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September 14, 2021

Using Staffing Companies to Help with the Worker Shortage? Check Your Liability Coverage

Workers just keep quitting. According to Business Insider, a record-breaking 4 million workers quit in April. In May, 3.6 million quit, and in June, 3.9 million quit. All of these resignations are leaving companies struggling to stay open. Staffing companies may provide relief – but make sure your liability exposures are covered.

Businesses Need Workers – Or Else

CNBC says that even though small businesses are trying to reopen, they are having a hard time finding workers. The National Federation of Independent Business surveyed in March and found that 42% of business owners had job openings that they couldn’t fill.

Whether it’s because of worries about COVID-19, generous unemployment benefits that make it financially possible for workers to stay at home, the thriving gig economy, or a push for higher wages and benefits, the result is the same – many businesses can’t find the workers they need to stay open.

The Foundation for Economic Education says that some U.S. businesses are closing because they can’t find workers.

Staffing Companies Provide a Solution

Rather than closing their doors, some businesses may find the help they need through staffing companies.

It makes sense. The recruitment process can take time, and businesses need workers now. With a staffing company, that’s possible. Workers, on the other hand, can try out a position without committing to it.

It sounds ideal, and it can be a good solution – but there is at least one potential catch. You need to make sure you’re not solving your worker shortage problem by creating new liability exposures. For example:

  • What if a temp worker sues for harassment or discrimination?
  • What if a temp worker accidentally injures a customer and that customer sues?
  • What if a temp worker makes a mistake that results in property damage?
  • What if a temp worker is injured on the job and has major medical costs and lost wages?

Managing Your Employment Liability Risks

When you hire workers directly, you probably run background checks to uncover anything that could create possible liability issues. You also maintain appropriate insurance coverage, like workers’ compensation, employment practices liability, and general liability insurance.

When you’re working with a staffing company, these issues are still important, but they can be a little more complicated.

Don’t wait until something goes wrong. Take steps to limit your exposures now. Make sure your staffing partner:

  • Runs appropriate background checks on workers.
  • Adds you as an “Additional Insured” on its insurance policies.
  • Provides legitimate proof of workers’ compensation insurance coverage. (Because of the high cost of coverage in California, some staffing companies participate in sketchy work comp coverage arrangements.)
  • Provides proof of employment practices liability insurance coverage.
  • Signs subrogation waivers to prevent their insurers from subrogating against your workers’ compensation insurance and general liability policies.

Contact your Heffernan Insurance Brokers agent for details and guidance.

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