by Todd Lebowitz

In the Staffing World, What Is MSP and VMS, and How Can they Help?

In 1979, my sister and I watched a kids’ movie called C.H.O.M.P.S., a “comic science fiction family film” (according to Wikipedia), which featured a Benji-lookalike border terrier named CHOMPS. Except the dog wasn’t really a terrier, and wasn’t even really a dog.

C.H.O.M.P.S. was an acronym for Canine Home Protection System, and the terrier was a robot [insert plot of every children’s movie here] invented by a brilliant kid, who then outsmarts bumbling adults who try to kidnap the dog but prove inept and not nearly as clever as our young hero.

The movie scores an abysmal 29% on Rotten Tomatoes and I don’t remember much about it, except that my sister and I still talk about it.

Although we’re all grown up now, we’re still overrun with acronyms. Two acronyms often appear in the context of retaining contingent labor, and if your company makes frequent use of temp staffing or other contingent workers, these may be good to know.

First, there’s MSP. An MSP is a Managed Service Provider. MSPs can manage many different things, but in the context of employment law and the contingent workforce, they can manage temporary staffing needs for a business. Generally, they will contract directly with multiple staffing agencies and taking the laboring oar in overseeing those relationships. MSPs can also identify and retain independent contractors. They will monitor spend and can produce all sorts of nifty reports. If your business uses an MSP, then when you need temp labor or other contingent workers, you tell the MSP what you’re looking for, and the MSP does the rest.

Next, there’s VMS. VMS stands for Vendor Management System. It is an online portal through which contingent workforce staffing needs can be arranged and managed. MSPs generally use VMSs, but a company can also use a VMS without an MSP.

When beginning a relationship with an MSP, sophisticated businesses will take a hand-on approach in negotiating the terms of service with the MSP, as well as negotiating (or providing) the form agreements that the MSP will enter into with staffing agencies and independent contractors. Your company is not a direct party to those agreements but, rather, is a third party beneficiary.

Those staffing agency agreements should generally include the same protections against joint employer liability that you’d include if you contracted with the staffing agency directly. Click here for Ten Things That Should Be in your Staffing Agency Agreements But Probably Aren’t.

You’ll also probably want all contingent workers retained through the MSP to sign arbitration agreements with classs action waivers, as well as individual agreements addressing the protection of your confidential information and ownership of any IP created during the assignment.

Bonus tip: Be careful not to say that all deliverables are “works made for hire.” Under some laws, including in California, declaring deliverables to be “works made for hire” automatically converts the relationship into employment. Bummer. Use assignment instead. You can read more about that topic here.

For companies that make frequent use of contingent labor, MSPs and VMSs can save a lot of time and aggravation. When engaging MSPs, it’s worth the up-front investment to renegotiate and modify the template agreements that the MSP will use on your company’s behalf.

If you’re later alleged to be a direct or joint employer of the contingent workers, well-drafted agreements will provide vital home protection — even better than you could get from C.H.O.M.P.S.

Bonus Fun Fact: Red Buttons was in this movie. It’s fun to say Red Buttons. Try it. Really. Say it aloud. But say it quietly in case someone is listening. You’ll like it and will probably keep saying it quietly to yourself all day, with a slight smile, because no one else is in on your little secret.

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05.22.23

by Todd Lebowitz

Today’s Riddle: Should I Cap a Temp’s Service at 6 months? 12 months?

I like riddles. How could you not? Here are two. Answers are at the bottom of the post:

1. What has to be broken before you can use it?
2. I’m tall when I’m young, and I’m short when I’m old. What am I?

Getting back to business, here’s a question I have been asked many times. It seems a bit like a riddle, with no clear answer and requiring careful thought. But I’m going to declare No Riddle. That’s because I think there’s a straightforward answer, and it might not be what you were thinking.

Here’s the question (in case you are among the 0% of today’s readers who skipped this post’s headline):

Should we cap a temp’s assignment at 6 months? 12 months?

To answer today’s question, I’m going to have to ask you two questions. (Sorry, that’s how we play this game.)

Question 1: As temps, my assumption is that they are intermingled with the company’s employee workforce, doing the same thing as employees, working side by side with employees, and reporting to the company’s supervisors. Is that accurate?

Question 2: Are they employed by a staffing agency and treated by that staffing agency as its W2 employees?

