temps; 
February 1995: 
Number of workers: 1,181,000; 
Percentage of total workforce: 1.0%; 
February 1997: 
Number of workers: 1,300,000; 
Percentage of total workforce: 1.0%; 
February 1999: 
Number of workers: 1,188,000; 
Percentage of total workforce: 0.9%. 

Category of worker: Direct-hire temps; 
February 1995: 
Number of workers: 3,393,000; 
Percentage of total workforce: 2.8%; 
February 1997: 
Number of workers: 3,263,000; 
Percentage of total workforce: 2.6%; 
February 1999: 
Number of workers: 3,227,000; 
Percentage of total workforce: 2.5%. 

Category of worker: On-call workers and day laborers; 
February 1995: 
Number of workers: 2,014,000; 
Percentage of total workforce: 1.6%; 
February 1997: 
Number of workers: 1,977,000; 
Percentage of total workforce: 1.6%; 
February 1999: 
Number of workers: 2,180,000; 
Percentage of total workforce: 1.7%. 

Category of worker: Contract company workers; 
February 1995: 
Number of workers: 652,000; 
Percentage of total workforce: 0.5%; 
February 1997: 
Number of workers: 809,000; 
Percentage of total workforce: 0.6%; 
February 1999: 
Number of workers: 769,000; 
Percentage of total workforce: 0.6%. 

Category of worker: Independent contractors; 
February 1995: 
Number of workers: 8,309,000; 
Percentage of total workforce: 6.7%; 
February 1997: 
Number of workers: 8,456,000; 
Percentage of total workforce: 6.7%; 
February 1999: 
Number of workers: 8,247,000; 
Percentage of total workforce: 6.3%. 

Category of worker: Self-employed workers; 
February 1995: 
Number of workers: 7,256,000; 
Percentage of total workforce: 5.9%; 
February 1997: 
Number of workers: 6,510,000; 
Percentage of total workforce: 5.1%; 
February 1999: 
Number of workers: 6,280,000; 
Percentage of total workforce: 4.8%. 

Category of worker: Regular part-time workers; 
February 1995: 
Number of workers: 16,813,000; 
Percentage of total workforce: 13.6%; 
February 1997: 
Number of workers: 17,290,000; 
Percentage of total workforce: 13.6%; 
February 1999: 
Number of workers: 17,380,000; 
Percentage of total workforce: 13.2%. 

Category of worker: Subtotal; 
February 1995: 
Number of workers: 39,618,000; 
Percentage of total workforce: 32.2[A]%; 
February 1997: 
Number of workers: 39,605,000; 
Percentage of total workforce: 31.2%; 
February 1999: 
Number of workers: 39,271,000; 
Percentage of total workforce: 29.9[A]%. 

Category of worker: Regular full-time workers; 
February 1995: 
Number of workers: 83,589,000; 
Percentage of total workforce: 67.8%; 
February 1997: 
Number of workers: 87,135,000; 
Percentage of total workforce: 68.8%; 
February 1999: 
Number of workers: 92,222,000; 
Percentage of total workforce: 70.1%. 

Category of worker: Total; 
February 1995: 
Number of workers: 123,207,000; 
Percentage of total workforce: 100%; 
February 1997: 
Number of workers: 126,740,000; 
Percentage of total workforce: 100%; 
February 1999: 
Number of workers: 131,493; 
Percentage of total workforce: 100%. 

[A] Percentages do not add up to subtotal because of rounding. 

Source: GAO analysis of data from the BLS February Contingent Work 
Supplements for 1995, 1997, and 1999. 

[End of table] 

Some Sectors of the Contingent Workforce Have Grown Over Time: 

Despite the data showing that the contingent workforce has not grown 
in recent years, data on longer-term trends, while limited, show that 
the number of contingent workers in some categories—certain types of 
temporary and part-time workers—has grown. For example, BLS collects 
information from employers on the “temporary help supply industry,” 
which includes the employees supplied by temporary employment agencies 
to client firms as well as individuals who work full-time for 
temporary employment agencies, such as recruiters.[Footnote 17] 
Although this information differs from the data on agency temps 
collected in the Contingent Work Supplement, it indicates that the 
industry has grown significantly, from 0.5 percent of the total 
workforce in 1982 to over 2 percent in 1998. From 1982 to 1998, the 
total number of jobs in the temporary help supply industry rose 577 
percent, while during the same period the total number of jobs grew 41 
percent. Furthermore, certain industries and communities have begun to 
rely heavily on agency temps. One study of the contingent workforce in 
the Silicon Valley area of California—an area with a large number of 
high-tech companies—noted that, from 1984 to 1995, the average number 
of people employed in temporary help agencies in Santa Clara County 
grew from 1.6 percent of the total workforce to 3.3 percent, more than 
a 100-percent increase.[Footnote 18] Over the same period, total 
employment in the area grew only 4 percent. The study also reported 
that, in 1997, temporary help agencies had over 200 offices in Silicon 
Valley that placed over 10,000 agency temps each week. 

Although not as dramatic as the growth in the number of temporary 
workers, the number of part-time workers has also grown over time. BLS 
has measured the number of part-time workers since the late 1960s. In 
1969, part-time workers constituted approximately 14.5 percent of the 
total workforce; by 1993, that figure had risen to 17.6 percent. 
[Footnote 19] The largest increase in the proportion of part-time 
workers, however, occurred during the 1970s and early 1980s, when 
changes in business cycles—such as the recession in 1983—prompted the 
greater use of part-time workers. In recent years, the proportion of 
part-time workers has declined slightly, from 18.9 percent of the 
total workforce in 1994 to 17.4 percent in 1999. In reviewing the 
number of “voluntary” and “involuntary” part-time workers (workers who 
choose to work part-time and workers who would prefer full-time jobs, 
respectively), the Congressional Research Service reported that, 
although most part-time workers choose to work a short schedule, 
involuntary part-time work has grown over the long run.[Footnote 20] 
The Congressional Research Service attributed this growth to several 
possible factors, including the changing economy; employers’ need to 
minimize labor costs; and the possibility that some workers do not 
have the skills needed to obtain full-time, long-term positions. 

Another area of growth in the use of contingent workers is the use of 
leased workers. Although BLS did not collect information on leased 
workers as part of its Contingent Work Supplement, DOL obtained 
information on the employee leasing industry in a 1994 survey of state 
unemployment insurance agencies.[Footnote 21] Labor found that several 
states had registration and reporting requirements for leasing 
companies that allowed them to estimate the number of leased workers 
in the state. Although most of the states’ reporting requirements were 
new, a few of the states that provided longer-term estimates reported 
substantial growth in the number of leased workers. For example, 
Florida reported that in 1989 there were 35,106 leased workers in the 
state; by 1993, this number had grown to 113,773. 

Many Contingent Workers Are More Likely Than Standard Full-Time 
Workers to Have Low Incomes: 

Despite the diversity among workers in the categories that make up the 
contingent workforce, on average, these workers have lower annual 
family incomes than standard full-time workers. With the exception of 
contract company and self-employed workers,[Footnote 22] the 
percentage of contingent workers with annual family incomes below 
$15,000 is larger than that of standard full-time workers.[Footnote 
23] For some contingent workers, such as agency temps, the differences 
are sizable: almost 30 percent of all agency temps have family incomes 
below $15,000, compared with 7.7 percent of standard full-time 
workers. Table 3 shows the number and percentage of workers by 
category with annual family incomes below $15,000. 

Table 3: Workers With Annual Family Incomes Below $15,000, 1999: 

Category of worker: Agency temps; 
Number of workers with family incomes below $15,000: 338,503; 
Percentage of workers in category with family incomes below 
$15,000[A]: 29.8[B]%. 

Category of worker: Direct-hire temps; 
Number of workers with family incomes below $15,000: 642,602; 
Percentage of workers in category with family incomes below 
$15,000[A]: 21.3[B]%. 

Category of worker: On-call workers and day laborers; 
Number of workers with family incomes below $15,000: 373,045; 
Percentage of workers in category with family incomes below 
$15,000[A]: 18.5[B]%. 

Category of worker: Contract company workers; 
Number of workers with family incomes below $15,000: 61,097; 
Percentage of workers in category with family incomes below 
$15,000[A]: 8.5[C]%. 

Category of worker: Independent contractors; 
Number of workers with family incomes below $15,000: 663,212; 
Percentage of workers in category with family incomes below 
$15,000[A]: 8.8[B]%. 

Category of worker: Self-employed workers; 
Number of workers with family incomes below $15,000: 415,674; 
Percentage of workers in category with family incomes below 
$15,000[A]: 7.5[C]%. 

Category of worker: Standard part-time workers; 
Number of workers with family incomes below $15,000: 2,799,753; 
Percentage of workers in category with family incomes below 
$15,000[A]: 17.5[B]%. 

Category of worker: Subtotal; 
Number of workers with family incomes below $15,000: 5,293,886; 
Percentage of workers in category with family incomes below 
$15,000[A]: 14.8[B]%. 

Category of worker: Standard full-time workers; 
Number of workers with family incomes below $15,000: 6,477,268; 
Percentage of workers in category with family incomes below 
$15,000[A]: 7.7%. 

Category of worker: Total workforce; 
Number of workers with family incomes below $15,000: 11,771,154; 
Percentage of workers in category with family incomes below 
$15,000[A]: 9.8%. 

[A] The percentages are based on the number of total respondents for 
each category. Individuals who refused to answer the questions on 
family income, had no response, or gave a “don’t know” answer were not 
included. 

[B] The difference between the percentage of workers in this category 
and the percentage of standard full-time workers is statistically 
significant at the .05 level. 

[C] The difference between the percentage of workers in this category 
and the percentage of standard full-time workers is not statistically 
significant. 

Source: GAO analysis of data from the BLS February 1999 Contingent 
Work Supplement. 

[End of table] 

Even when differences in the characteristics of the workers—such as 
age, education, race, industry, and occupation—are considered, most 
categories of contingent workers are more likely than standard full-
time workers to have annual family incomes below $15,000, and a few 
categories are much more likely. For example, agency temps are more 
than three times as likely to have annual family incomes below $15,000 
as standard full-time workers who are the same age, have the same 
levels of educational attainment, work in similar occupations and 
industries, and live in the same general areas of the country. 

Contingent Workers Are Less Likely Than Other Workers to Have Benefits: 

Overall, contingent workers are less likely than standard full-time 
workers to have employer-provided health insurance and pension 
benefits. Even when their employers offer these benefits, contingent 
workers are less likely than other workers to participate in the 
plans. Moreover, contingent workers who have low family incomes are 
even less likely to have employer-provided health insurance and 
pension benefits. Finally, many contingent workers do not qualify for 
unemployment compensation benefits because they do not meet the 
requirements for earnings or hours worked. 

Contingent Workers Are Less Likely to Have Health Insurance: 

Contingent workers in all categories are less likely than standard 
full-time workers to have health insurance. Figure 2 shows the 
percentages of contingent workers who have employer-provided health 
insurance and contingent workers who have health insurance from any 
source, whether through their employer, their spouse, another family 
member, or a previous job—-or whether they purchased it themselves. 

Figure 2: Workers With Health Insurance, 1999: 

[Refer to PDF for image: stacked vertical bar graph] 

Category of worker: Agency temps[A]; 
Workers with Health Insurance: 43%. 
Workers with Health Insurance through their Employer: 9%. 

Category of worker: Direct-hire temps[A]; 
Workers with Health Insurance: 75%. 
Workers with Health Insurance through their Employer: 25%. 

Category of worker: On-call workers and day laborers[A]; 
Workers with Health Insurance: 69%. 
Workers with Health Insurance through their Employer: 21%. 

Category of worker: Contract company workers[A]; 
Workers with Health Insurance: 83%. 
Workers with Health Insurance through their Employer: 58%. 

Category of worker: Independent contractors[A,B]; 
Workers with Health Insurance: 76%. 
Workers with Health Insurance through their Employer: 0. 

Category of worker: Self-employed workers[A,B]; 
Workers with Health Insurance: 83%. 
Workers with Health Insurance through their Employer: 0. 

Category of worker: Standard part-time workers[A]; 
Workers with Health Insurance: 76%. 
Workers with Health Insurance through their Employer: 17%. 

Category of worker: Standard full-time workers; 
Workers with Health Insurance: 88%. 
Workers with Health Insurance through their Employer: 73%. 

[A] The difference between the percentage of workers in this category 
and the percentage of standard full-time workers is statistically 
significant at the .05 level. 

[B] Most workers in this category do not have an employer. 

Source: GAO analysis of data from the BLS February 1999 Contingent 
Work Supplement. 

