Liability In Temporary Employment Services Contract

Response #1: I can only comment that these provisions are not uncommon. In the end it all comes down to who has the clout. If you are dealing with one of the "big boys," you may have to take what they are willing to give. If you choose a smaller, hungrier competitor, you probably can get more security in writing... but be sure you get proof of insurance to back up their warranties.¹

Response #2: We've used this language in certain contracts (not temp agencies, but in other situations); this may be a starting point for you:

". . . provided, however, nothing contained herein shall be construed to require COMPANY to indemnify AGENCY for any claims, demands, allegations, or causes of action asserted by AGENCY's employees arising out of or related to the services they provided to COMPANY, due to the alleged intentional, negligent, or unlawful acts or willful misconduct committed by AGENCY and/or any of its employees, officers, or agents (including, but not limited to acts violating anti-discrimination, family and medical leave, whistleblower, wage and hour, and occupational safety and health laws of the United States and the State of XXX)."²

Response #3: I always push back on limitations of liability, especially for services. It troubles me when the vendor will not stand behind their work. Some thoughts could be to agree to the limit of their insurance coverage; ensure that limits are reciprocal, or carve out particular areas, which are excluded from the limits. Infringement is definitely one of the areas that should be excluded if the IT person is working on software. Also, they should indemnify you for any employment/Department of Labor type claims without limits.³

 

Response #4: You should be concerned if they want to limit their liability as it relates to any tax or government obligation (e.g. workers comp). We recently decided to stop using "temp to hire" recruiters (which saves in fees) because of the legal landscape moving toward classifying contract workers as employees depending on the nature of control a company may have over the contractor.

Items to consider including if you do move forward:

• Standard consulting language on ownership of work product, confidentiality
• Screening services required to be performed - background checks
• Indemnification for payment of all withholding, employment taxes, benefits and insurance⁴

Response #5: It sounds like the contract is overly broad and would leave your company exposed to risk for liabilities that belong to the agency. There are various ways to negotiate these contract terms. Understanding that the agency is providing the employee, but that the employee's work duties are under your company's control can help determine how to approach negotiations. You've indicated that this is an IT professional. If I were the agency, I would be concerned about potential liability for cyber breach that arises as a result of work that the temp performed at your company's direction. On the other hand, as a joint employer, your company doesn't want to be liable for employment-related claims caused by the agency. For the Limitation Of Liability provision, my first counter is to make it reciprocal carve out certain types of claims (third party, breach of contract, etc.) and eliminate special, punitive, circumstantial, etc. Also, consider the "value of the services". This is so vague as to provide room for various interpretations. I've found that it is always better to put a number to it to avoid any such "interpretation" issues. American Staffing provides a model agreement that you might use for comparison. It is fairly well balanced, but keep in mind that it is written from the agency perspective.⁵

 

Response #6: In our contracts with third-party labor providers, the provider of the labor takes responsibility for actions of its employees/agents including any liability for torts committed by the employee/agent and also for all employment claims including wages and benefits claims. If your provider is not willing to undertake that liability and wants to pawn it off on you, I'd be looking for another vendor.⁶

 

Response #7: I am the general counsel for the American Staffing Association, the national trade association that represents staffing firms. It is in that capacity that I offer the following staffing industry perspective.

 

Staffing clients deal a lot with typical contractors. These are companies that promise to deliver a particular product or operational result. For example, you might use contractors to repave a parking lot or to develop a computer program. When you do this, you rightly expect the contractor to pay for everything that might go wrong because it controls the whole project.

 

A staffing firm is a contractor, but its financial exposure is necessarily more limited than that of most contractors. Staffing firms assign employees to work on client business. Although staffing firms control and stand behind their own services, namely providing assigned employees qualified to work under a client's supervision, they don't control a client's business. Assigned employees work among the elements and tools of a business that a client controls, including management, equipment, materials, systems, finance, design, quality control, procedures, planning, marketing, distribution, etc. Consequently, staffing firms cannot assume client business risks of which they have no knowledge, control, or financial interest. Staffing firms do, however, relieve clients of some risks that go with all employees, such as providing workers' compensation.

 

A contract between a staffing firm and a staffing client should fairly define their respective responsibilities. Using the philosophy of "Whose business is it?" such a contract should be based on the following principles:

 

The staffing firm is in the staffing business, not the many different businesses in which its clients operate.

 

The staffing firm and its client should be responsible for things of which each, respectively, have knowledge, control, and financial interest.

 

The staffing firm and its client do not know, control, or profit from the other's business operations.

 

Therefore, the contract's indemnity language should allocate responsibility according to the practical realities and responsibilities of each party's businesses.

 

Finally, with respect to joint employment concerns as a result of recent Department Of Labor and National Labor Relations Board actions, joint employment in the staffing context is nothing new - “ courts and agencies have, for decades, routinely held staffing firms and their clients to be joint employers. Clients typically will be joint employers because, among other things, they generally supervise and direct the employees' day-to-day work; control working conditions at the work site; and determine the length of temporary assignments. Joint employment, however, should not be of concern since any potential client liability should be no greater than that associated with internal employees and can be controlled and mitigated by the client. Moreover, in some cases, joint employer status can actually benefit clients, as in the context of workers' compensation. For more information, see my December 2013 ACC Docket article, Less than Meets the Eye: Potential Liability When Using Temporary Workers.⁷

 

Response #8: Also, make sure that any worker supplied through the agency is an actual employee of the agency as opposed to a subcontractor (here in the United States, a W2 employee rather than a 1099 independent contractor). That will help minimize the risk of having the worker reclassified as one of your employees by the tax authorities, or the worker claiming employment-related benefits directly from your organization.⁸