Are contract workers “employees” for ACA health insurance coverage purposes?


Your organization uses contract workers hired through employment service companies and pays the companies directly for the services of these workers. Under the Patient Protection and Affordable Care Act (ACA), are these contract workers considered your employees such that you must offer them health insurance coverage?


It depends. Generally, a worker would be your company's employee for purposes of the ACA if he or she is an employee under the common law standard. This general rule is subject to certain exceptions, such as for a sole proprietor, a partner in a partnership, a leased employee under Internal Revenue Code Sec. 414(n)(2), and certain direct sales and real estate workers under Internal Revenue Code Sec. 3508. Treasury regulations provide that an employer–employee relationship exists when the service recipient has the right to direct and control the individual who performs the services, not only as to the result to be accomplished by the work, but also as to the details and means by which that result is accomplished. Your company does not need to actually direct and control the individual; the mere right to do so is enough.

The ACA also addresses workers provided by staffing firms. The law provides that in a situation where the client and not the staffing firm is the employer, an offer of health insurance coverage to the worker by the staffing firm under a plan established or maintained by the staffing firm is treated as an offer of coverage made by the client. This rule applies, however, only if the fee that the client pays to the staffing firm for an individual enrolled in health coverage under the staffing company's health plan is higher than the fee that the client pays to the staffing firm for the same individual if he or she did not enroll in the staffing company's health plan.

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