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Corporate America’s growing use of outsourcing to cut labor costs — without adequate background checks — has put it at substantially greater risk of litigation, employment lawyers are warning. Employees with troubled or criminal pasts are sneaking into the labor force, upping the liability stakes for companies. At issue is one critical question: Who is responsible for the background check — the employer or the staffing agency? That legal debate has already surfaced in the courts, where companies and staffing agencies are pointing the finger at one another, each blaming the other for a bad employee that has slipped through the cracks. “More and more what you’re seeing now is that when companies get into trouble with a non-employee doing something, they’re pointing their finger at these staffing agencies,” said Craig Annunziata, partner in the Chicago office of Fisher & Phillips, a national employment law firm based in Atlanta. Annunziata also views outsourcing as new ammunition for plaintiffs’ lawyers. “If an employer has someone working for them and something goes wrong, a diligent plaintiffs’ lawyer — when they find out there’s a staffing agency involved — is going to sue both,” he said. “If you think about it, where there might have been just one defendant, now there potentially could be two. It is double the litigation.” A MURDER IN NEW JERSEY And it very well should be, argued plaintiffs’ attorney Chris Coffey, a Tennessee lawyer who is currently suing American Community Services (ACS), an Indiana-based magazine subscription processor, over the death of a 77-year-old New Jersey widow who was murdered in 2004 by a door-to-door magazine salesman. According to Coffey, the salesman, Azriel Bridge, 18, who was sentenced to 55 years for the woman’s death, had a criminal record in Chicago when he was hired to sell the magazines. The lawsuit names both ACS, the magazine clearinghouse, and Phoenix Imagery, the agency that hired Bridge. Reuter v. American Community Services Inc., No. OCN-L-3036-05 (Ocean Co., N.J., Super. Ct.). Coffey of Pryor, Flynn, Priest & Harber in Knoxville, Tenn., claims that both defendants should have known about the salesman’s criminal record and the potential risk he posed. “I think it’s the responsible thing to do to make employers and staffing agencies aware of the dangers of hiring unsuitable employees for a particular job,” said Coffey. Coffey said he is going after American Community Services, which oversees the sales crews. Coffey said ACS should know if someone is potentially dangerous. But Mike Bergerson, outside general counsel to ACS, said the magazine clearinghouse is not responsible for the sales crews. He said that ACS is strictly a clearinghouse that deals with processing, shipping and handling matters. ACS does not interview, oversee or hire the door-to-door salespeople, he said, and is “under no duty” to perform background checks. “We are not hiring them. These people who are direct sellers are either working on a commission basis for themselves, but not an employee basis,” said Bergerson. As for the murder suspect in the New Jersey case, Bergerson said, “We never hired him and we have no duty to monitor his whereabouts. Honestly, we feel sorry for the family.” Bergerson said that in recent years, ACS has been sued several times over crimes committed by salespeople. He said that the courts have either found that ACS is not responsible for the hirings of the door-to-door salespeople, or the cases have been settled by the insurance company. Meanwhile, temporary workers hired by staffing agencies have created many legal headaches for companies nationwide. Recent lawsuits trigged by outsourcing include:
To avoid a lawsuit, take these steps While outsourcing can open the door to litigation, it doesn’t mean that companies should shy away from it entirely. Employment attorneys note that there are steps that a company can take to avoid a lawsuit when using nonemployees. Rule number one: Get a background check. “The background check is the biggest thing,” said Tyler Paetkau of the San Francisco office of Chicago’s Winston & Strawn, who counsels staffing agencies and companies on outsourcing issues. “I think it just makes good sense to spend money on a thorough background check. Even just basic stuff is good.” Background checks should be done on: � Anyone with access to Social Security numbers, bank accounts, trade secrets, etc. � Top company executives and CEOs. � People who will work with children, the elderly or in people’s homes. Attorneys note that companies can rely on staffing agencies to conduct the background checks, but solid contractual agreements should be drafted first. Fisher & Phillips, an employment law firm, offers the following tips for companies that use nonemployees: � Require agencies that supply such workers to certify that they have conducted background checks for all workers and, in doing so, complied with the Fair Credit Reporting Act and any relevant state laws. � Insist that the supplying agencies certify that there is nothing revealed by the workers’ background checks that would contraindicate their placement at particular work sites and positions. � Include language in any agreement with the agency that it will defend and indemnify the company for any liability that results from the workers’ actions. � Mandate that the supplying agencies carry appropriate insurance for their workers, with the company listed as an additional insured. � Tresa Baldas

