When Is An Employee Leased?

The Affordable Care Act requires applicable large employers to offer minimum essential coverage to their full-time employees. A penalty is imposed if at least one full-time employee gets coverage from an exchange and coverage isn't offered to at least 95% of an employer's full-time employees. In an employer-employee relationship with two parties, classifying an individual as an employee can be relatively straightforward. It gets more complicated with a three-party employment arrangement. This relationship generates questions: Is the individual an employee of the staffing agency or the client of the agency? Can the IRS reclassify who is the individual's employer, and what happens in this case?