Co-Employment and Staffing Agency Insurance Issues

The importance of maintaining proper staffing agency insurance for companies enlisting the services of temporary workers is crucial to their success. These businesses have a lot of exposures and are often at risk for claims stemming from everything from property damage to sexual discrimination.

Staffing agencies and the companies that employ them need a solid understanding of both co-employment and how to work with a staffing firm to best handle any issues that may arise from this relationship, which is an important step in managing the many risks that often occur.

Handling co-employment issues

Co-employment is defined as “a relationship between two or more employers in which each has actual or potential legal rights and duties with respect to the same employee.” In a single employer/employee relationship, the employer bears certain responsibilities with respect to his or her employees, including paying wages, overtime pay, and taxes.

In addition, the employer has certain obligations with respect to providing worker’s compensation, benefits and pension plans, as well as ensuring civil rights compliance, appropriate labor/management relations, and a safe work site. In a co-employment situation, these responsibilities are often shared depending on how the relationship between the two entities is set up or created.

Co-employment is inherent in the staffing firm/client relationship, and since both have sufficient contact with an assigned employee, each company will be viewed as an employer. The staffing firm is viewed as the “primary employer” and bears most of the responsibility for the employee, which generally includes the following:

  • Pays the employee
  • Has the ability to hire and fire
  • Pays and withholds payroll taxes
  • Provides workers compensation
  • Provides benefits and pension plans, where applicable
  • Ensures civil rights compliance, and
  • Acts on complaints by the employee on working conditions

The client, on the other hand, takes full responsibility for supervising and directing day-to-day work, controls working conditions at the worksite, determines the required length of the assignment, and also ensures a safe work site, including civil rights compliance by employees.

Both entities must adhere to the safety and well being of the temp employee at all times. Having staffing agency insurance protects both the workers and the staffing company when safety issues, rights violations, or other claims relating to negligent acts arise.

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