If you answered yes to both, then the amount of time temps are assigned to the company will almost certainly have no bearing on their status. They will be employees of the agency and probably also joint employees of the company. There are various joint employment tests, and we can go through them (fun!) but it would be largely an academic exercise.

From a practical business standpoint, we should assume that any time the answer to my two questions are yes, these two conclusions will follow:

First, The entity receiving the services is likely to be a joint employer under the FLSA, NLRA, anti-discrimination law, and state laws, regardless of whether the temp is assigned for five months or five years. When temps are intermingled with employees in a staff aug situation, there is very likely joint employment, regardless of which test is applied. Arguments could be made under some tests that there is no joint employment, but for purposes of trying to answer the question above in a practical business-oriented way, I would assume there’s going to be joint employment.

Second, joint employment in this scenario is a risk inherent in working with temp staffing agencies. But that’s not necessarily a problem. Joint employment is not unlawful and, with one exception, joint employment only becomes a problem if the staffing agency/primary employer fails to do something it is legally required to do, such as pay overtime or minimum wage. In that event, both companies would be jointly liable if there is a joint employment relationship.

The one exception is the NLRA. If the company is a joint employer, then the various protections of the NLRA start to cross over the temp employee and direct employee populations, such that if the agency workers were to organize, the company might have to bargain with them; or there could be a mixed unit; or if agency workers picketed the company, it would not be illegal secondary picketing.

So, if the answer to both of my questions is yes, then I would not be concerned with the duration of assignment. The company is very likely a joint employer already.

Some companies have a practice of not engaging temps for more than six months or year before deciding either they don’t fit or they should be hired directly. But there is no rule of thumb, and this sort of practice is often implemented based on the misunderstanding that capping a temp’s service time would reduce the risk of joint employment in a staff aug situation.

In reality, it’s unlikely to make any difference. In a staff aug situation, once you’re in the swimming pool of joint employment, you’re wet. It doesn’t matter if you’re on the top step or in the deep end. And once you’re a joint employer, you might as well exercise as much control as you want. You can embrace it at that point.

The best way to protect the company against the risks and consequences of joint employment is in the contract with the staffing agency. Here are Ten Things That Should Be in Your Staffing Agency Agreement But Probably Aren’t.

On the other hand, if you would answer no to either of my two questions, then limiting the duration of the assignment could be helpful in reducing the risk of independent contractor misclassification, especially if the workers are 1099 contractors.

If the answer to either of the questions is no, then we’d have to dive deeper into the facts to be able to say whether limiting the duration of the assignment would make any difference at all.

So, did you get the answer to the two riddles? Scroll down to see the answers.

1. An egg
2. A candle

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03.13.23

by Todd Lebowitz

Ten Things That Should Be In Your Staffing Agency Agreements But Probably Aren’t

As promised during the Master Class session last week, here are Ten Things That Should Be in Your Staffing Agency Agreements But Probably Aren’t.

There are still four Master Class sessions to go. The next one will be Tuesday at 2pm ET, covering the NLRB and the Uncertain State of Labor Law. There is no charge to participate. CLE and HR credits are available. You can register here.

ten-things-that-should-be-in-your-staffing-agency-agreements-3.2023 Download

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02.27.23

by Todd Lebowitz

Airbag Jeans? Why You Should Address Disability Accommodations in Your Staffing Agency Agreements

A Swedish company has constructed airbag jeans for motorcyclists, designed to inflate for protection in the event of a crash. The denim-like fabric is water-repellent and abrasion-resistant. You can learn more here.

When riding a motorcycle, it’s smart to anticipate the possibility of injury. The same is true when engaging temps from a staffing agency.

Here’s what I mean. At some point, you’ll have a temp who requires reasonable accommodations for disabilities. The expense to accommodate might be small. But it might not be. Who pays for it, you or the staffing agency?

Last week, the EEOC announced a $119,000 settlement with a staffing company that rejected an applicant because of disabilities. The applicant, who is deaf, had been placed at a client. Before the applicant was to appear for work, a manager at the staffing agency cancelled the assignment, informing the applicant that the client did not have sign language interpreters available. The client, incidentally, was ready and willing to employ the applicant.

