Companies entering into contract staffing agreements with staffing agencies supplying contract staff must bear in mind the legal provisions under a slew of federal and state laws that has to be complied with as an employer.

1. Contract staffing issues with staffing agencies
Companies entering into contract staffing agreements with staffing agencies supplying
contract staff must bear in mind the legal provisions under a slew of federal and state laws
that has to be complied with as an employer. Organizations must bear in mind that staffing
firms are not insurers and they should not be expected to cover the risks beyond those
inherent in the staffing business. The general risks include that of related to being an
employer such as payment of wages and benefits, payrolls and taxes etc and liability for
client loss or damage caused by the staffing firms failure to properly screen or otherwise
qualify the assigned employee for the job.
While entering into a contract with a staffing agency supplying the company with workers or
as an independent contractor, organizations must specify who has control over which
aspects of work that needs to be done. Organizations must clearly define the employment
relationship to limit control over the contract staff by spelling out the particulars in a
contract. In general, the more control an organization have over the employees and the
more aspects of the employment relationship that concerned organization has responsibility
for, the more likely that organization would be considered as an employer of that employee
even in case of temporary employees. This would in turn make the organization/employer
liable for implementing federal laws and state laws.
When negotiating a contract with a staffing agency, organizations must keep in mind by
following the below mentioned basic guidelines:1. Enter into an agreement as an organization and a staffing agency not as between
two personalities,
2. To remain careful in drafting clauses to protect themselves from the liability of
employees,
3. Specify job descriptions,

2. 4. When entering into a contract with an independent contractor, an organization must
observe that the agreement clears or fulfills the test created by the Internal
Revenue Service or IRS to investigate if a worker is an employee or an independent
contractor. This test is popularly known as multi-factor test.
5. Where the independent contractor has formed a limited liability company or LLC,
then the agreement must be structured as being entered by two business entities
rather than between an organization and an individual,
6. Organizations must not undertake any activities that make the contract staff appear
to be under employer/employee relationship. These include not paying benefits,
paying for Social Security and Medicare taxes under the Federal Insurance
Contributions Act (FICA) or paying federal and state unemployment taxes under
The Federal Unemployment Tax Act (FUTA), keeping personal files or preparing 1-9
forms.
7. Require the contractor or contract staffing agency to invoice the client organization
for all their staffing services.