In Virginia, a woman has filed lawsuits seeking more than $60 million against a hospital, a temp agency and several credit companies after her Social Security number was stolen from a hospital billing department by a temporary worker who had recently been released from prison. Sloane v. Prince William County Hospital, No. LA66910, (Prince William Co., Va., Cir. Ct.). In California, temporary workers were recently indicted for bilking the American Red Cross out of thousands of Hurricane Katrina dollars at a California call center. Last year, federal agents arrested 27 illegal immigrants who were working for an outsourced repair vendor whose customers included commercial and cargo airlines. As labor attorney Don Benson can attest, illegal immigrants are also creating some big legal headaches and a new source of liability for employers that rely on third-party vendors. According to Benson, six federal Racketeer Influenced and Corrupt Organizations Act actions are currently pending around the country against employers accused of conspiring with temp agencies and subcontractors to recruit and hire illegal immigrants to drive down wages. A key issue in these cases, he said, is whether an employer could be held liable for the acts of third-party vendors. Benson, a shareholder in the Atlanta office of San Francisco-based Littler Mendelson who is defending a seed company in one such case in Idaho, argued that his client had nothing to do with the hiring of illegal immigrants. In that case, he said, the seed company bought seed from a farmer, who hired someone to supply the labor. Canyon County v. Syngenta Seeds, No. CV-05-306 (D. Idaho). “This could be a whole new source of liability for the acts of others. It’s not going to be safe to just watch your own immigration paperwork. But you’re going to have to worry about how these people came in through the community,” said said Benson. Employment lawyer Eric Gabrielle, a shareholder in Miami-based Stearns Weaver Miller Weissler Alhadeff & Sitterson’s Fort Lauderdale, Fla., office, said that temporary workers are also turning up as plaintiffs in lawsuits against employers. He is currently defending a company in a sexual harassment case filed by a temporary worker who was on the job just a few days and claims that the employer didn’t do anything to prevent the harassment. “What we’ve seen time and time again is where a placed employee ends up suing both the placement agency and the employer,” said Gabrielle, who believes outsourcing will lead to more litigation in the future. “It seems to me that an employer who is not signing someone up for the long term, for a career with a company, won’t have the same commitment to selecting the right person … And I think the more outsourcing increases, the greater the area of exposure.” Gabrielle referred to unscreened temporary workers as “landmines.” “I use the term landmines because landmines are dangers that you know are there, but don’t know where, and you don’t know who,” he said, adding companies put themselves at greater risk by relying on staffing agencies to weed out potentially bad employees. “When you’re relying on someone else to find the mines for you, they’re not going to have the same commitment to finding them because they don’t have to walk the path.” HURDLES TO CAUTION While companies ideally want to weed out bad employees, attorney John J. Myers, who chairs the labor department at Eckert Seamans Cherin & Mellott in Pittsburgh, noted that some state laws impede an employer’s ability to do so. For example, he said, Pennsylvania has a statute that prohibits the use of a criminal record in making a hiring decision unless it’s relevant to a particular job. And if an employer refuses to hire someone based on a criminal history, it has to notify him or her in writing. New York, and other states, have laws that prohibit refusing to hire someone because of an arrest, and prohibit a company from even inquiring about arrests, according to Myers. As a result, he said, companies facing outsourcing issues are stuck between a rock and a hard place: If they don’t do a thorough background check, they could get sued. And if they ask too many questions, they could get sued. Myers recommends companies err on the side of caution: Have a staffing agency do vigilant background checks.And get everything in writing. “The more employees you outsource,” he said, “the higher the risk of making a mistake.”

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