[End of figure] 

As figure 2 shows, most categories of contingent workers are much less 
likely than standard full-time workers to have health insurance 
through their employers. However, when insurance from other sources is 
included, coverage for contingent workers significantly improves for 
all categories of workers and compares more favorably with coverage 
for standard full-time workers. Of all the categories of contingent 
workers, agency temps are the least likely to have health insurance 
benefits: only 9 percent of agency temps have employer-provided health 
insurance (compared with 73 percent of standard full-time workers), 
and only 43 percent of agency temps have health insurance from any 
source (compared with 88 percent of standard full-time workers). The 
nature of temporary work, and the fact that many workers do not hold 
these positions very long, makes it difficult for agency temps to 
obtain employer-provided health insurance benefits. According to an 
industry association of temporary employment agencies, such work is 
generally short-term, intermittent, or transitional, with an average 
job tenure of under 10 weeks.[Footnote 24] A senior executive of one 
of the largest temporary employment agencies reported that 30 percent 
of the agency’s employees work for the agency 1 week or less, 50 
percent work 1 month or less, and 70 percent work less than 2 months. 
The agency faces a significant challenge in designing benefit plans, 
according to this executive, because most of its insurance providers 
require an employee to have worked for the agency at least 1 month to 
be eligible for coverage, and many providers are moving to a 2-month 
requirement.[Footnote 25] 

The overall health insurance picture worsens when the benefits of 
workers with annual family incomes below $15,000 are considered. While 
73 percent of all standard full-time workers have employer-provided 
health insurance benefits, this figure drops to 43 percent for those 
with low family incomes, as shown in table 4. Coverage for low-income 
contingent workers also drops. For example, the percentage of agency 
temps with employer-provided health insurance decreases from 9 percent 
to 3 percent when only those with family incomes below $15,000 are 
considered. Once again, when health insurance from any source is 
included, the disparity between coverage for contingent workers and 
standard full-time workers decreases, and, in fact, direct-hire temps 
and self-employed workers are as likely as standard full-time workers 
to have health insurance.[Footnote 26] The large differences in 
percentages of those with employer-provided health insurance benefits 
and those with health insurance through another source illustrate 
that, in some cases, other employers, such as those of family members, 
are bearing some of the costs of providing health insurance benefits 
to contingent workers, rather than those workers’ employers. 

Table 4: Health Insurance Coverage for Workers With Annual Family 
Incomes Below $15,000, 1999: 

Category of worker: Agency temps; 
Percentage with health insurance through their employer: 3%[A]; 
Percentage with health insurance from any source: 30%[A]. 

Category of worker: Direct-hire temps; 
Percentage with health insurance through their employer: 17%[A]; 
Percentage with health insurance from any source: 55%[B]. 

Category of worker: On-call workers and day laborers; 
Percentage with health insurance through their employer: 15%[A]; 
Percentage with health insurance from any source: 40%[A]. 

Category of worker: Contract company workers; 
Percentage with health insurance through their employer: [C];
Percentage with health insurance from any source: [C]. 

Category of worker: Independent contractors; 
Percentage with health insurance through their employer: [D];
Percentage with health insurance from any source: 39%[A]. 

Category of worker: Self-employed workers; 
Percentage with health insurance through their employer: [D]; 
Percentage with health insurance from any source: 57%[B]. 

Category of worker: Standard part-time workers; 
Percentage with health insurance through their employer: 14%[A]; 
Percentage with health insurance from any source: 52%[A]. 

Category of worker: Standard full-time workers; 
Percentage with health insurance through their employer: 43%; 
Percentage with health insurance from any source: 56%. 

[A] The difference between the percentage of workers in this category 
and the percentage of standard full-time workers is statistically 
significant at the .05 level. 

[B] The difference between the percentage of workers in this category 
and the percentage of standard full-time workers is not statistically 
significant. 

[C] The number of respondents in this category was too small to 
provide statistically reliable data. 

[D] Most workers in this category do not have an employer. 

Source: GAO analysis of data from the BLS February 1999 Contingent 
Work Supplement. 

[End of table] 

Even when workers may participate in the health insurance plans 
offered by their employers, many of them choose not to, usually 
because they feel that the cost of the health insurance plan is too 
high or because they are able to obtain benefits through another 
source. For example, in 1999, 46 percent of the agency temps who chose 
not to participate in their employers’ health insurance plans did so 
because the plans were too expensive, while 27 percent chose not to 
participate because they were covered under another health insurance 
plan. 

Contingent Workers Are Also Less Likely to Have Employer-Provided 
Pensions: 

In addition to being less likely to have health insurance benefits, 
contingent workers are less likely than standard full-time workers to 
be included in employer-provided pension plans. When workers retire, 
they rely on three main sources of retirement income: pensions, Social 
Security, and personal savings. Because contingent workers are less 
likely than other workers to have employer-provided pensions, they 
rely more heavily on Social Security income and savings upon 
retirement. However, Social Security was not designed to provide 
sufficient resources for individuals to maintain their preretirement 
standard of living. 

As shown in figure 3, 76 percent of standard full-time workers work 
for employers that offer pension plans to their employees, and 64 
percent of them are included in these plans. With the exception of 
contract company workers, contingent workers are less likely to work 
for employers that offer pension plans. When their employers do offer 
pension plans, all categories of contingent workers who work for an 
employer are less likely to be included in the plans.[Footnote 27] 
About 21 percent of agency temps—the category with the lowest 
proportion of pension plans—work for employers that offer pension 
plans, and only 7 percent are included in the plans. The predominant 
reason cited by workers for not participating in their employers’ 
pension plans when they were eligible to participate was that they 
felt that the plans were too expensive. 

Figure 3: Workers With Employer-Provided Pension Benefits, 1999: 

[Refer to PDF for image: stacked vertical bar graph] 

Category of worker: Agency temps[A]; 
Workers whose Employers offer pension plans: 21%; 
Workers included in their Employers pension plans: 7%. 

Category of worker: Direct-hire temps[A]; 
Workers whose Employers offer pension plans: 59%; 
Workers included in their Employers pension plans: 17%. 

Category of worker: On-call workers and day laborers[A]; 
Workers whose Employers offer pension plans: 56%; 
Workers included in their Employers pension plans: 24%. 

Category of worker: Contract company workers[A]; 
Workers whose Employers offer pension plans: 73%; 
Workers included in their Employers pension plans: 46%. 

Category of worker: Independent contractors[A,B]; 
Workers whose Employers offer pension plans: [Empty]; 
Workers included in their Employers pension plans: [Empty]. 

Category of worker: Self-employed workers[A,B]; 
Workers whose Employers offer pension plans: [Empty]; 
Workers included in their Employers pension plans: [Empty]. 

Category of worker: Standard part-time workers[A]; 
Workers whose Employers offer pension plans: 52%; 
Workers included in their Employers pension plans: 21%. 

Category of worker: Standard full-time workers; 
Workers whose Employers offer pension plans: 76%; 
Workers included in their Employers pension plans: 64%. 

[A] The difference between the percentage of workers in this category 
and the percentage of standard full-time workers is statistically 
significant at the .05 level. 

[B] The difference between the percentage of contract company workers 
and the percentage of standard full-time workers whose employers offer 
pension plans is not statistically significant. 

[C] Most workers in this category do not have an employer. 

Source: GAO analysis of data from the BLS February 1999 Contingent 
Work Supplement. 

[End of figure] 

Most contingent workers with annual family incomes below $15,000 are 
less likely than standard full-time workers with low incomes to work 
for employers that offer pension plans. The exceptions are direct-hire 
temps and standard part-time workers, who are as likely as standard 
full-time workers to work for employers that offer pensions.[Footnote 
28] However, when their employers offer pension plans, all contingent 
workers with low family incomes are less likely than standard full-
time workers to be included in the plans. As with health insurance, 
agency temps with low incomes are the least likely to be included in 
employer-provided pension plans. (See table 5.) 

Table 5: Pension Benefits for Workers With Annual Family Incomes Below 
$15,000, 1999: 

Category of worker: Agency temps; 
Percentage whose employers offer pension plans: 18%[A]; 
Percentage included in their employers’ pension plans: 1%[A]. 

Category of worker: Direct-hire temps; 
Percentage whose employers offer pension plans: 51%[B]; 
Percentage included in their employers’ pension plans: 5%[A]. 

Category of worker: On-call workers and day laborers; 
Percentage whose employers offer pension plans: 34%[A]; 
Percentage included in their employers’ pension plans: 10%[A]. 

Category of worker: Contract company workers; 
Percentage whose employers offer pension plans: [C]; 
Percentage included in their employers’ pension plans: [C]. 

Category of worker: Independent contractors; 
Percentage whose employers offer pension plans: [D];
Percentage included in their employers’ pension plans: [D]. 

Category of worker: Self-employed workers; 
Percentage whose employers offer pension plans: [D];
Percentage included in their employers’ pension plans: [D]. 

Category of worker: Standard part-time workers; 
Percentage whose employers offer pension plans: 43%[B]; 
Percentage included in their employers’ pension plans: 10%[A]. 

Category of worker: Standard full-time workers; 
Percentage whose employers offer pension plans: 45%; 
Percentage included in their employers’ pension plans: 24%. 

[A] The difference between the percentage of workers in this category 
and the percentage of standard full-time workers is statistically 
significant at the .05 level. 

[B] The difference between the percentage of workers in this category 
and the percentage of standard full-time workers is not statistically 
significant. 

[C] The number of respondents in this category was too small to 
provide statistically reliable data. 

[D] Most workers in these categories do not have an employer. 

Source: GAO analysis of data from the BLS February 1999 Contingent 
Work Supplement. 

[End of table] 

Fewer differences exist, however, between the number of contingent 
workers and standard full-time workers who have other retirement 
accounts, such as individual retirement accounts (IRA) and Keogh 
plans.[Footnote 29] As one might expect, many more independent 
contractors and self-employed workers than standard full-time workers 
have these types of retirement accounts-—42 percent of independent 
contractors and 46 percent of self-employed workers, compared with 16 
percent of standard full-time workers—because most independent 
contractors and self-employed workers do not have access to employer-
provided pensions, and standard full-time workers do not have access 
to Keogh plans. In addition, 16 percent of on-call workers and 18 
percent of contract company workers have these types of retirement 
accounts. 

Contingent Workers Are Less Likely to Be Covered by Key Laws Designed 
to Protect Workers: 

Key laws designed to protect workers generally do not distinguish 
between employees who are contingent workers and other employees; 
therefore, contingent workers who are employees are generally covered 
under the laws. For example, the Fair Labor Standards Act establishes 
minimum wage, overtime, and child labor standards for workers who are 
“employees.” However, some laws contain requirements that exclude 
certain contingent workers or make it difficult for them to be 
covered.[Footnote 30] For example, because they do not work enough 
hours, some temporary and part-time workers are not covered under the 
Family and Medical Leave Act. In addition, because these laws are 
based on the traditional employer-employee relationship, they 
generally cover only workers who are employees; independent 
contractors and self-employed workers, therefore, are not covered. 
Moreover, in some contingent work arrangements, it can be difficult to 
determine whether a worker is in fact an employee, and, in some cases, 
workers are misclassified by their employers. Further complicating the 
situation, it can be difficult to determine who the employer is when 
more than one company is involved. Figure 4 describes the key laws. 
(See appendix III for a more detailed description of these laws.) 

Figure 4: Key Laws Designed to Protect Workers: 

[Refer to PDF for image: table] 

Family and Medical Leave Act: 
Requires employers to allow employees to take up to 12 weeks of 
unpaid, job-protected leave for medical reasons related to a family 
member's or the employee's own health. 

Employee Retirement Income Security Act: 
Establishes uniform standards for employee pension and welfare benefit 
plans, including minimum participation, accrual, and vesting 
requirements; fiduciary responsibilities; and reporting and disclosure 
requirements. 

Fair Labor Standards Act: 
Establishes minimum wage, overtime, and child labor standards 

National Labor Relations Act: 
Guarantees the right of employees to organize and bargain collectively. 

Unemployment Compensation: 
Pays benefits to workers in covered jobs who become unemployed and 
meet state-established eligibility rules. 

Workers' Compensation: 
Provides benefits to injured workers while limiting employers' 
liability strictly to workers' compensation payments. 

Occupational Safety and Health Act: 
Requires employers to maintain a safe and healthy workplace for their 
employees and requires employers and employees to comply with all 
federal occupational health and safety standards. 

Title VII of the Civil Rights Act: 
Protects employees from discrimination based on race, color, religion, 
sex, or national origin. 

Americans With Disabilities Act: 
Protects employees from discrimination based on disability. 

Age Discrimination in Employment Act: 
Protects employees over age 40 from discrimination based on age. 

Consolidated Omnibus Budget Reconciliation Act: 
Requires employers to allow employees and their family members who 
would lose coverage under employer-sponsored group health plans as a 
result of certain events, such as being laid off from or quitting 
their jobs, to continue coverage at their own expense for a limited 
time. 

Health Insurance Portability and Accountability Act: 
Guarantees the availability and renewability of health insurance 
coverage for certain individuals and limits the use of preexisting 
condition restrictions. 

