Yup this seems to basically be co-employment risk mitigation. I have seen situations where there is a hard limit on how long we can hire a contractor for a task through an agency. I have also seen limitations in what we can specify, measure, reward and what we cannot.

The issue is basically that for contractors, you generally pay no benefits or retirement plans. However, if they are effectively employees, you do need to pay them that (ref. Uber driver cases where they are suing for classification as employees)