Running an IT staffing agency can be an incredible risky operation. The Edward Snowden saga reminds us that staffing firms might not always know what they’re getting from their contractors. In this article, we'll explore employment liability from the perspective of a staffing agency (if you'd like to information about the liability that comes with hiring temporary help, read "So You Hired a Dud. Here's What's Next.").
Booz Allen Hamilton, the firm that recommended Snowden to the NSA, performed all the usual background checks; however, as CNN notes, the staffing firm's system was flawed.
Your staffing firm might not send consultants to work on top-secret tech projects, but like Booz Allen Hamilton, you can be held liable for recommending contractors who do bad work or fail to meet expectations.
What Can an IT Staffing Firm Be Sued for?
IT staffing firms and employment agencies can face lawsuits from their clients as well as the temporary and freelance workers they recommend. They can be sued for…
- Hours and wage disputes.
- Recommendations of workers who are under-qualified or make mistakes.
In some cases, staffing firms can find themselves in the middle of a sticky dispute. The client could shortchange its employee, but you could be the one sued. Likewise, the temporary worker could make mistakes, and a lawsuit could be filed against you.
As the intermediary, you can sued by either side in employment or work-related lawsuits. Yikes.
Which Business Insurance Protects Tech Staffing Agencies?
Given this risk exposure, staffing firms should pay special attention to two types of small business insurance:
- Errors and Omissions Insurance / Professional Liability Insurance. When a freelance developer botches software development, costing your client time and money, you could be sued. Even though you're not their employer, you are responsible for taking reasonable efforts to ensure that your contractors accurately represent their qualifications and can deliver acceptable work. E&O coverage can pay for lawsuits when clients claim you sent them a bad apple.
- Employment Practices Liability Insurance. Employment staffing agencies can be sued for discrimination. Recently, the Equal Employment Opportunities Commission filed a lawsuit against one staffing agency that consistently did not refer qualified female applicants for jobs. If freelancers think you are discriminating against them, they could file a lawsuit against you. Fortunately, EPLI covers these lawsuits as well as others about employment, termination, and disagreements over pay and benefits.
To learn more about the cost of business insurance or to receive free quotes on E&O and EPL Insurance, check out our sample IT insurance quotes.