In some countries there are limits on how long a company can employ a contractor. I can't find it at the moment but I think that here (Norway) it is something like four years. After that the contractor is supposed to be either let go or offered permanent employment. Perhaps someone more familiar with the rules could chip in, I've only been contracting for a short period.
I think the situation is somewhat similar in the US except that instead of a legal maximum the contract must specify an explicit end date after which there must be a break in employment.