The EEOC’s news release doesn’t say whether the applicant actually needed an ASL interpreter or whether the client was planning to pay for one. But providing an ASL interpreter can be a reasonable accommodation. In a staffing agency relationship, who pays for reasonable accommodations needed by temps?

The best advice here is to plan ahead and put on those airbag jeans. Your contract with the staffing agency can address who pays for reasonable accommodations. All it takes is a short clause in the agreement. If the agency is paying, make sure there’s no markup on those expenses. Few staffing agency agreements address who pays for reasonable accommodations. But they should.

If you add a clause, differentiate between Title I and Title III obligations. Title I of the Americans with Disabilities Act (ADA) prohibits disability discrimination in employment. That’s the one you want to focus on. Title III of the ADA addresses public accessibility. You’ll pay for the wheelchair ramps and accessible doorways at your facility (Title III), but you may be able to shift the expenses of Title I compliance to the agency.

It’s also a good idea to make sure managers know to involve HR if disability or accommodation issues arise. You don’t want a manager saying “we can’t accommodate that” and ending a temp’s assignment.

Airbag jeans will be sold for $499 a pair. Reasonable accommodations may cost more. Either way, it’s smart to plan ahead and build protections in to your staffing agency agreement.

On March 7, I’ll be speaking at the 10th Annual Labor Relations and Employment Law Master Class Series, addressing recent developments in the contingent workforce area. I’ll be addressing joint employment and staffing agency relationships, and I plan to offer a list of ten items that should be in your staffing agency agreements but probably aren’t

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05.16.22

by Todd Lebowitz

Here’s a Bizarre Lawsuit, Plus Tips for Avoiding Misappropriation Trade Secrets

A couple in Uttarakhan, India, has sued their 35-year old son for $650,000 on the grounds that he failed to provide them a grandchild. The monetary claim reflects the amount they supposedly invested in him over the years, apparently viewing him as some sort of horse stud when they paid for his education and wedding.

Their petition explains, “We killed our dreams to raise him” and “despite all our efforts, my son and his wife have caused mental torture by not giving us a grandchild.”

In the business world it seems more reasonable to demand a return on your investment in someone. But that has limits too.

Last week in Virginia, a jury awarded $2 billion to a software company for misappropriation of trade secrets, finding that a rival had paid a disloyal employee of the victim company to steal trade secrets and pass them along. Investing in someone to steal trade secrets is not kosher. Unlike the “no grandbabies” case, that seems like solid ground for a lawsuit.

While the theft of trade secrets appeared intentional here, it’s possible to acquire a rival’s confidential information unintentionally too. The risk may be especially high when you’re retaining an independent contractor who has expertise in an industry and who has likely worked for various competitors in the same space.

When retaining independent contractors, businesses should take steps to ensure they are not going to be acquiring confidential or trade secret information from the contractor.

Here’s an easy tip to help protect your company from inadvertently acquiring confidential or trade secret information from a competitor: Include in your independent contractor agreement a clause that prohibits the contractor from using any confidential or trade secret information from any past client or employer. Prohibit the contractor from incorporating any such information into any work that the contractor creates for your business.

The same type of clause can be inserted into your employment agreements.

While intentionally stealing a rival’s trade secrets is obviously a no-no, an accidental taking or an accidental incorporation of such information into your software or other systems can also create liability. Taking a clear stand that you prohibit that sort of thing will help avoid a problem later. And, if something bad does occur (assuming you didn’t solicit the improper disclosure), you’ll be in a much better place to defend against a misappropriation claim.

As for the Uttarakhan man and his wife, I don’t know what the best defense is to that sort of claim. But I do know the next family get-together is likely to be a bit uncomfortable.

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05.02.22

by Todd Lebowitz

Don’t Get in Over Your Head: Set Up a Gatekeeper

Last month in Washington State, at a trailhead on the Olympic Peninsula, a woman dropped her cell phone in a pit latrine. Yes, that’s a flushless outhouse. The woman tried to retrieve the phone using a dog leash, then tried to use the dog leash to support herself as she reached down into the stinky muck. Dog leashes, however, are not meant for such endeavors, and — yes, this really happened — the leash failed. The woman fell head first into the latrine.

Making the best of a shitty situation, the woman found her phone, which she then used to call for help. The fire department rescued her, and the dispatch operator will be telling the story of that intake call forever.

The lesson here is: Know when to get help.

