Temporary employees. For some companies, they are a great option. Temps can provide needed help during a busy season, fill a short-term gap for an employee on an extended leave or provide expertise for a specific project.

But there are several considerations to keep in mind when hiring temporary workers.

Temps are generally hired for a specified period of time, typically not more than a one-year period and are entitled to many of the same legal protections as other employees, such as workers’ compensation laws, requirements under the federal Occupational Safety and Health Act and the rights provided by Title VII and other anti-discrimination statutes.

Employers are obligated to pay income, Social Security and Medicare taxes for temporary employees; such workers may also be eligible for health care or retirement benefits, depending on the circumstances.

Companies can hire temporary workers on their own or through an agency. Working with an agency can alleviate an employer’s burden, as the agency will typically withhold the required taxes and pay the worker’s wages. However, employers could be held liable as a “joint employer” if the agency fails to comply with legal requirements. To protect themselves, employers should engage in due diligence before working with an agency, carefully review staffing agency contracts and require proof of insurance.

Misclassification of workers presents a host of legal problems for employers. Regulators – from state Attorneys General to the federal Department of Labor – have targeted misclassification in major lawsuits across the country, some resulting in multi-million settlements. The Internal Revenue Service is also interested in the issue and entitled to retroactive tax payments if the agency determines the employer failed to pay the requisite taxes.

Workers themselves can also bring suit, alleging that they were actually treated like an employee despite being labeled a temp.

In 2000, Microsoft paid $97 million to settle a class action brought by 10,000 temporary workers who sued after working for the company for several years, in some cases sitting right next to employees. The self-described “permatemps” argued the company hired them through temp agencies to avoid paying them health benefits, pensions and stock options. They told the court that they were actually permanent employees and therefore deserved the same benefits.

Most problems occur when a temporary position begins to look permanent. Maybe the worker turned out to be an invaluable resource, the employee who was supposed to return to work never did or the project drags on unexpectedly.

In a lawsuit, regulators or the court will consider the scope of the employment relationship in order to determine if the individual is a temporary worker or employee, with factors such as the level of control the employer exercises over the worker, whether the company is the worker’s sole source of income, if the work is flexible (in location and hours) and if the worker uses the company’s equipment.

To avoid facing liability, employers should strive to treat temporary workers like temps. Keep the employment period defined (and typically less than one year), do not conduct performance reviews or pay bonuses and consider not inviting temps to company functions, such as the summer picnic or holiday party.