[End of figure] 

Some Laws Have Requirements That Exclude Certain Contingent Workers: 

Contingent workers, such as temporary, on-call, and part-time workers, 
may not be covered by some of the laws designed to protect workers. 
For example, the Family and Medical Leave Act requires workers to have 
worked for an employer at least 12 months and at least 1,250 hours 
during the past 12 months in order to be covered. These conditions 
decrease the likelihood that workers who are temporary, on-call, or 
part-time will be covered. Although employers are not required to 
provide pension or health care plans to their employees, when plans 
are offered, the Employee Retirement Income Security Act (ERISA) has 
rules that govern which employees must be included in the plans in 
order to qualify for special tax treatment. For example, ERISA allows 
employers to exclude workers who have worked fewer than 1,000 hours in 
a 12-month period from their pension plans. ERISA also allows 
employers to exclude employees who have worked for the company less 
than 3 years as well as part-time and seasonal employees from the 
count of employees who must be included in self-insured medical plans 
and group-term life insurance plans. As a result, some temporary, on-
call, and part-time workers may not be included in their employers’ 
benefit plans. These exclusions are intended to strike a balance 
between protecting workers and not unduly burdening employers. For 
example, the exclusions in ERISA were enacted to recognize that it may 
be impractical or too costly for employers to include all short-term 
employees in their pension plans. 

Some laws have exemptions for portions of certain industries or types 
of employers that may disproportionately affect contingent workers. 
For example, the Fair Labor Standards Act exempts agricultural 
employers from the overtime pay requirement and agricultural employers 
who do not use more than 500 days of labor in any calendar quarter 
from both the minimum wage and overtime pay requirements. These 
exemptions affect some categories of contingent workers more than 
standard full-time workers because a greater proportion of these 
contingent workers are in the agriculture industry; for example, 4 
percent of direct-hire temporary workers and 3 percent of on-call 
workers and day laborers are employed in agriculture, compared with 1 
percent of standard full-time workers (see appendix III). 

Similarly, the nature of contingent work makes it difficult for some 
contingent workers to meet state eligibility requirements for 
unemployment insurance benefits. Temporary and part-time workers may 
not meet the minimum earnings requirements, which vary from state to 
state, and these workers may have difficulty meeting the rules 
governing job loss because they have less flexibility when the 
circumstances of their jobs change. For example, temporary workers who 
choose this type of work in order to meet family obligations or to 
attend school might be more likely to quit if their employer changed 
the hours they were required to work or the job location. 
Nevertheless, they would be ineligible for unemployment compensation 
benefits in many states because they voluntarily quit without good 
cause.[Footnote 31] In addition, contingent workers can find it 
difficult to meet continuing eligibility requirements. According to a 
report by a worker advocacy group, unemployed workers who limit their 
search for new work to only part-time jobs are denied unemployment 
benefits in many states because the workers are not available for full-
time employment.[Footnote 32] This group reported that, as of 1997, 10 
states expressly allow unemployed workers to seek only part-time jobs 
and remain eligible for benefits, but most states do not, and 24 
states find unemployed workers ineligible for benefits if they limit 
their search to part-time work. 

Some contingent workers, such as temporary or contract company 
workers, also may find it difficult to meet the requirements of the 
National Labor Relations Act, as administered by the National Labor 
Relations Board, for joining an existing bargaining unit or forming a 
new bargaining unit. For example, temporary workers who want to join 
an existing collective bargaining unit at a work site must show that 
they have a “sufficient community of interest” with the permanent 
workers in the bargaining unit.[Footnote 33] When a joint employment 
relationship exists, such as one or more temporary employment agencies 
and the client firm that hired the workers through the agency, both 
the employment agency (or agencies) and the client firm must consent 
to the inclusion of temporary workers in an existing bargaining unit. 
[Footnote 34] According to some labor experts, these requirements have 
prevented temporary workers from joining unions and encouraged 
employers that want to scale back the size of bargaining units to 
contract out jobs. 

Contingent workers may also find it difficult to form new collective 
bargaining units. For example, temporary workers who do not work at 
one employment site for an extended period of time, such as day 
laborers and home health care workers, may find it difficult to form 
bargaining units because they do not work at one location or with one 
employer long enough to identify with a particular group of workers 
and organize a union. In addition, some worker advocacy groups 
maintain that contract company workers have difficulty forming new 
collective bargaining units because employers that use contract 
company workers may cancel the contracts and contract with other 
companies when workers attempt to unionize. 

Workers Are Sometimes Misclassified by Their Employers: 

Because most key laws cover only workers who are employees, contingent 
workers in categories that are not considered employees—independent 
contractors and self-employed workers—are, by definition, not covered. 
As a result, the 8.2 million independent contractors and 6.3 million 
self-employed workers identified in the 1999 Contingent Work 
Supplement are not covered by the key laws. In earlier work, we have 
noted that employers often classify workers improperly. For example, 
they consider some workers independent contractors when, in fact, they 
are more appropriately considered employees.[Footnote 35] 

In addition, it can be difficult to determine whether a worker is an 
independent contractor or an employee because the tests used to make 
this determination are complex and subjective, and they differ from 
law to law. For example, the National Labor Relations Act, the Civil 
Rights Act, the Fair Labor Standards Act, and ERISA use different 
definitions of an employee and various tests, or criteria, to 
determine whether workers are independent contractors or employees. 
[Footnote 36] 

Moreover, employers have economic incentives to misclassify employees 
as independent contractors because employers are not obligated to make 
certain financial expenditures for independent contractors that they 
make for employees, such as paying certain taxes (Social Security, 
Medicare, and unemployment taxes); providing workers’ compensation 
insurance; paying minimum and overtime wages; or including independent 
contractors in employee benefit plans. For 1984, the last year for 
which IRS made a comprehensive estimate of the extent of the problem, 
the agency estimated that 15 percent of employers misclassified 3.4 
million workers as independent contractors. Even after accounting for 
the taxes paid by the misclassified independent contractors, this 
noncompliance produced an estimated tax loss for 1984 of $1.6 billion 
in Social Security taxes, unemployment taxes, and income taxes that 
should have been withheld from wages. 

Several court cases illustrate the problem of misclassification. For 
example, in 1996, thousands of individuals who worked for the 
Microsoft Corporation won a court case in which they claimed that they 
were actually employees of the company rather than independent 
contractors. In January 2000, the Supreme Court denied Microsoft’s 
petition for review of an appeals court’s ruling that, as a result of 
the misclassification—-coupled with the fact that the plan in question 
covered the individuals if they were employees-—the workers were 
improperly denied employee benefits.[Footnote 37 In another case in 
which workers were misclassified as independent contractors, over 100 
workers employed as chicken catchers at processing plants filed suit 
to obtain overtime wages. The court determined that they were 
employees of the company and, as such, entitled to overtime wages 
under the Fair Labor Standards Act.[Footnote 38 In contrast, courts 
have often held that workers were properly classified as independent 
contractors and, therefore, not eligible for certain benefits and 
protections under the laws.[Footnote 39] 

Workers in other categories are also sometimes improperly categorized 
by their employers and, as a result, are not included in employee 
benefit plans. Several court cases illustrate such instances. A group 
of workers who worked for the city of Seattle for 17 years as 
“intermittent” janitors were found by the court to have been 
incorrectly categorized by the city as temporary workers and 
improperly denied employee benefits.[Footnote 40 In another case, 
county workers in King County, Washington, were categorized as 
“temporary” workers and denied health insurance, paid leave, and other 
benefits although they had worked full-time for the county for years. 
The case was settled in 1997; approximately 2,500 past and present 
employees were paid back wages of $24 million and paid future benefits 
worth about $18 million, and about 500 long-term temporary workers 
were placed in jobs with full benefits. The settlement also 
established a procedure to ensure proper employee classifications, 
including appeal rights for workers.[Footnote 41] 

Determining Who the Employer Is in Contingent Work Arrangements Can Be 
Difficult: 

Even when it is clear that workers are employees, determining who the 
employer is can be difficult in contingent work arrangements involving 
more than one employer. In these arrangements, the employer may be (1) 
an intermediary such as a temporary employment agency, contract 
company, or leasing company; (2) the client firm that obtains workers 
through the intermediary; or (3) both the intermediary and the client 
firm. It is often difficult in these cases for workers to determine 
which company is liable under the various laws designed to protect 
workers, and, as a result, much litigation has ensued. For example, in 
a recent case, a group of minimum-wage homecare workers sought to 
unionize and tried to bargain with the state agency that provided 
their paychecks.[Footnote 42] However, the workers were told by the 
state that their employer was the county, which assigned them to 
clients and set their hours. The county, on the other hand, claimed 
that it was not the employer, either. After 3 years, a court 
determined that the workers were independent contractors and, 
therefore, had no employer with whom they could bargain.[Footnote 43] 

States also have a difficult time determining who is liable for 
unemployment insurance contributions and workers’ compensation 
insurance when contingent work arrangements involve more than one 
company. For example, in its 1994 survey of state unemployment 
insurance agencies, DOL asked the state agencies which company was 
considered the employer for unemployment insurance purposes when 
workers were provided by leasing companies. Labor found that 27 states 
considered the leasing company the employer, 9 states considered the 
client firm the employer, and 14 states used various tests to make the 
determination. 

Options for Expanding Benefits Coverage and Worker Protections Under 
the Laws Vary: 

Because contingent workers are less likely than other workers to 
receive benefits through their employers, several groups have proposed 
strategies to increase contingent workers’ health insurance and 
pension coverage and their coverage under laws designed to protect 
workers. Some proposals build broadly on the current employer-employee 
relationship. For example, one legislative proposal would require 
employers to offer a comparable package of benefits to all of their 
workers. Other proposals focus on alternatives outside the traditional 
employment relationship, such as creating health plans run by 
associations that would allow individuals to pool together to purchase 
group insurance in an effort to obtain more affordable rates. These 
proposals usually involve trade-offs, which must be carefully 
considered in terms of their benefits, costs, and effects on the labor 
market. 

Some Proposals Build on the Current Employer-Employee Relationship: 

On the national, state, and local levels, several legislative 
proposals have been introduced that are designed to build broadly on 
the current employer-employee relationship by increasing coverage 
under employer-sponsored benefit plans and laws designed to protect 
workers. For example, a proposal introduced in the Congress would 
mandate that a temporary worker who is an employee of a company be 
eligible to receive any benefit offered by the company to its other 
employees after the temporary worker has worked for the company for 
1,000 hours during a 12month period.[Footnote 44] This proposal, 
however, might result in employers’ choosing to reduce hours worked by 
temporary employees to fewer than 1,000 or to reduce salaries, the 
size of their workforce, or benefit packages offered in order to cover 
their increased costs. 

At the state level, proposals in Massachusetts and Pennsylvania would 
require employers to offer comparable benefits and compensation to all 
of their workers regardless of the number of hours an employee works 
each week.[Footnote 45] A similar proposal in Rhode Island called for 
amending state laws to make all workers eligible for prorated coverage 
for both health and pension benefits on the basis of hours worked. For 
example, the amount an employer contributed toward health care benefit 
coverage for a half-time worker would have been at least 50 percent of 
the employer’s contribution for full-time worker.[Footnote 46] 
Adoption of such proposals could expand coverage for workers who 
currently do not receive employer-sponsored health and retirement 
benefits. However, some experts believe that such proposals could have 
unintended effects because employers might reduce salaries or decrease 
the number of staff positions available to cover the increased costs 
of providing benefits to all employees; alternatively, employers might 
eliminate these benefits altogether. Moreover, some of these proposals 
might be preempted by ERISA, which takes precedence over state laws 
that relate to employee benefit plans. 

Another approach would require employers to provide equal hourly wages 
and benefits for equal work regardless of employment status. According 
to the Economic Policy Institute,[Footnote 47] some categories of 
contingent workers earn less than other employees in the same 
workplace who are performing the same types of tasks.[Footnote 48] 
Moreover, these contingent workers are sometimes excluded from benefit 
packages offered to other workers. In response to the disparate 
earnings, the Institute and others have called for pay and benefit 
parity as a strategy for improving the overall conditions of these 
workers. Current laws do not prohibit pay differentiation based on the 
number of hours worked per week or on work arrangement. Requiring pay 
parity for all workers doing the same work could increase the overall 
earnings for contingent workers, and mandating benefit parity could 
increase the likelihood of their receiving employer-sponsored 
benefits. On the other hand, employers might find such a requirement 
financially burdensome, as it would increase their labor costs, and 
they could decide to reduce wages, the size of their workforce, or the 
benefit packages they offer to their employees. In addition, such a 
requirement might be hard to implement, because it would be difficult 
to assess whether two people were actually doing identical work. 

At the local level, laws have also been adopted that address the needs 
of some contingent workers. For example, several cities and counties 
have adopted living-wage ordinances to ensure that employers who do 
business with the city or county pay their employees a “living wage.”
[Footnote 49] Some of these ordinances cover only contractors in 
typically low-wage industries such as janitorial, clerical, food 
services, and temporary work, while others apply more broadly to city 
or county service contractors and subcontractors. Several of the 
ordinances also require covered employers to provide health insurance 
benefits to workers or require a higher rate of pay if the employers 
do not provide health benefits. For example, a Buffalo, New York, 
ordinance requires employers to pay $1 an hour more than the 
prescribed wage if they do not provide health benefits to their 
employees. 

