Indemnification Agreements for the Staffing Industry

Recognizing potential pitfalls in service agreements

What is Indemnification?

The “making whole” of another party after a loss incident.

– This responsibility can be created either by statute or by entering into a contract with the party.

– The general purpose is to “transfer risk” – in this case from a client company to your temporary staffing firm.

Common Indemnity Language

Hold Harmless Agreement

Additional Insured (General Liability Policies)

Alternate Employer Endorsement

Waiver of Subrogation

Example of Indemnity Agreement

Agreements to Indemnity:“RISKS ASSOCIATED WITH CONTRACTORS’ BUSINESS”

Contractors agree to indemnify and defend customer from any and all losses, liability, expenses (including court costs and attorneys’ fees), and claims for damage of any nature whatsoever, which customer may incur, suffer, become liable for, or which may be asserted or claimed against Customer, on the basis that Contractors have materially breached any of their responsibilities as set forth in the Customer Agreement.

Contractors’ liability under this Agreement is expressly limited to those events which are insured under its various insurance programs and/or loss reimbursement and insured limits specified therein.

Example of Perils

Property Damage

– Vehicle damage

– Loss of inventory

Confidentiality Infringement

Identity Theft

Embezzlement

Workers Comp

Workplace Violence

Case Study

Your company places 5 employees in a lab to do some research.

– One of the employees mistakenly leaves a gas valve on and inundates the building with explosive gas.

– No one is seriously hurt, but the building has to be evacuated by your client and two other tenants that operate businesses.

– What are some of the liabilities here?

Common Pitfalls for Sales Staff

Your client demands that you sign or they will go elsewhere.

You hear the line “all of our other suppliers sign this with no objection.”

VMS arrangements distance you from the client and the ability to negotiate the provision.

Role Definition is Critical

Stick to your specialty

– You know how to recruit

– You know how to provide employees and support

– You know how to match employees to assignments

Let your client handle their specialty

– They know how to operate their facility and equipment

Placing Supervisors

This can create some liabilities and increases your perceived control of the workplace.

OSHA recordkeeping responsibilities can also be created.

Advice

Avoid being pressured into signing

Seek help from legal and insurance underwriting professionals

Sample Contracts are available at: http://www.americanstaffing.net/legalandgovernment/contracts.cfm

Summary

Big Accounts can also mean Big Liability

Watch for terms like:

– Waiver of Subrogation

– Additional Insured

– Alternate Employer Endorsement

Don’t be afraid to negotiate and seek the help of insurance and legal professionals.

Know the potential liabilities before agreeing to place supervisors or provide site-specific training.