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The Dangers of Outsourcing

Barry Shanoff

May 1, 2006

3 Min Read
The Dangers of Outsourcing

THINKING ABOUT OUTSOURCING to cut costs in your waste business? Think again. It could end up as a case of being penny-wise and pound-foolish. And, oh, can you get pounded!

Companies that outsource may think that the staffing agency conducts a thorough background check before recommending an individual for employment. However, that's not always the case. And, when an employee with a troubled past enters the company workforce, and something goes wrong, the finger-pointing begins.

New hires who are referrals from a staffing agency can go straight onto the company payroll or they can remain, strictly speaking, employees of the agency. Either way, if someone gets injured as the result of conduct that would have been foreseeable with an effective background check, the injured party is going to sue both the company and the agency.

To cite an extreme example, if a company allows someone with a history of violent crimes to work as a door-to-door salesman, and the individual murders a homeowner after getting inside the house for a sales pitch, the company is going get sued for failing to investigate the person's criminal background. If the perpetrator came from a staffing agency, then the agency also will be sued.

“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,” Chris Coffey, a Tennessee lawyer, told The National Law Journal. Coffey is suing a magazine subscription processor and the agency that hired a magazine salesman with a history of violent crime who was convicted of killing a 77-year-old New Jersey widow.

Furthermore, employers that rely on staffing agencies and other third-party vendors and end up with a workforce of illegal immigrants can find themselves in a bind. A number of cases are now pending against employers who are accused of violating the federal Racketeer Influenced and Corrupt Organizations Act by working with staffing agencies and other sources to hire illegal immigrants for the purpose of holding down wages. For their part, the employers argue that they had nothing to do with finding and hiring the workers. Therefore, the issue becomes whether they can nevertheless be held liable when a third-party vendor acts illegally.

Although outsourcing has its risks, waste firms need not avoid it entirely. For starters, the likelihood of a lawsuit can be minimized when an employer insists on a background check for any non-employee. It may be safe for an employer to rely on a staffing agency for a background check, but the arrangements and expectations should be spelled out in writing. The agency should expressly state (a) what kind of investigation it will make, (b) the relevance and suitability of the investigation for the intended work site and position, and (c) compliance with applicable federal and state laws. Moreover, the agency should stand behind its work by indemnifying the employer for any liability attributable to the worker. Agencies that directly employ workers who are placed at a company should maintain appropriate insurance with the company named as an additional insured.

Barry Shanoff
Legal Editor
Rockville, Md.

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