Alternatively, a Department of Labor working group looking at issues 
related to contingent workers has called for, among other things, 
changes in the law that would make it easier for contingent workers to 
organize and bargain with their employers.[Footnote 50] Because it can 
be more difficult for temporary workers than other workers to join an 
existing bargaining unit or establish a new unit, the working group 
called for modifying the law to allow contingent workers to organize 
and bargain with their employers more easily. The group also advocated 
extending to independent contractors, agency temps, and contract 
company workers the provisions of labor law that recognize the 
temporary and intermittent nature of work in the construction and 
garment industries by allowing employers and employees in these 
industries to enter into pre-hire agreements. Expanding collective 
bargaining for contingent workers could increase the likelihood that 
these workers receive pay equity and the benefits that other workers 
receive. However, it could still be hard for contingent workers to 
organize given the temporary nature of their work and the fact that 
some of these workers are not housed at the same employment sites for 
extended periods of time. 

Other proposals address the misclassification of employees as 
independent contractors. For example, one proposal would make it more 
difficult for employers to misclassify their employees as independent 
contractors by clarifying the definition of an independent contractor. 
[Footnote 51] Because misclassification often results in the lack of 
coverage under employer-sponsored benefit plans and exempts workers 
from coverage under most laws designed to protect workers, making it 
more difficult for employers to misclassify employees as independent 
contractors could increase coverage for workers. 

In a related area, a December 1994 report issued by the Commission on 
the Future of Worker-Management Relations—-a joint commission of the 
Departments of Labor and Commerce also known as the “Dunlop Commission”
-—addressed the fact that the definitions of employee and employer 
vary from law to law. The Commission called on the Congress to adopt a 
single, more coherent definition of an employee based on the economic 
realities of the relationship between the worker and employer and 
apply it across the board to all laws. Similarly, the Commission 
recommended modernizing and standardizing the definition of an 
employer to reflect the economic realities of the relationship between 
providers and recipients of services and remove incentives for firms 
to avoid workplace responsibilities. 

Adopting a more stringent and uniform definition of an employee could 
help increase benefits coverage for some contingent workers and 
provide greater protection under the laws designed to protect workers 
because they might not be as easily misclassified as independent 
contractors. As employees, these workers would be more likely to 
receive the same benefits as the rest of their employer’s workforce 
and would be covered by laws that do not apply to independent 
contractors. In addition, providing a more uniform definition of an 
employer might help workers determine liability under various labor 
laws and reduce the need for litigation to resolve the issue of 
employer liability, particularly in situations involving more than one 
company. On the other hand, some of the laws have different 
definitions of an employee and an employer because they were enacted 
for different purposes; adopting a uniform definition might result in 
some laws being applied more narrowly. For example, in determining 
whether a worker is an independent contractor or an employee covered 
by the Fair Labor Standards Act, courts have used a broad definition 
of an employee. If a uniform definition of an employee was adopted for 
all laws, fewer workers might be covered under this act. In addition, 
employers might reduce benefits offered if their costs rose 
significantly as a result of having to include more individuals in the 
plans. 

Some Proposals Seek New Approaches Outside the Traditional 
Relationship: 

In response to the changing nature of the employer-employee 
relationship, other proposals seek new approaches or alternatives 
outside the traditional relationship. These approaches are generally 
based at the local and state levels and vary in their specific 
strategies. For example, Working Today, a national nonprofit 
membership group, has developed a model for delivering portable, more 
affordable benefits to some contingent workers.[Footnote 52] Working 
Today is attempting to create a new safety net for these workers by 
providing access to the individual insurance market through 
intermediaries such as professional associations, unions, nonprofits, 
and employers. It plans to launch a demonstration project for workers 
in New York’s new media industry later this year.[Footnote 53 

Other groups, including the New Jersey Temporary Workers Task Force 
and Working Partnerships USA in San Jose, California, have crafted 
codes of conduct for temporary employment agencies and called on the 
clients of temporary employment agencies to contract only with 
agencies that abide by these codes. One provision of these codes of 
conduct is that temporary employment agencies agree to offer health 
insurance coverage to temporary workers after they have been employed 
by an agency for 90 days. Other provisions address treatment of 
workers by temporary employment agencies and require that the agencies 
provide workers with information about state and federal employment 
laws and abide by those laws. While these strategies may help expand 
coverage for contingent workers, they are in the beginning stages of 
implementation. Therefore, it is too early to evaluate their overall 
effect. 

Another approach to expanding health insurance coverage among 
contingent workers would be to encourage individuals to obtain health 
insurance outside the employer-employee relationship by instituting 
tax incentives for those who pay for their own benefits, similar to 
the incentives offered to employers. Just as businesses may deduct the 
cost of health care premiums, self-employed individuals are currently 
allowed to deduct 60 percent of their health care premiums. By 2003, 
self-employed workers will be able to deduct 100 percent of the cost. 
Individuals who are not self-employed and purchase insurance on their 
own, however, are not afforded similar treatment under tax laws. The 
fact that these individuals’ premiums are not tax-deductible, coupled 
with the high cost of individual insurance plans, can make it 
difficult for contingent workers to purchase coverage on their own. If 
the tax code were changed to permit all individuals who are not 
covered by employer plans, including contingent workers, to deduct the 
cost of their health insurance premiums as the self-employed do, there 
would be some costs involved: primarily, the cost of the federal tax 
subsidy itself, of programs to educate workers on the availability of 
the new deduction, and of the regulation and oversight needed to 
ensure that the provision was not abused. 

In addition, numerous legislative proposals would increase 
accessibility to retirement benefits for workers who are not tied to 
an individual employer. For example, several proposals would increase 
incentives for individuals to put money away for retirement by 
expanding IRA tax benefits or creating tax-subsidized programs with 
matching federal contributions. While these programs would provide 
increased opportunities for retirement savings for contingent workers, 
they have been opposed for reasons such as their cost, their 
administrative complexity, and the tendency of savings subsidies to 
benefit higher-income individuals, who are more likely to save. 

A number of state laws address other issues related to contingent 
workers. Several states have established commissions to evaluate the 
effects of their laws on contingent workers and have enacted 
legislation that establishes specific protections for temporary 
workers, day laborers, independent contractors, and part-time workers. 
For example, Rhode Island and North Carolina have enacted laws that 
require comprehensive studies of the impact of contingent work in 
their states, and Rhode Island enacted the Temporary Employee 
Protection Act in 1999, which requires temporary employment agencies 
to provide written notice of job descriptions, pay rates, and work 
schedules to agency temps. 

Agency and Other Comments: 

We provided DOL an opportunity to comment on this report. We also asked 
the labor experts on whose work we relied to comment. DOL officials 
generally concurred with our findings. They also provided several 
technical comments, which we incorporated. In addition, we 
incorporated technical comments from labor experts where appropriate. 

As arranged with your office, unless you publicly announce its 
contents earlier, we plan no further distribution of this report until 
30 days from the date of this letter. At that time, we will send 
copies to the Honorable Alexis M. Herman, Secretary of Labor; the 
Honorable Katharine G. Abraham, Commissioner of the Bureau of Labor 
Statistics; appropriate congressional committees; and other interested 
parties. Please call me at (202) 512-7215 or Kay E. Brown at (202) 512-
3674 if you or your staff have any questions about this report. Other 
staff who made major contributions to this report are listed in 
appendix IV. 

Signed by: 

Cynthia M. Fagnoni: 
Director, Education, Workforce, and Income Security Issues: 

[End of section] 

Appendix I: Scope and Methodology: 

To describe the demographic characteristics and categories of workers 
that make up the contingent workforce and estimate its size and the 
extent to which these workers have access to employee benefits, we 
used the data collected in the Current Population Survey as well as 
data collected in a special supplement to the survey—the Contingent 
Work Supplement. 

The Current Population Survey: 

The Current Population Survey is designed and administered jointly by 
the Bureau of the Census and the Bureau of Labor Statistics (BLS). It 
is the source of official government statistics on employment and 
unemployment in the United States. The survey is used to collect 
information on employment as well as such demographic information as 
age, sex, race, marital status, educational attainment, and family 
structure. The survey is based on a sample of the civilian, 
noninstitutionalized population of the United States. Using a 
multistage stratified sample design, about 50,000 households are 
selected on the basis of area of residence to represent the country as 
a whole and individual states. 

The Contingent Work Supplement: 

Designed by BLS, the Contingent Work Supplement is a set of questions 
about contingent workers and workers in alternative work arrangements. 
These questions were asked of all employed workers, except unpaid 
family workers, in February 1995, 1997, and 1999. 

Our Definition of Contingent Workers: 

Although we used data from the Contingent Work Supplement, we used a 
definition of contingent worker different from the one used by BLS in 
its analyses of the data, which led us to combine the data 
differently. The BLS definition of a contingent worker is generally 
limited to workers in jobs “structured to be of limited duration.” On 
the basis of this definition, BLS constructed three estimates of the 
size of the contingent workforce.[Footnote 54] 

Although we believe it is useful to consider the nature and size of 
the population of workers in jobs of limited duration, as well as 
their access to benefits, we also believe it is useful to provide 
information according to categories of workers that are more readily 
identifiable and mutually exclusive. Therefore, we did not restrict 
our definition to include only workers with a relatively short job 
tenure but rather provided information on a range of workers who could 
be considered contingent under different definitions. We modeled our 
approach on research involving contingent workers, choosing categories 
of workers that we believe provide sufficient detail to allow readers 
to find easily data on the workers they consider to be contingent. 
[Footnote 55] We developed information on direct-hire temporaries—-
workers hired directly by employers to work in temporary jobs—-
although the Contingent Work Supplement did not contain a question 
that directly asked for this information.[Footnote 56]3 We also 
combined on-call workers and day laborers because the definitions and 
characteristics of these workers are similar and the number of day 
laborers alone was not large enough to be statistically significant. 

We did not include information on leased workers because of a general 
lack of understanding of the term and lack of data on these workers. 

[End of section] 

Appendix II: Characteristics of Contingent Workers: 

Percentage, unless indicated otherwise: 

Characteristic: Age; 16-19 years; 
Agency temps: 5.8%; 
Direct-hire temps: 16.4%; 
On-call workers and day laborers: 9.9%; 
Contract company workers: 4.8%; 
Independent contractors: 0.9%; 
Self-employed workers: 0.3%; 
Standard part-time workers: 24.3%; 
Standard full-time workers: 1.6%. 

Characteristic: Age; 20-24 years; 
Agency temps: 20.9%; 
Direct-hire temps: 22.6%; 
On-call workers and day laborers: 10.9%; 
Contract company workers: 11.3%; 
Independent contractors: 3.1%; 
Self-employed workers: 2.6%; 
Standard part-time workers: 16.2%; 
Standard full-time workers: 8.6%. 

Characteristic: Age; 25-34 years; 
Agency temps: 29.3%; 
Direct-hire temps: 23.4%; 
On-call workers and day laborers: 22.8%; 
Contract company workers: 30.6%; 
Independent contractors: 17.9%; 
Self-employed workers: 14.0%; 
Standard part-time workers: 15.5%; 
Standard full-time workers: 26.1%. 

Characteristic: Age; 35-54 years; 
Agency temps: 34.8%; 
Direct-hire temps: 28.0%; 
On-call workers and day laborers: 38.4%; 
Contract company workers: 45.3%; 
Independent contractors: 56.6%; 
Self-employed workers: 54.2%; 
Standard part-time workers: 29.3%; 
Standard full-time workers: 53.0%. 

Characteristic: Age; 55-64 years; 
Agency temps: 6.5%; 
Direct-hire temps: 6.2%; 
On-call workers and day laborers: 10.1%; 
Contract company workers: 6.1%; 
Independent contractors: 14.7%; 
Self-employed workers: 20.1%; 
Standard part-time workers: 8.1%; 
Standard full-time workers: 9.4%. 

Characteristic: Age; 65 and older; 
Agency temps: 2.8%; 
Direct-hire temps: 3.5%; 
On-call workers and day laborers: 7.9%; 
Contract company workers: 1.9%; 
Independent contractors: 6.8%; 
Self-employed workers: 8.9%; 
Standard part-time workers: 6.7%; 
Standard full-time workers: 1.3%. 

Characteristic: Age; Mean age; 
Agency temps: 35 years; 
Direct-hire temps: 33 years; 
On-call workers and day laborers: 39 years; 
Contract company workers: 37 years; 
Independent contractors: 45 years; 
Self-employed workers: 47 years; 
Standard part-time workers: 35 years; 
Standard full-time workers: 39 years. 

Characteristic: Gender: Men; 
Agency temps: 42.2%; 
Direct-hire temps: 47.8%; 
On-call workers and day laborers: 49.3%; 
Contract company workers: 70.5%; 
Independent contractors: 66.2%; 
Self-employed workers: 63.4%; 
Standard part-time workers: 29.9%; 
Standard full-time workers: 56.1%. 

