TEMP Staffing Company or Subcontractor/Consultant? Be Careful!

By Rob Schild

Does your staffing company place temporary employees into professional positions/ capacity for your clients?

If so, it is very important that you understand the difference between a temporary employee, consultant and/or independent contractor. Your staffing company might unknowingly be acting as a subcontractor, consultant, engineering, architectural, IT/programing, healthcare, legal, or financial or other professional capacity not covered within the scope of your liability policy.

Some temporary staffing liability policies provide coverage for placing temporary employees in these types of positions but exclude coverage when these (your) employees operate outside of your clients control or direction.

Sign-Off Authority

These employees should never have ‘Sign-Off-Authority’ or possess authority to approve or be responsible for making decisions regarding the operations of your client’s company, its operations, or employees. In short, a temporary employee must ultimately work at the control and direction of your client. Otherwise, the temporary staffing company could be held liable for the professional decisions and actions of the temporary employee.

A Real World Example

Some years ago, a client – a national professional/white-collar temporary staffing company – was asked to provide a Project Manager for their client, a large international aerospace company. The staffing company had a long-term and ongoing relationship with this client, providing professional engineers. However, the Project Manager position in question would oversee a project that entailed developing an APU (Auxiliary Power Unit) and would be expected to manage the program, employees, and have ‘Sign-Off’ authority for the work performed on the project.

Just say No!

I advised my staffing company client not to provide this employee to their aerospace client because under these conditions the temporary staffing company would be acting as a professional engineering firm, would be assuming the responsibility for the actions and decisions made by their employee (the project manager), and finally because their staffing liability policy would not provide coverage for this exposure.

Months later in the news, it was reported that the same aerospace company’s entire fleet of aircraft was grounded (world-wide) due to an issue with their auxiliary power units (APU). Had my staffing company client provided their employee as a Project Manager as described, they could have been involved in a lengthy and complicated legal battle with a duty to defend, but without coverage to pay for doing so.

Blue Collar Professionals

One of the most frequent situations I encounter involve labor (blue collar) temporary staffing companies. Sometimes these firms are asked to provide Project Managers/Executive Supervisors in addition to the skilled trade and/or laborers they normally provide.

It’s difficult sometimes to say no to a client

When the staffing company says no to placing the Project Managers/Executive Supervisors, they could jeopardize their relationship with their client and could possibly lose the job orders for the skilled trade and/or laborers. However, when they say yes, they are assuming the legal responsibility for the decisions and actions their employee makes in respects to their clients project. Typically a Project Manager/Executive Supervisor would be responsible for making decisions relating to the execution and completion of the project in question.

Protect Your Company

Your company should have a ‘Temporary Employee Sign-Off Authority Policy’ whenever you make temporary professional placements for your clients. Basically, this policy would document that your employee understands and acknowledges that they do not possess any authority, either verbal or written, to approve work or projects that they make come in contact with during the course of their assignment. A labor law attorney can help you develop this type of policy.

Direct Hires are ok

Liability boils down to whose employee is making the decisions. If you source and place a direct hire for your client; and your client hires the employee directly – the liability for that employee falls on the employer [your client].

Employ Best Practices

When you provide a direct hire placement, your company is only responsible for acting professionally in doing so and in relation to the agreed terms and conditions in which you acted. Some of these responsibilities might include reference checks, aptitude or assessment testing, integrity testing, drug testing, criminal and sexual predator background checks, etc. Most staffing liability policies provide coverage for staffing companies providing direct hires.