Staffing Agency Agreement Overview
Staffing agency agreements are between the staffing agency and the client company, or even between staffing agencies where there are multiple staffing agencies involved, or two or more clients of the staffing agency where it is an employee leasing agreement with a co-employment arrangement. That agreement will set out the terms of employment for the temporary worker and the relationship and obligations between the staffing agency and its client. Staff may be hired as employees – under the terms set out in the staffing agency agreement, or as contractors. There can be "actual agency" or non-agency employees . The purpose of the staffing agency agreement is to ensure both that there are contractual obligations created between the parties and to set out the terms of employment. Although it may be easy to think (wrongly) that an oral agreement is fine, there may be too many important terms that should be incorporated into a written staffing agency agreement. It is too easy not to include all of the terms you require in an oral agreement and to then find out when issues arise with a staffing agency agreement that it does not cover what you thought it did. Accordingly, it is important to set out all of the relevant terms in a written agreement, including a non-solicitation clause if desired, and perhaps also a confidentiality clause.
Staffing Agency Agreement Must-Haves
At the outset, a staffing agency agreement should clearly set forth the scope of services to be performed. This may include identifying the positions for which the staffing agency will be supplying workers, as well as the number of workers to be supplied at any given time. From an employer’s perspective, it is best to make the scope of services as narrowly tailored as possible to avoid inadvertently increasing the staffing agency’s obligations beyond what is otherwise intended.
A well-drafted staffing agency agreement will also include the terms upon which the staffing agency will be compensated. While common compensation methods include a percentage of the temporary employee’s pay rate and a flat fee per hour of service, this is by no means an exhaustive list. Whatever the compensation structure, the agreement must desire how the staffing agency will invoice for its employers, how the client employer will make all required withholdings and payments, what happens in the event a temporary employee later becomes a third-party client, and what happens if the temporary employee is injured on the job.
The agreement should also contain the recruiting standards that will be utilized by the staffing agency when sourcing candidates for placement. Particularly in the construction context, it is important that the agreement spell out what types of documents the staffing agency and workers need to verify in order to ensure a compliant workforce. Do the temporary employees need to undergo background checks? What about drug testing?
An often overlooked but essential component of a staffing agency agreement is the confidentiality provisions. While many industries have now adopted the doctrine of "inevitable disclosure" recognized in Pepsico, Inc. v. Redmond, 54 F.3d 1262, 1270 (7th Cir. 1995), the temporary agency relationship requires a different take on the doctrine because of the obvious and heightened potential for disclosure of trade secrets to a competitive workforce.
Finally, a staffing agency agreement should address liability issues. Staffing agency agreements should specify that the staffing agency will be liable for the acts and omissions of its employees or agents in the performance of the services contracted. Conversely, client employers should ensure that staffing agencies are only liable where their negligence causes, fosters or contributes to harm.
Staffing Agency Agreement Legal Considerations
While the business terms are often the focus of an agreement between company A and staffing agency B, there are a number of important legal considerations that must be taken into account in drafting or entering into a staffing agency agreement. Many staffing agency agreements make no reference to legal controls over the employment of agency staff. Some, however, have incorporated a set of minimum standards for the employment of all agency staff to which both employer and staffing agency must adhere, regardless of whether there is any agreement at the point of engagement. Careful attention should be paid to industry codes of practice, specifically those related to the supply of hospitality workers and those operating in the health and social care sectors. As in many industries, they may be legally binding as well as purely voluntary.
The family-friendly policies introduced by the 2006 Work and Families Act (and subsequently reinforced by the Children and Families Act 2014) are highly relevant, particularly those on unpaid parental leave and unpaid time off for dependents. These provisions apply equally to temporary workers, not just to those engaged on permanent contracts. For example, a temporary worker has the right to take unpaid parental leave to look after a child who falls ill – that is to say, to focus on his or her child’s immediate care needs and/or make arrangements for a longer-term solution. It may be necessary to amend a staffing agency’s terms of business to reflect this. Company A will also need to take care to ensure that its staffing agency staff are treated equally to permanent employees in relation to pay, working time regulations, or provide an explanation as to why not.
The written statement of particulars of employment (including pay and hours of work) and the Contract (Rights of Temporary Agency Workers) Regulations 2010 (the "Agency Worker Regulations") require an agency to provide in writing, to a specific exclusion list, the following information:
A staffing agreement may in fact be a type of contract of service, creating an employer/employee relationship between company A and its staffing agency staff without the need for a formal hiring process. In that case, the "normal" principles of employment law will apply. Alternatively, the staffing agency may use agency contracts, which provide for agency workers to be engaged on a contract of services by the staffing agency. This leaves the staffing agency responsible for complying with the Agency Worker Regulations.