Characteristic: Gender: Women; 
Agency temps: 57.8%; 
Direct-hire temps: 52.2%; 
On-call workers and day laborers: 50.8%; 
Contract company workers: 29.5%; 
Independent contractors: 33.8%; 
Self-employed workers: 36.6%; 
Standard part-time workers: 70.1%; 
Standard full-time workers: 43.9%. 

Characteristic: Race/origin: White[A]; 
Agency temps: 61.0%; 
Direct-hire temps: 68.6%; 
On-call workers and day laborers: 72.1%; 
Contract company workers: 73.6%; 
Independent contractors: 84.8%; 
Self-employed workers: 84.0%; 
Standard part-time workers: 78.5%; 
Standard full-time workers: 72.9%. 

Characteristic: Race/origin: Black[B]; 
Agency temps: 21.0%; 
Direct-hire temps: 9.9%; 
On-call workers and day laborers: 11.6%; 
Contract company workers: 12.6%; 
Independent contractors: 5.5%; 
Self-employed workers: 4.1%; 
Standard part-time workers: 8.9%; 
Standard full-time workers: 11.9%. 

Characteristic: Race/origin: Hispanic; 
Agency temps: 13.6%; 
Direct-hire temps: 13.0%; 
On-call workers and day laborers: 13.2%; 
Contract company workers: 6.0%; 
Independent contractors: 6.1%; 
Self-employed workers: 6.0%; 
Standard part-time workers: 8.9%; 
Standard full-time workers: 10.9%. 

Characteristic: Race/origin: Other[C]; 
Agency temps: 4.5%; 
Direct-hire temps: 8.5%; 
On-call workers and day laborers: 3.1%; 
Contract company workers: 7.9%; 
Independent contractors: 3.6%; 
Self-employed workers: 5.9%; 
Standard part-time workers: 3.7%; 
Standard full-time workers: 4.3%. 

Characteristic: Education: Less than high school diploma; 
Agency temps: 15.5%; 
Direct-hire temps: 15.8%; 
On-call workers and day laborers: 20.0%; 
Contract company workers: 9.4%; 
Independent contractors: 8.4%; 
Self-employed workers: 7.9%; 
Standard part-time workers: 24.7%; 
Standard full-time workers: 9.9%. 

Characteristic: Education: High school diploma, no college; 
Agency temps: 32.3%; 
Direct-hire temps: 18.7%; 
On-call workers and day laborers: 30.8%; 
Contract company workers: 22.4%; 
Independent contractors: 29.5%; 
Self-employed workers: 30.9%; 
Standard part-time workers: 27.3%; 
Standard full-time workers: 32.4%. 

Characteristic: Education: Some college; 
Agency temps: 35.5%; 
Direct-hire temps: 33.4%; 
On-call workers and day laborers: 27.2%; 
Contract company workers: 33.5%; 
Independent contractors: 27.8%; 
Self-employed workers: 25.9%; 
Standard part-time workers: 33.5%; 
Standard full-time workers: 28.4%. 

Characteristic: Education: College degree; 
Agency temps: 13.6%; 
Direct-hire temps: 17.5%; 
On-call workers and day laborers: 17.8%; 
Contract company workers: 25.8%; 
Independent contractors: 22.2%; 
Self-employed workers: 21.4%; 
Standard part-time workers: 10.6%; 
Standard full-time workers: 20.0%. 

Characteristic: Education: Graduate school; 
Agency temps: 3.1%; 
Direct-hire temps: 14.6%; 
On-call workers and day laborers: 4.2%; 
Contract company workers: 8.9%; 
Independent contractors: 12.1%; 
Self-employed workers: 13.9%; 
Standard part-time workers: 4.0%; 
Standard full-time workers: 9.4%. 

Characteristic: Geographic region: New England; 
Agency temps: 5.0%; 
Direct-hire temps: 5.7%; 
On-call workers and day laborers: 4.0%; 
Contract company workers: 4.5%; 
Independent contractors: 6.5%; 
Self-employed workers: 4.4%; 
Standard part-time workers: 6.2%; 
Standard full-time workers: 5.0%. 

Characteristic: Geographic region: Mid-Atlantic; 
Agency temps: 11.1%; 
Direct-hire temps: 13.3%; 
On-call workers and day laborers: 14.7%; 
Contract company workers: 9.4%; 
Independent contractors: 13.6%; 
Self-employed workers: 13.1%; 
Standard part-time workers: 15.2%; 
Standard full-time workers: 13.5%. 

Characteristic: Geographic region: E. North Central; 
Agency temps: 17.0%; 
Direct-hire temps: 13.0%; 
On-call workers and day laborers: 13.6%; 
Contract company workers: 16.9%; 
Independent contractors: 13.3%; 
Self-employed workers: 14.7%; 
Standard part-time workers: 18.7%; 
Standard full-time workers: 17.0%. 

Characteristic: Geographic region: W. North Central; 
Agency temps: 5.0%; 
Direct-hire temps: 7.7%; 
On-call workers and day laborers: 7.1%; 
Contract company workers: 7.1%; 
Independent contractors: 5.6%; 
Self-employed workers: 10.7%; 
Standard part-time workers: 8.6%; 
Standard full-time workers: 7.2%. 

Characteristic: Geographic region: South Atlantic; 
Agency temps: 21.0%; 
Direct-hire temps: 14.7%; 
On-call workers and day laborers: 14.5%; 
Contract company workers: 17.4%; 
Independent contractors: 19.2%; 
Self-employed workers: 16.6%; 
Standard part-time workers: 15.5%; 
Standard full-time workers: 18.5%. 

Characteristic: Geographic region: E. South Central; 
Agency temps: 3.3%; 
Direct-hire temps: 5.8%; 
On-call workers and day laborers: 5.9%; 
Contract company workers: 4.7%; 
Independent contractors: 4.9%; 
Self-employed workers: 6.6%; 
Standard part-time workers: 5.0%; 
Standard full-time workers: 6.2%. 

Characteristic: Geographic region: W. South Central; 
Agency temps: 10.8%; 
Direct-hire temps: 9.3%; 
On-call workers and day laborers: 12.4%; 
Contract company workers: 9.4%; 
Independent contractors: 9.8%; 
Self-employed workers: 11.2%; 
Standard part-time workers: 8.8%; 
Standard full-time workers: 11.3%. 

Characteristic: Geographic region: Mountain; 
Agency temps: 5.8%; 
Direct-hire temps: 9.6%; 
On-call workers and day laborers: 7.7%; 
Contract company workers: 8.2%; 
Independent contractors: 8.1%; 
Self-employed workers: 6.5%; 
Standard part-time workers: 6.5%; 
Standard full-time workers: 6.1%. 

Characteristic: Geographic region: Pacific; 
Agency temps: 21.1%; 
Direct-hire temps: 20.9%; 
On-call workers and day laborers: 20.1%; 
Contract company workers: 22.4%; 
Independent contractors: 19.0%; 
Self-employed workers: 16.2%; 
Standard part-time workers: 15.5%; 
Standard full-time workers: 15.4%. 

Characteristic: Industry: Business services; 
Agency temps: 23.4%; 
Direct-hire temps: 3.0%; 
On-call workers and day laborers: 4.6%; 
Contract company workers: 9.4%; 
Independent contractors: 9.3%; 
Self-employed workers: 5.4%; 
Standard part-time workers: 3.5%; 
Standard full-time workers: 4.5%. 

Characteristic: Industry: Auto and repair services; 
Agency temps: 0.6%; 
Direct-hire temps: 0.3%; 
On-call workers and day laborers: 1.2%; 
Contract company workers: 1.1%; 
Independent contractors: 3.3%; 
Self-employed workers: 3.8%; 
Standard part-time workers: 0.6%; 
Standard full-time workers: 1.1%. 

Characteristic: Industry: Personal services--Private households; 
Agency temps: 1.5%; 
Direct-hire temps: 1.9%; 
On-call workers and day laborers: 2.4%; 
Contract company workers: 0.4%; 
Independent contractors: 1.1%; 
Self-employed workers: 0%; 
Standard part-time workers: 1.3%; 
Standard full-time workers: 0.3%. 

Characteristic: Industry: Personal services----Other personal services; 
Agency temps: 1.7%; 
Direct-hire temps: 4.2%; 
On-call workers and day laborers: 3.7%; 
Contract company workers: 0.8%; 
Independent contractors: 5.5%; 
Self-employed workers: 6.3%; 
Standard part-time workers: 3.2%; 
Standard full-time workers: 1.9%. 

Characteristic: Industry: Entertainment and recreation services; 
Agency temps: 0.4%; 
Direct-hire temps: 2.9%; 
On-call workers and day laborers: 2.3%; 
Contract company workers: 0.9%; 
Independent contractors: 3.1%; 
Self-employed workers: 1.6%; 
Standard part-time workers: 4.0%; 
Standard full-time workers: 1.3%. 

Characteristic: Industry: Professional services--Hospitals; 
Agency temps: 3.6%; 
Direct-hire temps: 4.3%; 
On-call workers and day laborers: 7.4%; 
Contract company workers: 5.6%; 
Independent contractors: 0.2%; 
Self-employed workers: 0%; 
Standard part-time workers: 4.2%; 
Standard full-time workers: 4.1%. 

Characteristic: Industry: Professional services----Health services; 
Agency temps: 3.1%; 
Direct-hire temps: 1.8%; 
On-call workers and day laborers: 5.8%; 
Contract company workers: 2.3%; 
Independent contractors: 3.8%; 
Self-employed workers: 5.4%; 
Standard part-time workers: 7.5%; 
Standard full-time workers: 4.5%. 

Characteristic: Industry: Professional services----Educational 
services; 
Agency temps: 0.9%; 
Direct-hire temps: 33.5%; 
On-call workers and day laborers: 19.3%; 
Contract company workers: 4.5%; 
Independent contractors: 1.5%; 
Self-employed workers: 0.8%; 
Standard part-time workers: 10.3%; 
Standard full-time workers: 8.9%. 

Characteristic: Industry: Professional services----Social services; 
Agency temps: 0.5%; 
Direct-hire temps: 3.6%; 
On-call workers and day laborers: 2.2%; 
Contract company workers: 0.6%; 
Independent contractors: 3.1%; 
Self-employed workers: 5.9%; 
Standard part-time workers: 3.5%; 
Standard full-time workers: 2.1%. 

Characteristic: Industry: Professional services----Other professional 
services; 
Agency temps: 4.6%; 
Direct-hire temps: 4.0%; 
On-call workers and day laborers: 1.5%; 
Contract company workers: 1.5%; 
Independent contractors: 10.9%; 
Self-employed workers: 6.4%; 
Standard part-time workers: 4.6%; 
Standard full-time workers: 4.2%. 

Characteristic: Industry: Subtotal—-all services; 
Agency temps: 40.3%; 
Direct-hire temps: 59.5%; 
On-call workers and day laborers: 50.4%; 
Contract company workers: 27.1%; 
Independent contractors: 41.8%; 
Self-employed workers: 35.6%; 
Standard part-time workers: 42.7%; 
Standard full-time workers: 32.9%. 

Characteristic: Industry: Agriculture; 
Agency temps: 0.6%; 
Direct-hire temps: 3.6%; 
On-call workers and day laborers: 2.9%; 
Contract company workers: 0.4%; 
Independent contractors: 5.0%; 
Self-employed workers: 15.0%; 
Standard part-time workers: 1.3%; 
Standard full-time workers: 1.1%. 

Characteristic: Industry: Mining; 
Agency temps: 0.1%; 
Direct-hire temps: 0.2%; 
On-call workers and day laborers: 0.4%; 
Contract company workers: 2.8%; 
Independent contractors: 0.2%; 
Self-employed workers: 0.1%; 
Standard part-time workers: 0%; 
Standard full-time workers: 0.5%. 

Characteristic: Industry: Construction; 
Agency temps: 2.5%; 
Direct-hire temps: 5.7%; 
On-call workers and day laborers: 10.7%; 
Contract company workers: 9.3%; 
Independent contractors: 19.9%; 
Self-employed workers: 6.6%; 
Standard part-time workers: 1.7%; 
Standard full-time workers: 5.6%. 

Characteristic: Industry: Manufacturing--Durable goods; 
Agency temps: 21.0%; 
Direct-hire temps: 3.9%; 
On-call workers and day laborers: 2.6%; 
Contract company workers: 11.7%; 
Independent contractors: 2.6%; 
Self-employed workers: 3.3%; 
Standard part-time workers: 1.8%; 
Standard full-time workers: 12.5%. 

Characteristic: Industry: Manufacturing----Nondurable goods; 
Agency temps: 9.0%; 
Direct-hire temps: 1.8%; 
On-call workers and day laborers: 2.1%; 
Contract company workers: 6.3%; 
Independent contractors: 2.0%; 
Self-employed workers: 2.3%; 
Standard part-time workers: 2.1%; 
Standard full-time workers: 7.6%. 

