Article by Lori Brown. Originally Published by The Staffing Stream
The changes made last year to joint-employer standards via the National Labor Relations Board’s decision in Browning-Ferris Industries of California Inc. (BFI) case marked a dramatic definitional expansion of “employee” and shift in the long-time joint employer test. Indeed, the NLRB’s adoption of an “indirect control” versus “direct and immediate” test sent shock waves through the business community, leaving many scrambling to devise sustainable strategies moving forward.
However, those in the staffing business know one thing to be certain: Joint employment in the staffing space is not exactly new news. However, a significant consequence of the wide-spread panic over Browning-Ferris is the increasing insistence on broad indemnification language. And by “broad,” I mean the client company’s request to be held harmless and indemnified for virtually anything and everything that happens arising out of the employee assignment.
These requests are often unreasonable and accepting them in wholesale fashion just to get the business might not be where you want to calibrate your internal “indemnification tolerance.”
Staffing executives have options to safeguard themselves from this broad definition. As a general rule, assuming contractual liability for actions the staffing firm cannot control can be a “bet the company” decision. To be sure, indemnifying the client for the unlawful or wrongful acts could easily result in multi-million dollar exposure. What’s more is that few insurance policies will cover such contractually- assumed liability.
A “best” or “better” practice is to cover and indemnify those risks you can control, i.e. payments, taxes, damages arising out of the assigned employee’s bad acts, or of course, quality issues associated with the work performed by the assigned employee. Somehow, some way, the staffing company should do its level best to include preserve semblance of “fault based indemnity” in its client agreement. Broad indemnification clauses rob the staffing company of its ability to argue the merits of fault and responsibility. It is well-advised to get into the practice of carefully spelling out the staffing firm’s responsibilities in contrast to the client’s responsibilities. While BFI made it far more difficult for the client company to avoid joint employer liability, do not fall victim to their panic by putting your company, unnecessarily at risk.
Lori Brown is president and COO of ComplianceHR, a web-based platform that helps companies make critical employment decisions, such as who can be retained as an independent contractor and which employees need to be paid overtime.
