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Staffing Agencies - The Good, The Bad, The Ugly

The Good

When markets and customer demand are erratic, the use third-party staffing agencies is often a good method to manage a variable-sized work force. When properly done, the use of such staffing agencies often avoids complicated administrative benefits and payroll issues. As long as the proper skill set can be obtained, it is often easier to find workers who are willing to sign on for what is anticipated to be a short-term engagement through a staffing company.

The Bad

When engaging a staffing agency, there is often a temptation to simply sign whatever agreement the staffing agency supplies as its usual form agreement, and this agreement is often inadequate. Not all staffing agencies are created equal, and some are better at coping with the complexities of work force management, benefit oversight, and payroll than others. Some have hiring practices that could expose their clients to employment liabilities that were unforeseen and unanticipated by their clients.

The Ugly

The EEOC is well aware of the increasing use of staffing agencies by U.S. companies. In a case involving Aerotek, Inc., a staffing agency in Illinois, the EEOC took its investigation of Aerotek’s recruitment, hiring and placement practices, and possible age discrimination to the next level. The EEOC first alleged it found hundreds of discriminatory requests for staff by clients of Aerotek. To follow-up on those findings, the EEOC sought and successfully obtained the names of 22,000 more Aerotek clients. The EEOC now intends to further its investigation related to these additional Aerotek clients.

With the EEOC furthering the overall U.S. Department of Labor’s emphasis on joint employers, investigating staffing agencies is one more way for the Commission to pursue companies for issues related to staffing companies’ hiring processes.

What To Do

First, conduct due diligence on the staffing agencies with which you may do business to determine their record concerning compliance with employment-related regulations and their history in terms of government investigations and employment litigation. Second, do not just accept the terms of the staffing agency’s form contract, rather make sure that the terms provide for (1) full compliance with employment regulations by the staffing agency; (2) the right to audit that compliance; and (3) indemnity and insurance provisions that fully protect you. Remember that most staffing agencies have little in the way of assets, so just an indemnity may not be enough. You should require that they have adequate insurance. To avoid your relationship with staffing agencies turning into a scary Spaghetti Western movie, care needs to be taken in selecting, engaging, and auditing them.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.