Characteristic: Industry: Transportation; 
Agency temps: 2.0%; 
Direct-hire temps: 1.4%; 
On-call workers and day laborers: 7.1%; 
Contract company workers: 4.6%; 
Independent contractors: 5.0%; 
Self-employed workers: 3.8%; 
Standard part-time workers: 3.1%; 
Standard full-time workers: 5.1%. 

Characteristic: Industry: Communications; 
Agency temps: 3.0%; 
Direct-hire temps: 0.8%; 
On-call workers and day laborers: 0.9%; 
Contract company workers: 5.6%; 
Independent contractors: 0.5%; 
Self-employed workers: 0.1%; 
Standard part-time workers: 0.5%; 
Standard full-time workers: 1.8%. 

Characteristic: Industry: Utilities and sanitation; 
Agency temps: 1.3%; 
Direct-hire temps: 0.7%; 
On-call workers and day laborers: 1.0%; 
Contract company workers: 3.8%; 
Independent contractors: 0.2%; 
Self-employed workers: 0.1%; 
Standard part-time workers: 0.3%; 
Standard full-time workers: 1.4%. 

Characteristic: Industry: Wholesale trade; 
Agency temps: 4.2%; 
Direct-hire temps: 2.0%; 
On-call workers and day laborers: 2.3%; 
Contract company workers: 0.8%; 
Independent contractors: 3.5%; 
Self-employed workers: 4.7%; 
Standard part-time workers: 1.9%; 
Standard full-time workers: 4.4%. 

Characteristic: Industry: Retail trade--Eating and drinking places; 
Agency temps: 0.5%; 
Direct-hire temps: 4.3%; 
On-call workers and day laborers: 6.8%; 
Contract company workers: 1.7%; 
Independent contractors: 1.7%; 
Self-employed workers: 5.2%; 
Standard part-time workers: 16.0%; 
Standard full-time workers: 3.5%. 

Characteristic: Industry: Retail trade--Other retail trade; 
Agency temps: 3.4%; 
Direct-hire temps: 8.0%; 
On-call workers and day laborers: 7.6%; 
Contract company workers: 2.9%; 
Independent contractors: 8.5%; 
Self-employed workers: 16.5%; 
Standard part-time workers: 23.0%; 
Standard full-time workers: 10.0%. 

Characteristic: Industry: Banking and other finance; 
Agency temps: 3.6%; 
Direct-hire temps: 1.1%; 
On-call workers and day laborers: 0.7%; 
Contract company workers: 3.9%; 
Independent contractors: 1.8%; 
Self-employed workers: 1.1%; 
Standard part-time workers: 1.9%; 
Standard full-time workers: 3.6%. 

Characteristic: Industry: Insurance and real estate; 
Agency temps: 3.4%; 
Direct-hire temps: 1.6%; 
On-call workers and day laborers: 1.8%; 
Contract company workers: 5.0%; 
Independent contractors: 6.9%; 
Self-employed workers: 5.0%; 
Standard part-time workers: 2.3%; 
Standard full-time workers: 3.7%. 

Characteristic: Industry: Forestry and fisheries; 
Agency temps: 0%; 
Direct-hire temps: 0.2%; 
On-call workers and day laborers: 0.3%; 
Contract company workers: 0%; 
Independent contractors: 0.3%; 
Self-employed workers: 0.3%; 
Standard part-time workers: 0%; 
Standard full-time workers: 0.1%. 

Characteristic: Industry: Justice, public order, and safety; 
Agency temps: 0.5%; 
Direct-hire temps: 1.1%; 
On-call workers and day laborers: 1.2%; 
Contract company workers: 0.4%; 
Independent contractors: 0.1%; 
Self-employed workers: 0%; 
Standard part-time workers: 0.6%; 
Standard full-time workers: 2.6%. 

Characteristic: Industry: Administration of human resource; 
Agency temps: 0%; 
Direct-hire temps: 0.5%; 
On-call workers and day laborers: 0.4%; 
Contract company workers: 1.6%; 
Independent contractors: 0%; 
Self-employed workers: 0%; 
Standard part-time workers: 0.2%; 
Standard full-time workers: 0.8%. 

Characteristic: Industry: National security and international affairs; 
Agency temps: 0.1%; 
Direct-hire temps: 0.9%; 
On-call workers and day laborers: 0%; 
Contract company workers: 3.6%; 
Independent contractors: 0%; 
Self-employed workers: 0%; 
Standard part-time workers: 0.1%; 
Standard full-time workers: 0.6%. 

Characteristic: Industry: Other public administration; 
Agency temps: 1.8%; 
Direct-hire temps: 2.5%; 
On-call workers and day laborers: 0.9%; 
Contract company workers: 5.2%; 
Independent contractors: 0.1%; 
Self-employed workers: 0%; 
Standard part-time workers: 0.6%; 
Standard full-time workers: 2.0%. 

Characteristic: Occupation: Executive, administrative, and managerial; 
Agency temps: 4.3%; 
Direct-hire temps: 6.8%; 
On-call workers and day laborers: 5.0%; 
Contract company workers: 12.0%; 
Independent contractors: 20.5%; 
Self-employed workers: 24.8%; 
Standard part-time workers: 5.1%; 
Standard full-time workers: 16.0%. 

Characteristic: Occupation: Professional specialty; 
Agency temps: 6.8%; 
Direct-hire temps: 31.0%; 
On-call workers and day laborers: 22.6%; 
Contract company workers: 28.8%; 
Independent contractors: 18.5%; 
Self-employed workers: 12.3%; 
Standard part-time workers: 10.9%; 
Standard full-time workers: 16.0%. 

Characteristic: Occupation: Technicians and related support; 
Agency temps: 4.1%; 
Direct-hire temps: 2.8%; 
On-call workers and day laborers: 4.1%; 
Contract company workers: 6.7%; 
Independent contractors: 1.1%; 
Self-employed workers: 0.5%; 
Standard part-time workers: 2.9%; 
Standard full-time workers: 3.5%. 

Characteristic: Occupation: Sales; 
Agency temps: 1.8%; 
Direct-hire temps: 7.1%; 
On-call workers and day laborers: 5.6%; 
Contract company workers: 1.5%; 
Independent contractors: 17.3%; 
Self-employed workers: 21.2%; 
Standard part-time workers: 20.1%; 
Standard full-time workers: 10.0%. 

Characteristic: Occupation: Administrative support, including clerical; 
Agency temps: 36.1%; 
Direct-hire temps: 19.7%; 
On-call workers and day laborers: 9.0%; 
Contract company workers: 3.4%; 
Independent contractors: 3.4%; 
Self-employed workers: 4.9%; 
Standard part-time workers: 17.4%; 
Standard full-time workers: 15.0%. 

Characteristic: Occupation: Private household; 
Agency temps: 0.3%; 
Direct-hire temps: 1.8%; 
On-call workers and day laborers: 2.2%; 
Contract company workers: 0%; 
Independent contractors: 1.0%; 
Self-employed workers: 0%; 
Standard part-time workers: 1.2%; 
Standard full-time workers: 0.2%. 

Characteristic: Occupation: Protective service; 
Agency temps: 0.9%; 
Direct-hire temps: 0.8%; 
On-call workers and day laborers: 1.9%; 
Contract company workers: 11.7%; 
Independent contractors: 0.2%; 
Self-employed workers: 0.1%; 
Standard part-time workers: 1.2%; 
Standard full-time workers: 2.3%. 

Characteristic: Occupation: Other service; 
Agency temps: 6.9%; 
Direct-hire temps: 11.5%; 
On-call workers and day laborers: 19.3%; 
Contract company workers: 7.1%; 
Independent contractors: 7.6%; 
Self-employed workers: 11.0%; 
Standard part-time workers: 27.3%; 
Standard full-time workers: 8.3%. 

Characteristic: Occupation: Precision production, craft, and repair; 
Agency temps: 8.7%; 
Direct-hire temps: 6.4%; 
On-call workers and day laborers: 10.3%; 
Contract company workers: 16.0%; 
Independent contractors: 18.9%; 
Self-employed workers: 7.2%; 
Standard part-time workers: 2.3%; 
Standard full-time workers: 12.4%. 

Characteristic: Occupation: Machine operators, assemblers, and 
inspectors; 
Agency temps: 18.6%; 
Direct-hire temps: 2.7%; 
On-call workers and day laborers: 2.2%; 
Contract company workers: 0.6%; 
Independent contractors: 1.7%; 
Self-employed workers: 1.0%; 
Standard part-time workers: 2.1%; 
Standard full-time workers: 7.0%. 

Characteristic: Occupation: Transportation and material moving; 
Agency temps: 2.2%; 
Direct-hire temps: 1.8%; 
On-call workers and day laborers: 7.8%; 
Contract company workers: 2.5%; 
Independent contractors: 4.3%; 
Self-employed workers: 2.2%; 
Standard part-time workers: 2.8%; 
Standard full-time workers: 4.4%. 

Characteristic: Occupation: Handlers, equipment cleaners, helpers, and 
laborers; 
Agency temps: 8.3%; 
Direct-hire temps: 3.6%; 
On-call workers and day laborers: 6.4%; 
Contract company workers: 7.6%; 
Independent contractors: 1.0%; 
Self-employed workers: 0.6%; 
Standard part-time workers: 5.8%; 
Standard full-time workers: 3.6%. 

Characteristic: Occupation: Farming, forestry, and fishing; 
Agency temps: 1.0%; 
Direct-hire temps: 4.0%; 
On-call workers and day laborers: 3.6%; 
Contract company workers: 2.2%; 
Independent contractors: 4.4%; 
Self-employed workers: 14.1%; 
Standard part-time workers: 1.1%; 
Standard full-time workers: 1.2%. 

[A] White, non-Hispanic. 

[B] Black, non-Hispanic. 

[C] Other, non-Hispanic. 

Source: 1999 BLS Contingent Work Supplement. 

[End of table] 

[End of section] 

Appendix III 

Key Laws Designed to Protect Workers: 

This appendix provides a more detailed description of the key laws 
designed for workers’ protection and their applicability to members of 
the contingent workforce. By definition, these laws apply only to 
employees— independent contractors and self-employed workers are not 
covered. However, no definitive test exists to distinguish whether a 
worker is an employee or an independent contractor. In determining 
whether an employment relationship exists under federal statutes, 
courts have developed several criteria. These criteria have been 
classified as the economic realities test, the common law test, and a 
combination of the two sometimes referred to as a “hybrid” test. 

The economic realities test looks to whether the worker is 
economically dependent upon the principal or is in business for 
himself. The test is not precise, leaving determinations to be made on 
a case-by-case basis. The test consists of a number of factors, such 
as the degree of control exercised by the employing party over the 
worker, the worker’s opportunity for profit or loss, the worker’s 
capital investment in the business, the degree of skill required for 
the job, and whether the worker is an integral part of the business. 

The traditional common law test examines the employing party’s right 
to control how the work is performed. To determine whether the 
employing party has this right, courts may consider the degree of 
skill required to perform the work, who supplies the tools and 
equipment needed to perform the work, and the length of time the 
worker has been working for the employing party. 

When the tests are combined in some type of hybrid, a court typically 
weighs the common law factors and some additional factors related to 
the worker’s economic situation, such as how the work relationship may 
be terminated, whether the worker receives leave and retirement 
benefits, and whether the hiring party pays Social Security taxes. 

Each of the laws is discussed in more detail below, including the 
tests used under each to determine whether a worker is an employee or 
an independent contractor. 

Family and Medical Leave Act of 1993 (29 U.S.C. 2601): 

The Family and Medical Leave Act of 1993 provides various protections 
for employees who need time off from their jobs because of medical 
problems or the birth or adoption of a child. The act requires 
employers to allow employees to take up to 12 weeks of unpaid leave 
for medical reasons related to the employee or a family member or to 
care for a newborn or newly adopted child without reduction of pay or 
benefits when he or she returns to work. It also requires employers to 
maintain the same health care coverage for employees while they are on 
leave that was provided when they were actively employed. To have this 
coverage, employees must have been employed for 12 months by an 
employer that employs 50 or more employees who work 20 or more 
calendar weeks in a year and must have worked at least 1,250 hours 
during the past 12 months. 

Independent contractors and self-employed workers are not counted as 
employees for the purpose of determining whether an employer has 50 or 
more employees. Courts have applied the economic realities test to 
determine whether a worker is an employee or an independent contractor 
under this law. 

Under Department of Labor (DOL) regulations, in joint employment 
relationships, only the primary employer is required to give various 
notices, grant leave, and maintain health benefits under the act. For 
employees of temporary employment agencies, the agency most commonly 
is considered the primary employer. Job restoration is the primary 
responsibility of the primary employer. Thus, if a business client of 
a temporary employment agency terminates a contract while an employee 
is on leave, the worker does not have the right to return to the 
original position; however, the staffing agency is responsible for 
placing the worker in a comparable position elsewhere. 