That lesson also applies to your company’s independent contractor relationships. Today’s tip is to set up a Gatekeeper System.

If your company is like most businesses, it’s simpler to contract with outside labor than to hire new employees. Operations managers or a procurement team are the people most likely to approve contracts for services. Because there are no employees being engaged in these contracts, the contracts don’t go to Human Resources, and they probably don’t get reviewed by Legal.

But every contract for services carries a risk that the individuals providing the services may be misclassified. Even if treated as independent contractors, those workers might be your employees under federal or state law. Or, if they’re being treated as employees of the business you contract with, they might be your joint employees. Both scenarios – independent contractor misclassification and joint employment – present legal risks.

But your operations managers or procurement team have not been trained to recognize those risks. They likely have never considered that the people providing those services might be deemed your company’s employees.

To protect against these risks, set up a Gatekeeper System. That would be a policy that says, anytime we retain non-employees to provide a service, there must be a written contract and it must be reviewed by a specific individual, the gatekeeper.

The gatekeeper will be trained to issue-spot and to recognize circumstances that may present an elevated risk of misclassification or joint employment. The gatekeeper can raise concerns with the legal department. Or maybe the gatekeeper is part of the legal team.

Setting up a Gatekeeper System is easy. It’s just a policy requiring a specific layer of review whenever non-employees are retained to perform a service. Make sure everyone authorized to enter into contracts for the business knows of the policy. Then train your gatekeeper to issue spot and to escalate for further analysis when necessary.

The point is that someone needs to know to look out for these risks. You can only protect yourself against the risks you have identified. Once you get sued or hit with an audit, it’s too late.

Just like it was too late for our friend the Washington hiker, who should have asked for help a bit earlier — before getting in over her head.

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02.28.22

by Todd Lebowitz

Upside Down? U.S. Companies Can Learn from Australian High Court Ruling on Independent Contractors

There’s no reason our maps are oriented the way they are, with Australia at the bottom and Canada near the top. There’s no right side up in space, and we could just as easily think of the world with Australia on top, in the middle.

Same with our way of deciding Who Is My Employee? The process for determining whether someone is an employee or an independent contractor doesn’t have to be the way Americans conduct that analysis.

Two High Court decisions this month in Australia highlight a key difference between the American approach and what is now the new Australian approach.

In the U.S., courts look past the written contract and analyze a worker’s status based on the actual facts of the relationship.

The Australian High Court says the U.S. approach is upside down.

In two highly publicized decisions, the Australian court ruled that the contract establishes the rules of the relationship and therefore also determines the worker’s status. In one case, the agreement said the work would be controlled by the hiring party. By contractually reserving the right to control the work, the hiring party inadvertently made the worker an employee. The court still looked past the fact that the parties called the worker an independent contractor, but the court said the contractual requirements of the relationship — the terms and conditions — controlled the outcome.

The other High Court case involved two truck drivers. Their contracts exhaustively set forth terms preserving their flexibility to work for others and to control how their work was performed. Their contracts also called for the drivers to use their own equipment, which involved a significant investment by the drivers. The court overruled a lower court decision that deemed the workers to be employees. The lower court focused on actual control exerted by the hiring party. But the High Court said the contract controls and, in this case, the contract established requirements consistent with independent contractor status. It is up to the parties to follow the contract, but the contract establishes the independent contractor relationship.

There are lessons for American companies here too.

While under U.S. law, the actual facts of the relationship control whether the worker is an employee, the independent contractor agreement is an opportunity to memorialize the helpful facts. That’s why off-the-shelf templates in the U.S. are of no value. (Hot tip: Google & Bing is not a law firm.) See related posts here and here, including how to discomfit a bear.

An independent contractor agreement in the U.S. should be drafted with the particular facts of the relationship in mind. Does the worker get to decide when and where the work is done? If so, put that in the contract. The worker controls when and where the work is performed, and the hiring party has no right to control when and where.

If the worker’s status is challenged, you want the contract to be a helpful piece of evidence. You want to be able to say to a court: Not only does the worker get to decide when and where the work is done (or insert other factor), but the contract forbids us from controlling that.

In the U.S., contract terms like that will be persuasive evidence, but only if the actual facts align. In Australia, the contract sets the rules, and the parties are in breach if they fail to follow the rules established in the contract.

