Understanding Employment Practices Liability Issues

Understanding Employment Practices Liability Issues

The temporary staffing services industry is undergoing rapid growth amid many employers deciding to go this alternative route, or simply offsetting the loss of full-time workers as they take vacations or sick leave. The use of temporary employees, however, is not without some legal risk. Staffing companies, along with their clients, have a unique relationship generally known as “co-employment”, which can create some interesting permutations when applied to the types of workplace exposures that exist.

The very real concern of employment practices liability issues must be addressed. Some carriers even offer special employment practices liability insurance (EPLI) policies to respond to the exposures faced by temporary staffing services agencies and their client companies.

EPLI cases are somewhat prevalent in the staffing industry

While other types of employers face similar concerns, employment discrimination lawsuits are not uncommon in the temporary staffing services industry. This is due in part to significant turnover and the vast size of their workforces, both of which result in considerably heightened exposure to litigation.

By allowing the temp staff company to handle most or all of employer-type actions such as hiring, discipline, and termination, client companies can minimize exposure to claims and liability based on co-employment status. However, they cannot fully avoid co-employment status under many of the employment discrimination laws, as it comes part and parcel with the arrangement between them and the staffing agency.

Co-employment liability generally exists for employees of temporary staffing companies placed on assignment at a client company because the temporary staffing company and the client company share “employer” responsibilities.

While the temporary staffing company interviews candidates, checks references, and handles all other employment-related functions up to the time of the assignment of a temp worker, the client company generally supervises and controls the day-to-day activities and work environment of the temporary worker while on assignment. This division of duties serves as way to determine who is responsible for the temp employee at any given time.

Some client companies demand indemnification agreements from temporary staffing companies relative to employment practices liability-related exposures arising in the workplace. At the same time, EPLI policies most often contain exclusions for breach of contractual obligations. It’s important to speak to your insurer to fully understand your duties and responsibilities as it is laid out in the policy language.