Employee Retirement Income Security Act (29 U.S.C. 1001): 

The Employee Retirement Income Security Act (ERISA) establishes 
uniform standards for employee pension and welfare benefit plans, 
including minimum participation, accrual, and vesting requirements; 
fiduciary responsibilities; and reporting and disclosure requirements. 
The act does not require employers to provide pension or welfare 
benefits to employees; it applies to any employer or employee 
organization engaged in commerce or any industry affecting commerce 
that maintains a covered employee benefit plan. 

Contingent workers are covered by the act only if the employer allows 
them to participate in a pension or welfare benefit plan. Which 
employees are included in a plan depends on how the plan documents are 
drafted and interpreted. If an employer wishes to exclude some or all 
types of contingent workers from participating in a plan, the employer 
must clearly define the excluded groups of workers, and that 
definition must be properly applied. Otherwise, contingent workers 
whom the employer intended to exclude may be covered. 

Whether contingent workers are counted as employees can be important 
in determining whether an employer is entitled to certain tax benefits 
under the Internal Revenue Code—such as a tax deduction for the cost 
of the benefits if the plan meets certain requirements, some of which 
involve counting employees. For example, an employer is entitled to 
certain tax benefits if its pension plan covers 70 percent of all 
lower-paid (“nonhighly compensated”) employees who worked 1,000 hours 
or more over the last 12 months. Employers that use many temporary 
workers may find meeting this requirement difficult and, therefore, 
may not provide pension plans for their employees. 

Further, in applying the above coverage test, the Internal Revenue 
Code requires employers to include in their employee count certain 
employees supplied by third-party contractors. This requirement 
essentially covers “leased employees,” but the definition of a leased 
employee is broad enough to cover some employees supplied by temporary 
employment agencies. Being counted as a leased employee does not 
entitle the employee to any benefit; it means only that the employee 
is counted for purposes of determining whether the plan meets the 70-
percent coverage test for favorable tax treatment. 

Again, the above laws relate to employees, not independent contractors 
and the self-employed. The common law test is applied to determine 
whether a person is an employee or an independent contractor under 
ERISA. 

Fair Labor Standards Act (29 U.S.C. 201): 

The Fair Labor Standards Act establishes minimum wage, overtime, and 
child labor standards for employees. The act covers all employees of 
employers engaged in commerce or the production of goods that meet a 
dollar volume-of-business requirement. The act also covers all 
employees engaged in commerce or the production of goods for commerce; 
all employees engaged in domestic service covered by the law; all 
employees of a hospital, residential care institution, or school; and 
all federal, state, and local government employees. 

The act covers contingent workers, except independent contractors and 
self-employed workers, and does not distinguish between full-time and 
part-time employment or between temporary and permanent workers. In 
deciding whether a worker is an employee or an independent contractor 
under the act, courts have used the broad economic realities test. 

Under DOL regulations, if an employee is employed in a “joint employment
” relationship (a situation in which more than one employer has legal 
responsibility for the worker and employment by one employer is 
related to the employment by the other employer or employers), all of 
the employee’s work is considered one employment and all employers are 
responsible for compliance with the act. For example, if a temporary 
employment agency supplies an employee to a company that fails to pay 
proper overtime compensation, both the temporary agency and the 
company are liable for the amount of overtime pay the employee is 
owed. [Footnote 57] 

National Labor Relations Act (29 U.S.C. 151): 

The National Labor Relations Act guarantees the right of employees to 
organize and bargain collectively. The act applies to all employers 
and employees in their relationships with labor organizations whose 
activities affect interstate commerce. The act does not differentiate 
by firm size. 

The coverage issue regarding temporary workers is whether they have a 
right to join the same bargaining units as permanent employees with 
whom they work. Generally, agency temps who work at one site on a 
fairly regular basis over a sufficient period of time can join the 
existing collective bargaining unit of permanent employees if the 
agency (or agencies, if more than one is involved) and the employer 
that hired the workers from the agency consent to this arrangement. 
However, temporary workers often do not work at one work site long 
enough to have an interest in joining a union. 

In 1945, the Supreme Court held that the common law test for 
determining whether a person is an employee or an independent 
contractor under the National Labor Relations Act could be ignored in 
favor of broader policy considerations. In response to this decision, 
the Congress included language in the 1947 Labor Management Relations 
Act that amended 29 U.S.C. 151 to explicitly exclude “any individual 
having the status of an independent contractor” from coverage. In 
1968, on the basis of this new language, the Supreme Court held that 
the common law test should be applied in determining whether a person 
is an employee or an independent contractor under the National Labor 
Relations Act.[Footnote 58] 

Unemployment Compensation: 

The unemployment compensation system is a joint federal-state system 
funded by both federal and state payroll taxes. It was established by 
the Social Security Act of 1935 and was intended to provide temporary 
relief through partial wage replacement for workers who lose jobs for 
economic reasons, such as lay-offs, and to help stabilize the economy 
during recessions. The system pays benefits to workers who become 
unemployed and meet state-established eligibility rules. Generally, 
only employees are eligible to receive unemployment compensation 
benefits; independent contractors and self-employed workers are not 
covered. Most states use a different type of test to determine whether 
workers are employees than those used for other laws. This test is 
called the “ABC test”: workers are considered employees unless (a) 
they are free from direction and control over performance of the work; 
(b) the service is performed either outside the usual course of the 
business for which it is performed or is performed outside of all 
places of business of the enterprise for which it is performed; and 
(c) the individual is customarily engaged in an independent trade, 
occupation, profession, or business. 

Workers’ Compensation: 

State and federal workers’ compensation programs provide benefits for 
wage loss and medical care to injured workers and, in some cases, 
their families. At the same time, employers’ liabilities are limited 
strictly to workers’ compensation payments. Benefits paid depend on 
the nature and extent of the injuries and the ability of injured 
workers to continue working. For employees whose injuries are not 
serious, the only benefits received are of a medical nature. Employees 
with more serious injuries or illnesses may also be entitled to wage-
loss benefits; vocational rehabilitation benefits; and schedule 
payments for the permanent loss, or loss of use of, parts or functions 
of the body. In addition, survivors of an employee may receive death 
benefits if the employee’s death resulted from a job-related injury or 
illness. As with many other laws, independent contractors and self-
employed workers are generally not covered. Most states use the common 
law test to determine whether workers are employees or independent 
contractors. 

Occupational Safety and Health Act (29 U.S.C. 651): 

The Occupational Safety and Health Act requires employers to maintain 
a safe and healthy workplace for their employees. The act does not 
distinguish contingent workers from other employees and covers 
contingent workers except for independent contractors and other self-
employed workers. Either the economic realities test or the common law 
test is applied to determine whether someone is an independent 
contractor. According to the law, the party responsible for ensuring 
safety is the employer that is in direct control of the workplace and 
the actions of those who work there, including contingent workers such 
as agency temps and contract company workers who are supplied by 
another party. Thus, if an accident occurs at the workplace, the 
employer that created the hazard, not the temporary help firm or 
contract company, is liable. 

Title VII of the Civil Rights Act (42 U.S.C. 2000e), the Americans 
With Disabilities Act (42 U.S.C. 12101), and the Age Discrimination 
in Employment Act (29 U.S.C. 621): 

Title VII of the Civil Rights Act, the Americans With Disabilities 
Act, and the Age Discrimination in Employment Act protect all 
employees and job applicants from various forms of discrimination, 
such as discrimination based on race, national origin, gender, 
disability, or age. The Civil Rights Act and the Americans With 
Disabilities Act apply to employers that have 15 or more employees for 
each of 20 or more calendar weeks in a year. The Age Discrimination in 
Employment Act applies to employers that have 20 or more employees for 
each working day in each of 20 or more calendar weeks. These laws do 
not distinguish contingent workers from other workers; they cover all 
contingent workers other than independent contractors. 

Further, each of these laws explicitly covers temporary employment 
agencies. Title VII of the Civil Rights Act explicitly prohibits 
employment agencies from discriminating on the basis of race, color, 
religion, gender, or national origin in classifying or referring 
people for employment. The Americans With Disabilities Act explicitly 
includes employment agencies in the definition of entities covered by 
the law. The Age Discrimination in Employment Act explicitly prohibits 
employment agencies from discriminating on the basis of a person’s age 
(if over 40) in classifying or referring a person for employment. 

Using the hybrid test, courts have generally determined that 
independent contractors are not considered employees for purposes of 
federal antidiscrimination statutes. Independent contractors do, 
however, receive some protection from discrimination. Under a 
provision of the Civil Rights Act that protects contractual rights, 
independent contractors are protected against racial discrimination in 
both the termination of a contract and the creation of a hostile work 
environment. 

In joint employment situations, one employer may be liable for the 
discriminatory acts of the other employer if the employer that is 
being held liable controls some substantial aspect of the employee’s 
compensation or terms and conditions of employment. 

Consolidated Omnibus Budget Reconciliation Act (29 U.S.C. 1161): 

Continuation of group health plan coverage is required under this act 
for employees who otherwise would lose coverage as a result of certain 
events, such as being laid off by their employers. Individuals may 
continue coverage under their former employers’ group health plans at 
their own expense. Depending on the qualifying event, the duration of 
required coverage ranges from 18 to 36 months. In general, when a 
covered employee experiences termination or reduction in hours of 
employment, the continued coverage of the employee and the employee’s 
spouse and dependents must continue for 18 months. The act applies to 
all group health plans, except those maintained by employers with 
fewer than 20 employees. Workers who were considered employees under 
the group health plans are also employees for purposes of this act. 

Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. 
1320d): 

This act guarantees the availability and renewability of health 
insurance coverage for certain individuals. It limits, and in most 
cases eliminates, the waiting time before a plan covers a preexisting 
condition for group health plan participants and beneficiaries who 
move from one job to another and from employment to unemployment. The 
act also creates federal standards for insurers, health maintenance 
organizations, and employer plans, including those who self-insure. 
The act does not require employers to offer health insurance to its 
employees or, if they offer health insurance, to cover part-time, 
seasonal, or temporary employees. However, the act increases the tax 
deduction for health insurance for self-employed workers, including 
independent contractors, to 100 percent of premiums by 2007, which 
theoretically will expand coverage to that sector of the contingent 
workforce. It also provides new tax incentives to encourage 
individuals and employers to purchase long-term-care insurance. 

[End of section] 

Appendix IV: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Kay E. Brown, (202) 512-3674: 
Revae E. Moran, (202) 512-3863: 

Staff Acknowledgments: 

Abbey G. Frank assisted in the work throughout the review and cowrote 
the report; Paula J. Bonin performed the analyses of data from BLS’ 
Contingent Work Supplements; John G. Smale, Jr., and James P. Wright 
assisted with the methodology and the analysis of the BLS data; Robert 
G. Crystal and Daniel A. Schwimer reviewed the coverage of contingent 
workers under laws designed to protect workers; and Lise L. Levie 
provided technical assistance and reviewed the accuracy of the report. 

[End of section] 

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[End of section] 

Related GAO Products: 

Fair Labor Standards Act: White Collar Exemptions in the Modern Work 
Place [hyperlink, http://www.gao.gov/products/GAO/HEHS-99-164], Sept. 
30, 1999). 

Employment-Based Health Insurance: Medium and Large Employers Can 
Purchase Coverage, but Some Workers Are Not Eligible [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-98184], July 27, 1998). 

Private Health Insurance: Continued Erosion of Coverage Linked to Cost 
Pressures [hyperlink, http://www.gao.gov/products/GAO/HEHS-97-122], 
July 24, 1997). 

Tax Administration: Issues in Classifying Workers as Employees or 
Independent Contractors [hyperlink, 
http://www.gao.gov/products/GAO/T-GGD-96-130], June 20, 1996). 

Tax Administration: Issues Involving Worker Classification [hyperlink, 
http://www.gao.gov/products/GAO/T-GGD95-224], Aug. 2, 1995). 

Tax Administration: Estimates of the Tax Gap for Service Providers 
[hyperlink, http://www.gao.gov/products/GAO/GGD-95-59], Dec. 28, 1994). 

Workers at Risk: Increased Numbers in Contingent Employment Lack 
Insurance, Other Benefits [hyperlink, 
http://www.gao.gov/products/GAO/HRD-91-56], Mar. 8, 1991). 

Tax Administration: Information Returns Can Be Used to Identify 
Employers Who Misclassify Workers [hyperlink, 
http://www.gao.gov/products/GAO/GGD-89-107], Sept. 25, 1989). 

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Footnotes: 

[1] Labor economist Audrey Freedman defined contingent work in a 
speech at a 1985 conference on employment security as “conditional and 
transitory employment relationships as initiated by a need for labor—
usually, because a company has an increased demand for a particular 
service or product or technology, at a particular place, at a specific 
time.” 

[2] The Contingent Work Supplement was designed to identify workers 
BLS considered contingent in terms of their job security and those who 
work in alternative work arrangements. See appendix I for more 
information. 

[3] The requirements for these protections vary from law to law, and 
most, but not all, workers are covered. 

[4] Social Security provides benefits to retired and long-term 
disabled workers and their dependents and survivors. Medicare provides 
hospital and medical insurance benefits to those aged 65 and older, as 
well as to certain others. The hospital insurance portion of Medicare 
is paid by both employees and employers; the medical insurance portion 
is funded by both the federal government and premiums paid by 
enrollees. 

