The Legal Risks of Hiring Temps And Outsourcing Work: What You Don’t Know Can Really Hurt You

Ah, welcome to work in the 21st century. Where the notion of hiring a full-time, “regular” employee seems less and less common. Instead, companies hire temporary workers, contract employees, or offshore their work to another country.

And don’t think YOU are safe; today there is even a story in cnn.com about how investment banking is increasingly being offshored; workers in India, for example, will handle research and analysis for investment banks as well as execute foreign exchange trades and handle highly complicated credit derivatives contracts.

But, the main story here is about a key legal issue in all this outsourcing and temping. Specifically, according to a leading story in law.com

companies hiring temp workers or outsourcing their work tend to be more sloppy or careless about background checks, and end up hiring more “rotten apples” than if they were hiring those old-fashioned “full-time” employees.

In addition to hiring more rotten apples, a big issue is who has liability when problems arise — the temp agency that supplied the worker or the company that employs the worker. For example, what happens if an Indiana-based magazine subscription processor has a door-to-door magazine salesman who murders a potential customer? Well, a lawsuit claims that The lawsuit names both ACS, the magazine clearinghouse, and Phoenix Imagery, the agency that hired the employee, as defendants. ACS denies that it should be liable, arguing that it has nothing to do with hiring or monitoring of employees.

Another type of lawsuit involving temps has been filed under the federal Racketeer Influenced and Corrupt Organizations Act, which has charged employers with conspiring with temp agencies and subcontractors to recruit and hire illegal immigrants to drive down wages.

The article, which can be found here, includes some excellent advise for companies to avoid liability for “bad apples,” including:

Require agencies that supply such workers to certify that they have conducted background checks for all workers and complied with the relevant laws;

• Insist that the supplying agencies certify that there is nothing revealed by the workers’ background checks that would indicate they shouldn’t be placed in the job;

• Include language in any agreement with the agency that it will defend and indemnify the company for any liability.