Many businesses use temporary or contracted employees to reduce the cost of workers’ compensation, paid leave, health insurance and state taxes. And, the strategy makes sense. Hire independent contractors and reduce overhead. In fact, the LA Times* reported that businesses in Los Angeles, Riverside and San Bernardino counties practice this strategy more than anywhere else in the nation.
However, this will not make you completely exempt from liability or insurance responsibility. Think about this—A temporary employee is injured in a fall. Does this affect your workers’ compensation experience? Or, a temporary employee at the order desk quotes a small client pricing you give to your largest customer. Now the small client wants all future orders at this discounted rate. Will you suffer monetary damages and want the temporary employee’s agency to make you whole? There are a few additional steps you must take to make sure your strategy is complete.
- A reputable temporary help agency will have workers’ compensation with a California admitted carrier, general liability, a bond, an errors and omissions policy and Employment Practices Liability Insurance. Take the time to verify these policies are in place.
- Just like any other vendor to your business, you should ask your temporary agency for a certificate of insurance and be added as an additional insured to their policies (except workers’ compensation). Without these documents you may end up legally liable for the acts of your temporary employees and have no insurance recourse.
- Workers’ compensation is handled in another way. You should have an Alternative Employer endorsement from the staffing firm in lieu of being added as an additional insured.
- Be aware that most crime policies do not cover acts by temporary employees. This can also be true for leased employees on your general liability policy.
- Obtain a signed contract that spells out the terms and conditions of the temporary placement. The contract should also state the temporary help agency will indemnify and hold you harmless.
Please click or call if you have questions about your coverage or need a sample indemnification or hold harmless agreement.
* Selvin, Molly and Hennessy-Fiske, Molly. “L.A. Area Leads in Employers That Aren't.” Los Angeles Times on the web 27 July 2006. 28 July 2006.