[5] In 2000, employers and employees will each contribute 7.65 percent 
of an employee’s wages up to a wage limit of $76,200. 

[6] The unemployment compensation system, funded by both federal and 
state payroll taxes, pays benefits to workers in covered jobs who 
become unemployed and meet state-established eligibility rules. 

[7] Workers’ compensation programs provide cash, medical benefits, or 
both to workers or their families when the workers are injured, become 
ill, or die while performing their job. Benefits are provided under 
state and federal laws. Most workers are covered by state programs 
fully funded by employers; benefits are provided through commercial 
insurance carriers, state funds, or self-insurance mechanisms. Federal 
employees and workers in the maritime industry are covered by federal 
programs. 

[8] Two types of pension plans are available to workers through their 
employers: defined benefit plans and defined contribution plans. Under 
a defined benefit plan, benefits are generally based on a formula 
linked to a worker’s earnings and years of employment, and the 
employer is responsible for funding the benefits. Under a defined 
contribution plan, an amount is contributed to a retirement account 
for a worker, and benefits are based on the amount contributed to the 
account and earnings on that amount; the employee bears the risk of 
any loss. The employer generally contributes to the plan, but often 
the worker is permitted or expected to make contributions. 

[9] The Medicaid program provides medical assistance largely to low-
income people who are aged, blind, or disabled. 

[10] The Supplemental Security Income program provides income 
assistance to aged, blind, or disabled people with limited income and 
resources. 

[11] Susan Houseman, Temporary, Part-Time, and Contract Employment in 
the United States: A Report on the W.E. Upjohn Institute’s Employer 
Survey on Flexible Staffing Policies (Kalamazoo, Mich.: W.E. Upjohn 
Institute for Employment Research, Nov. 1996, revised June 1997). 

[12] Susan Houseman, Flexible Staffing Arrangements: A Report on 
Temporary Help, On-Call, Direct-Hire Temporary, Leased, Contract 
Company, and Independent Contractor Employment in the United States 
(Kalamazoo, Mich.: W.E. Upjohn Institute for Employment Research, Aug. 
1999). 

[13] Different categories of contingent workers were asked different 
questions about their preferences. Agency temps, on-call workers, day 
laborers, and contract company workers were asked whether they would 
prefer to have a permanent rather than a temporary job. Independent 
contractors and self-employed workers were asked whether they would 
prefer to work for someone else rather than continuing in their 
current work arrangement. 

[14] In two of its three estimates of the contingent workforce, BLS 
included only workers who indicated that they had worked for their 
current employer 1 year or less and that they expected to work in 
their current job for 1 year or less. BLS expanded its third estimate 
to include wage and salary workers who indicated that even if the 
economy did not change and their job performance was adequate, they 
could not continue in their current jobs as long as they wished. 

[15] BLS did not obtain information on leased workers in the 
Contingent Work Supplement. A question on leased workers was included 
in the 1995 supplement but no usable data were obtained because the 
definition of a leased worker was not clear to the respondents. As a 
result, the question was deleted from subsequent versions. 

[16] The differences between the percentages for each category of 
workers (except self-employed workers) and the percentage of standard 
full-time workers are so small that they are not statistically 
significant. Therefore, the relative size of each individual category 
of workers, other than self-employed workers, is considered to be 
unchanged from February 1995 to February 1999. 

[17] BLS collects data on the temporary help supply industry—Standard 
Industrial Classification code 7363—as part of its annual Current 
Employment Statistics surveys. Because the data cover all jobs in the 
industry, they count individuals registered with more than one 
temporary agency multiple times if the workers received payments from 
more than one agency. 

[18] Chris Benner, Shock Absorbers in the Flexible Economy: The Rise 
of Contingent Employment in Silicon Valley (San Jose, Calif.: Working 
Partnerships USA, May 1996). 

[19] As a result of a major redesign of the Current Population Survey 
in 1994, data on part-time workers collected before 1994 are not 
directly comparable to the data for 1994 and subsequent years. Before 
1994, workers who usually worked 1 to 34 hours but who worked 35 or 
more hours during the week the data were collected were included in 
the total number of full-time, rather than part-time, workers. From 
1994 forward, such workers have been included in the part-time total. 

[20] Linda Levine, Part-Time Job Growth and the Labor Effects of 
Policy Responses: An Overview (Washington, D.C.: Congressional 
Research Service, Dec. 1998). 

[21] Department of Labor, Employee Leasing: Implications for State 
Unemployment Insurance Programs (Washington, D.C.: Department of 
Labor, Occasional Paper 97-1, 1997). 

[22] The differences between the percentages for these workers and the 
percentage of standard full-time workers are not statistically 
significant. Therefore, workers in these two categories are as likely 
to have family incomes below $15,000 as standard full-time workers are. 

[23] The BLS data on family income from $15,000 to $40,000 are 
reported in $5,000 increments; $15,000 is the increment that is 
closest to and below the 1999 federal poverty threshold of $17,028 for 
a family of four. Family income is defined as the combined income of 
all family members aged 15 years or older from jobs; net income from 
businesses, farms, and rent; pensions; dividends; interest; Social 
Security payments; and any other money income. Family members may 
include standard full-time workers. 

[24] Testimony of the Senior Vice President of the National 
Association of Temporary and Staffing Services (now the American 
Staffing Association) before the Department of Labor’s Advisory 
Council on Employee Welfare and Pension Benefit Plans, July 1999. 

[25] Statement of the Executive Vice President of Field Operations, 
Sales and Marketing, Kelly Services, Inc., before the Department of 
Labor’s Advisory Council on Employee Welfare and Pension Benefit 
Plans, July 1999. 

[26] Although the percentages of workers in these two categories with 
health insurance from any source differ from the percentage of 
standard full-time workers with health insurance, the differences are 
so small that they are not statistically significant. 

[27] The questions in the BLS Contingent Work Supplement related to 
pension plans were: “Does [your employer] offer a pension or 
retirement plan to any of its employees?”; “Are you included in this 
plan?”; and “Why not?” 

[28] Although the percentages of workers in these two categories who 
work for employers that offer pension plans differ from the percentage 
of standard full-time workers who work for employers that offer 
pensions, the differences are so small that they are not statistically 
significant. 

[29] IRAs are accounts available to certain workers, such as most 
workers not covered by an employer-provided pension plan and workers 
covered by an employer-provided pension whose income falls below a 
certain threshold. Contributions made to IRAs are generally tax-
deductible, and the earnings made on IRAs are tax-deferred. Keogh 
plans are, generally, retirement plans for the self-employed. They 
closely resemble IRAs but allow higher annual tax-deductible 
contributions. 

[30] All of the key laws designed to protect workers have some 
exclusions, such as exclusions for small businesses, that apply to 
both contingent workers and standard full-time workers. We did not, 
however, have reliable data that would allow us to determine whether 
contingent workers are disproportionately affected by these exclusions. 

[31] Applicants are generally disqualified from receiving benefits 
when job loss is due to voluntary separation without “good cause,” 
although the definition of “good cause” varies from state to state. 
See appendix III. 

[32] National Employment Law Project, Mending the Unemployment 
Compensation Safety Net for Contingent Workers (New York, N.Y.: 
National Employment Law Project, Oct. 1997). 

[33] A “sufficient community of interest” includes factors such as 
common supervision, working conditions, and interest in the unit’s 
wages, hours, and conditions of employment. 

[34] Agency temps, contract company workers, and leased workers may be 
considered employees of the temporary employment agency, contract 
company, or leasing company that hired them, employees of the client 
firm to which they are supplied, or both. When both are considered 
employers, this is called a “joint employment” or “co-employment” 
arrangement. 

[35] Tax Administration: Issues in Classifying Workers as Employees or 
Independent Contractors [hyperlink, 
http://www.gao.gov/products/GAO/T-GGD-96-130], June 20, 1996); Tax 
Administration: Issues Involving Worker Classification [hyperlink, 
http://www.gao.gov/products/GAO/T-GGD-95-224], Aug. 2, 1995); and Tax 
Administration: Estimates of the Tax Gap for Service Providers 
[hyperlink, http://www.gao.gov/products/GAO/GGD-95-59], Dec. 28, 1994). 

[36] See appendix III for descriptions of the tests used under each 
law. 

[37] Vizcaino v. Microsoft Corp., 97 F.3d 1187 (9th cir. 1996) and 
Microsoft Corp. v. Vizcaino, U.S., No. 99-498, cert. denied Jan. 10, 
2000. 

[38] Heath v. Perdue Farms, Inc., 87 F.Supp. 2d 452 (2000). 

[39] Schwiger v. Farm Bureau Insurance Company of Nebraska, 207 F.3d 
980 (8th Cir. 2000) and Birchem v. Knights of Columbus, 116 F.3d 310 
(8th Cir. 1998). 

[40] Scannell v. City of Seattle, 97 Wn.2d 701, 648 P.2d 435 (1982) 
and Scannell v. City of Seattle, State of Washington, King County 
Superior Court Cause No. 844600, Settlement Agreement. 

[41] Logan v. King County, Washington State Superior Court, King 
County Cause No. 93-2-202334 SEA, Settlement Agreement (1997). 

[42] The description of the circumstances of this case, other than the 
final decision, came from a summary of the case published in an 
article written by the General Counsel for the Service Employees 
International Union. See Jonathan P. Hiatt, “Policy Issues Concerning 
the Contingent Work Force,” Washington and Lee Law Review, Vol. 52, 
No. 3 (1995), pp. 739-53. 

[43] Service Employees International Union, Local 434 v. County of Los 
Angeles, 225 Cal. App. 3d 761 (1990). 

[44] The Equity for Temporary Workers Act of 1999 was introduced in 
the House of Representatives on June 22, 1999. The bill was referred 
to the Subcommittee on Workforce Protections. 

[45] The Workplace Equity Bill was introduced in the Massachusetts 
State Legislature in the spring of 1999. At the time of our work, the 
bill was being reviewed at the committee level. The Contingent Workers 
and Part-Time Workers’ Rights Act, S.B. 1480, was introduced in the 
Pennsylvania Senate on June 15, 1998, but was not enacted. 

[46] The Employment Security Benefits Act was introduced in the Rhode 
Island State Legislature in1998 and 1999, but it did not become law. 

[47] The Economic Policy Institute, located in Washington, D.C., is a 
nonprofit organization that conducts research on policies aimed at 
achieving economic growth, prosperity, and opportunity. It was founded 
in 1986. 

[48] Arne Kalleberg and others, Nonstandard Work, Substandard Jobs: 
Flexible Work Arrangements in the U.S. (Washington, D.C.: Economic 
Policy Institute, 1997). 

[49] The wage levels required by these ordinances range from $6.22 to 
$11.42 an hour. Most are indexed to increase over time with increases 
in the cost of living. 

[50] The Department of Labor maintains the Advisory Council on 
Employee Welfare and Pension Benefit Plans. Each year, the Advisory 
Council creates working groups that research specific areas of 
concern. In 1999, a working group was created to look at the benefit 
implications of the growth of the contingent workforce. The group’s 
final report was issued on November 10, 1999. 

[51] The Independent Contractor Clarification Act of 1999 was 
introduced in the House of Representatives on April 22, 1999. The bill 
was referred to the House Committee on Ways and Means. 

[52] Working Today was founded in 1995 to promote the interests of 
America’s independent workforce through advocacy, service, and 
education. The organization is based in New York City and has over 
93,000 members. 

[53] The new media industry includes workers in high-tech jobs such as 
web page designers, software developers, and computer programmers. 

[54] See Anne Polivka, “Contingent and alternative work arrangements, 
defined,” Monthly Labor Review (Oct. 1996), pp. 3-9. 

[55] See Susan Houseman, Flexible Staffing Arrangements, Aug. 1999, 
and Anne Polivka, Sharon Cohany, and Steven Hipple, “Definition, 
Composition, and Economic Consequences of the Nonstandard Work Force,” 
in Nonstandard Work Arrangements and the Changing Labor Market: 
Dimensions, Causes and Institutional Responses, IRRA Series 2000, 
Marianne Ferber and Lonnie Golden, editors, forthcoming. 

[56] We constructed the category of direct-hire temps using several 
questions from the supplement: We included workers who indicated that, 
although they did not work for a temporary employment agency, their 
job was temporary or they could not stay in their job as long as they 
wished for one of the following reasons: (1) they were working only 
until a specific project was completed, (2) they were temporarily 
replacing another worker, (3) they were hired for a fixed period of 
time, (4) their job was seasonal, or (5) they expected to work for 
less than a year because their job was temporary. 

[57] For more information on the Fair Labor Standards Act, see Fair 
Labor Standards Act: White Collar Exemptions in the Modern Work Place 
[hyperlink, http://www.gao.gov/products/GAO/HEHS-99-164], Sept. 30, 
1999. 

[58] NLRB v. United Insurance Company of America, 390 U.S. 254, 256 
(1968). 

[End of document]