Staffing Agency Agreement Negotiation Tips
Negotiating a staffing agency agreement can be a complex process, but taking the time to carefully review the key components of the contract can keep an organization from being surprised by unexpected issues and consequences. An employer needs to keep in mind that the staffing agency also wants to profit from the relationship. Negotiating should be a win-win scenario. Mark Davidson with Business & Legal Resources offers some tips for employers who are negotiating staffing agency contracts. Communication is key to successful negotiation. When discussing a contract with the staffing agency, be sure to articulate the reasons behind any requested changes. When making a request for change or clarification, try making a proposal to accomplish your objective without being confrontational. Employers need to consider addressing disputes before they become an issue. Many companies will allow the ability to cancel the contract without cause after specifying a notice period. Others will require notification with cause. Consider grouping all of your contract dispute requirements together in the contract. Davidson recommends making sure your contract allows for amendments as necessary. He writes, "The original contract should not hamper your ability to amend policies or procedures to accommodate internal or external changes that affect the agency’s services."
Common Errors in Staffing Agency Agreements
a common mistake is failing to address applicable laws and business needs. Often employers overlook employment status issues or forget to designate controlling law provisions.
Another common mistake is not documenting the pricing structure or payment method. Employers should specify how hourly rates are calculated, what if any fees may be charged, and when payments will be made. Specificity is key to avoiding disputes later on.
Employers also frequently forget to state the rate of pay for temporary workers. Temporary workers’ pay can often differ greatly from that of the staffing agency’s employees. Therefore, it is crucial for employers to specify pay rates in their contracts.
Employers and staffing agencies should also avoid common pitfalls found in insurance and indemnification provisions. Adequate insurance is a must because it protects employees . Such basic provisions will cover the employer in the rare case that the staffing agency is unable to pay the claims of the temporary employees.
To avoid gaps in coverage, the staffing agency and employer should review their respective insurance policies to ensure adequate coverage exists for bodily or physical injury. It is a common pitfall for parties to fail to examine their policies properly, and as a result are vulnerable to understating costs and expenses.
Finally, inadequate notice provisions and remedies for breach of contract are common contractual mistakes. For example, requiring 10 days’ notice for termination, realistically impossibly long in the staffing industry, would be considered an inadequate notice provision. Contracts without adequate and enforceable remedies for breaches leave the dissatisfied party with few or no options and can result in the entire contract being rendered ineffective.
Best Practices for Staffing Agency Agreement Management
After the staffing agency agreement goes into effect, companies should conduct regular evaluations of the quality of service they receive from their staffing agencies. Certain key performance indicators such as timeliness, quality of performance, responsiveness to changes in business needs, and adherence to budgetary concerns should be at the top of the evaluation list. The results of these evaluations should dictate on-going communication with the staffing agency and a willingness to adapt the agreement and or relationship accordingly. Regular communication is one of the simplest and most effective ways to ensure that both parties understand the terms of the agreement and that client demand for staffing needs is met in a timely and cost-effective manner. When expectations are not met, the client must address its concerns with the staffing agency as soon as possible to avoid disruption in staffing services and the potential for breach of contract actions.
Staffing Agency Agreement Future Trends
As the contingent workforce continues to grow and evolve with emerging trends within the economy, so too does the accompanying need for appropriate and viable staffing agency agreements. With many employees now working remotely instead of in an office, employers are beginning to use staffing agencies to help mitigate the risks associated with remote or freelance employees. Employers are also hiring more freelancers, particularly in the technology space, for short-term or project-based work rather than hiring a full-time employee. This has caused an uptick in the use of staffing agencies that specialize in hiring freelancers.
Companies are also employing staffing agencies to help them with the gig economy impacts within their workforce. Both the gig economy and the traditional workforce are beginning to converge. As workers in the gig economy begin to enter retirement age, more of them are looking for work with traditional employers; in fact, according to a recent AARP report, nearly one-in-three workers age 55 and older say they would like to try traditional work on a part-time or temporary basis. Adding to this change in the demographics of the gig economy is the younger millennial population that is looking for flexibility in their hours and work location. Employees are seeking out employers who offer remote work and flexible scheduling , which may very well be one of the reasons why an employer might employ a staffing agency. With the rise in older workers and the continued push for younger workers who favor flexible hours and remote work, it should come as no surprise that the gig economy will continue to expand, as will the use of staffing agency agreements.
Technologically, human resource (HR) technology is continuing to evolve which has opened up many new doors for employers in the staffing agency space. Using HR technology, particularly in the gig economy, employers are able to build the tools to serve many different needs of their organization, but the most common uses are to automate administrative tasks, to leverage the data available in those systems to make better decisions, and to centralize access to this information. It can do this through collaboration between the administrative HR function and the leaner IT function.
One of the newer trends in HR is the robotics process automation (RPA) shift. It can be looked at as an advanced automation tool to replace the simplest mind-numbing task that workers may find quotidian. With RPA in the staffing agency space, employers are able to view large amounts of information quickly and easily. Many employers are using these systems to operate a more efficient supply chain, which further enables the gig economy by using these efficiency gains with their staffing agencies.