Using Temporary Labor Firms

We often have to resort to temporary employees to get us through labor overloads. It can seem so easy to call a temporary labor firm for a placement, but what happens next can become a nightmare of incompetency, malingering and bad attitude. What does one do?

Review the written contract you have with the temporary labor firm.  Most companies that hire temporary labor have no idea how to negotiate a written agreement to protect them from liability. Furthermore, they have no idea that State and Federal regulations may cause these individuals to be your “permanent employee” and be entitled to the same benefit plans offered to your other employees in the same class.

Therefore, from an Insurance Risk Mitigation point of view, have a consultation with your legal counsel to set up a Standard Sub-Contractor Agreement. Utilize the agreement with the temporary labor firm to mitigate potential problems. Your legal counsel agreement should include Waivers of Subrogation in favor of you from the temporary labor firm and its’ Insurers and;

a.)  Defense and Indemnity Clause.

b.)  Additional Insured status in your favor.

c.)   The temporary labor firm’s policies must be declared by their Insurance Carrier has to be Primary and Non-Contributory.

d.)  A misclassification clause in favor of your company in the event the temporary labor firm uses Sub-Contractors and other individuals who can cause havoc upon you via the cost Worker’s Compensation and other insurance coverages.

e.)  A declaration of which party is responsible for supplying personal protective equipment.

f.)  How the issues of medical monitoring and contract/temporary labor medical files would be addressed.

g.)  Who is responsible for necessary drug testing?

h.)  If the Contractor/Temporary Worker drives any vehicle on behalf of the organization, there should be a provision relating to the driving record and vehicle use. In other words, you want to contractually have the Contract Labor Provider ensure that its’ employees have responsible driving records.

i.)  Seek advice from your legal counsel as to whether you or the Temporary Labor Firm is deemed to be the employer. Information on that subject can be gleaned from your attorney and letters of interpretations on

To sum up, the above items are just a few of the concerns you should have and mitigate through your legal counsel’s Contractual Agreement Form with the Temporary Labor Firm. The form may include the items above in your favor on their Auto Liability, Excess Liability, Inland Marine Policies, Property, Worker’s Compensation, etc.  

If the Labor Contractor is permitted to utilize Sub-Contractors for your organization, that needs to be addressed and those Sub-Contractors must comply with the same guidelines that you impose upon the Primary Labor Contractor.

As an Insurance Broker, we do not practice law but herein are discussing issues in the form of Insurance Risk Management. We hope these may be helpful to you in your continued operations and in conjunction with your legal counsel.

That’s how we do it at Bone Robertson & McBride Inc.

With good health to you,

Don Bone

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