But no matter where you sit, and no matter which way your map is aligned, companies should view independent contractor agreements as an opportunity to build the case that an independent contractor is properly classified.

By planning ahead and drafting carefully, you can maximize your chances of coming out on top.

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02.07.22

by Todd Lebowitz

Iguanas with Jackets: Here’s One Exhibit to Include with Every Staffing Agency Agreement

*I met this little guy in Costa Rica, 2017*

It happens every year.

When the temperature in Florida drops into the 30s, the iguanas freeze. Unable to regulate their body temperature, they drop out of trees, landing on sidewalks and in yards like solid rubber toy animals.

The freeze doesn’t kill them though. It just stuns them for a while, then they eventually warm up, reanimate, and go about their daily iguana business.

Getting stunned like this can’t be avoided for the iguanas. Amazon is not yet selling iguana jackets, and online delivery to lizards is notoriously complicated. (Note to self: Business opportunity?)

But unlike iguanas, businesses can reduce their chances at getting stunned — at least when it comes to avoiding lawsuits from staffing agency workers.

When staffing agency workers file wage and hour lawsuits, they often sue both the staffing agency and the business where they worked. The workers allege that both are joint employers, often bringing class claims or a collective action.

Businesses that carefully draft their staffing agency agreements will have some natural defenses against these claims. I’ve written about that here. I call this strategy The Monster with Three Eyes.

But there’s a fourth strategy too. Force individual staffing agency workers to arbitrate these claims instead of pursuing them in court, and include class action waivers with the agreement to arbitrate.

There are two ways to introduce arbitration agreements with class waivers in your staffing agency agreements.

First, you can mandate that staffing agencies sign arbitration agreements with their own employees. Some courts have found that arbitration agreements between a staffing agency and its employee protect the third party business too, even if the third party hasn’t signed the agreement.

But that approach carries risk. The agency’s arbitration agreement might be poorly written, or it might include terms that make it unenforceable. Your protection is only as good as whatever form agreement the agency presents to their workers.

There’s a second approach I like better. It goes like this:

Draft your own individual arbitration agreement (with class waiver) for staffing agency workers to sign, requiring them to arbitrate any claims against you. Make it mutual, of course.
Append it to the staffing agency agreement as an exhibit.
Include a clause in the staffing agency agreement requiring the agency not to assign anyone to your business unless they’ve first signed this agreement.

The agreement will be short. No more than two pages. It can also include an agreement by the agency worker to protect your confidential information and assign inventions.

If the document is properly characterized as an offer by your business, accepted by the worker, you have offer plus acceptance equals contract — even if your business doesn’t sign it. There is specific language you can include that can make that work.

So if you use staffing agency workers, don’t assume you won’t get sued as a joint employer. You particularly want to avoid class and collective actions, and this type of arbitration agreement will do the trick.

Plan for bad weather in advance. Include this layer of protection with your staffing agency agreements. Consider it your own little iguana jacket.

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03.16.20

by Todd Lebowitz

Nothing on TV? Read Your Contract to See If There’s a COVID-19 Exception

covid-19 force majeure

Now that everything fun is banned and workplaces are sending people home, I’m planning to spend next week getting hernia repair surgery on Wednesday. Then I’ll take it easy watching baseball NCAA basketball the NBA tennis Netflix the second part of the week.

Or so I thought. Yesterday I learned that all non-essential surgeries are likely going to be cancelled. So it may be back to work. Or home to work. Or some variation of work. I think the hernia and I will continue our relationship for a while longer.

Where does this leave you with independent contractors and staffing agency contracts?

COVID-19 is creating conditions we never anticipated, and the work to be performed by contractors or staffing agency workers may be unnecessary — or impossible.

Are you still on the hook to pay them? The answer lies within your contract. There are a few ways performance may be excused.

