Last year, the US National Labor Relations Board held that Browning-Ferris Industries was a joint employer of a staffing firm’s employees under the board’s new expanded definition of joint employment. Earlier this year, the board held that, as a joint employer, Browning Ferris had engaged in unfair labor practices when it refused to recognize and bargain with a union with respect to the terms and conditions of employment of those employees. Days later, the US Department of Labor issued interpretive guidance suggesting more businesses should be classified as “joint employers” of workers employed by another company.
Despite these developments, joint employment is nothing new for staffing. Under prior court decisions and wellestablished legal precedent, staffing firms and clients have long been held to be joint employers. In fact, potential client liability for temporary and contract employees is no greater — and less, in some cases — than liability for the client’s internal employees, and can be mitigated by screening staffing providers for employment law compliance.
Nevertheless, in the aftermath of Browning-Ferris, some staffing clients began to question their potential liability when utilizing temporary and contract workers. Such clients want the staffing firm to bear liability for their products and services, for damages resulting from temporary employees’ work, for benefi ts they may be required to provide — and even for the client’s own wrongful conduct. Clients often will cite joint employment concerns as justifying broad indemnification language and argue that “every other staffing firm” signs their agreement. Such requests are unreasonable, and it is simply not true that every staffing firm accedes to them.
Staffing firms should not be expected to cover risks beyond those inherent in the staffing business. Those risks include discharging employer responsibilities such as payment of wages and benefits, and payroll taxes; and liability for client loss or damage caused by the staffing firm’s failure to properly screen or otherwise qualify the assigned employee for the job. Staffing firms do not guarantee client business outcomes. They provide employees qualified to work in the work settings and with the tools of the business that the clients control. Therefore, staffing firms should not be responsible for results that depend on so many elements outside of their control.
The risks associated with signing broad indemnity agreements are substantial and can have dire financial and other repercussions. For example, a broad indemnity can result in a staffing firm’s liability for an assigned employee’s actions even when the firm did not supervise the employee or have a presence at the worksite — and may even result in the firm having to indemnify the client for the client’s own wrongful actions, such as workplace harassment or discrimination. Such liability makes no sense.
A federal court case several years ago starkly illustrates the danger. The case involved an employee on a construction assignment who caused an explosion while moving propane tanks. In a suit brought by the client, the staffing firm argued it was not liable because the employee was under the customer’s control at the time of the accident. The district court agreed, but the appeals court reversed the decision because the staffing firm had agreed to indemnify the client against all liabilities arising out of work performed by the employee.
The American Staffing Association has developed suggested contract language for its member companies that spells out the staffing firm’s and the client’s responsibilities. It is based on the simple principle that each party is responsible for the risks associated with its own business, and that each party has a duty to indemnify the other only for those risks. In addition to reviewing ASA materials, of course, staffing firms should carefully review their business insurance policies to ensure that they are covered for any contractually assumed liability.
