This case focuses on an organization’s attempts to control labor costs by decreasing expenses. Thoroughly answer the 2 main questions for discussion posed at the end of the case study –
Montgomery was never convinced that transferring the engineering and design
employees to a PEO was a good idea. He tried hard to convince the management
team that it was a risky maneuver, but he couldn’t get them away from the idea
that it would save money on employment costs. He is concerned about Thompson’s
liability for misclassification of employees, and he wants to minimize the risk as
much as possible, starting with the agreement between Thompson and Mayfield.
He has scheduled a meeting this afternoon with your team, and he has asked you to
provide him with the following information:
1. What kind of agreement should Thompson have in place with the PEO for
transferring regular employees to contract labor?
2. Although the engineering employees were told they were independents and they
were calling themselves independents, are they truly independent contractors
or co-employees of Mayfield and Thompson? What risks are associated with the
change in employee classification, and how can Thompson minimize and protect
itself from those risks?