Force majeure or impossibility clauses. Force majeure is French legalese that means, literally, “Bad stuff happens if people eat bats and pangolins.” I’m not real good at French, so I could be off slightly. But it’s close. These are the boilerplate provisions most people never read. It’s time to read them. We now have states of emergency declared, pandemic status, CDC Level 2 and 3 travel restrictions, and mandatory quarantines in various parts of the world. Any of these events may be sufficient to trigger the force majeure or impossibility clause in your contract, if there is such a clause. Most of these clauses will not be so specific as to address pandemics, but terms like “Acts of God” or similar language might suffice. These clauses generally aren’t expected to list every contingency that would trigger excusing performance. A global pandemic seems likely to fit — if the conditions make performance impossible. A general business downturn that results from the virus might not be enough.
Termination without cause. A force majeure clause is probably unnecessary if performance can be cancelled without cause, either at will or after a short notice period. This may be the time to issue notice.
Modification or renegotiation. Your contractor or staffing agency may be as unprepared or as unwilling to perform as you are. It’s time to have a discussion — preferably by phone or while maintaining social distancing. A side letter in which both sides agree to modify the contract may be in order.
No obligation to perform. If your contract is a master services agreement, performance might not be required. Check your work orders, and maybe all you need to do is modify or terminate those.

In the meantime, consider opening that bottle of wine you’ve been saving and starting a good book. We all need to make the best of a bad situation, and Cabernet can help.

Need training on avoiding independent contractor misclassification claims? Hey, I do that!

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03.09.20

by Todd Lebowitz

Who Pays for Reasonable Accommodations to Staffing Agency Workers? Ask Shorty.

Limb lengthening reasoable accommodation

Suppose you’ve got a staffing agency worker (we’ll call him Shorty) who’s a bit vertically challenged and is self-conscious about it. He tells you he’s gonna need some time off because he found this:

A limb-lengthening clinic in Las Vegas claims it can make you a few inches taller through minimally invasivce surgery. According to this article on OddityCentral.com, here’s how it works:

“We cut the leg bones – either femur (upper leg bone) or tibia (lower leg bone) – and insert a device that slowly stretches them out which makes you taller permanently.”

“I insert a device that responds to an external remote control that the patient will control at home. Once the device is set, I place screws at the top and bottom of the device to lock into position. This is done on each leg.”

The doc says you then just press a button at home and you’ll stretch by 1 mm a day. Just like nature intended.

So, back to Shorty. Suppose he has this surgery one weekend and comes back to work a bit achy from all the stretching. He wants some extra breaks to get him off his feet. Or he wants you to provide him a stool so he can rest more often from his station on the assembly line. Do you have a reasonable accommodation obligation?

If you’re in HR, you know that weird stuff happens, so maybe you hadn’t considered limb-lengthening, but let’s use this as an excuse to think about relationships with staffing agency workers and what your obligations might be for medical issues.

This is unlikely to be a disability situation, unless Shorty’s stature is due to a medical condition. But you’ll undoubtedly have staffing agency workers who do have disabilities and who do need reasonable accommodations.

That brings us to today’s Tip of the Day:

Consider adding to your staffing agency contracts a clause requiring the agency to pay the expenses for any reasonable accommodations provided to qualified staffing agency employees to allow them to perform their job functions.

Accomodations can sometimes be expensive, and it’s not unforeseeable that staffing agency workers will need accommodations at some point. Plan ahead, and build this contingency into the contract.

A clause like that may lengthen your contract a bit, but this lengthening can be done in a sentence or two — with no surgical intervention, no cuts in your femur or tibia, and no insertion of a stretch button in your leg. That’s the kind of lengthening I’d be much more inclined to try. I’ll leave my limbs just the way they are.

Need training on avoiding independent contractor misclassification claims? Hey, I do that!

Who Is My Employee?

Exploring Independent Contractor Misclassification & Joint Employment Issues

Tag Archives: Agreements

In the Staffing World, What Is MSP and VMS, and How Can they Help?

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Today’s Riddle: Should I Cap a Temp’s Service at 6 months? 12 months?

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Ten Things That Should Be In Your Staffing Agency Agreements But Probably Aren’t

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Airbag Jeans? Why You Should Address Disability Accommodations in Your Staffing Agency Agreements

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Here’s a Bizarre Lawsuit, Plus Tips for Avoiding Misappropriation Trade Secrets

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Don’t Get in Over Your Head: Set Up a Gatekeeper

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Upside Down? U.S. Companies Can Learn from Australian High Court Ruling on Independent Contractors

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Iguanas with Jackets: Here’s One Exhibit to Include with Every Staffing Agency Agreement

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Nothing on TV? Read Your Contract to See If There’s a COVID-19 Exception

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Who Pays for Reasonable Accommodations to Staffing Agency Workers? Ask Shorty.

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