10 Key Provisions of a Labor Staffing Services Agreement

RECITALS/DEFINITIONS

  • Define the Parties (e.g. Company and Client) and Effective Date of the Agreement
  • Define the “Labor Staffing Services” being provided:
    • Who is providing the services? (e.g. Company to provide such services to Client)
    • Reference any relevant Exhibits with further descriptions and breakdowns of such services
  • Define any other relevant terms (e.g. “Assigned Employee” is the employee assigned by Company to Client)

DUTIES OF THE PARTIES

Duties of the Company (Supplier of Labor Staffing Services)

Spell out what labor staffing services are to be provided, including any relevant limitations thereof.

Some typical services provided (which are often defined in an Exhibit to the Agreement) are as follows:

Provision of Labor Staffing –

Clearly define the services provided

Typical services provided include employee recruiting and interviewing

Workers’ Compensation Insurance –

Company typically provides such insurance for Assigned Employees

This provision will typically reference a later Insurance provision in the agreement

Screening of Employees –

Certain tests and background checks of employees will be implemented

This is usually spelled out in an Exhibit to the Agreement

Guarantee –

If Client is unsatisfied with Assigned Employee, there must be a replacement system

Typically, Client will give notice, whereby Company will assign a new employee

Employee Waiver –

Assigned Employee waives benefits Client gives to regular staff

Duties of the Client (Receiver of the Labor Staffing Services)

Spell out the duties of the Client as it pertains to their receipt and management of the Assigned Employee

Some typical services provided are as follows:

Supervision of Work –

Client typically controls the premises and processes related to Assigned Employee’s work

Client typically controls the quality of Assigned Employee’s work product

Accurate Job Description –

Client should provide an accurate description of the duties to be provided by Assigned Employee, including any relevant risks thereof

Such work often requires Company’s prior written approval

Client Benefits –

Client must typically not provide Assigned Employee with benefits provided to regular staff

Driving –

Client must typically not require Assigned Employee to operate a vehicle

If operating Assigned Employee is required to operate a vehicle in the course of such work:

Client usually accepts full responsibility thereof

Client usually acquires insurance to cover such activity, including:

Workers’ Compensation Insurance

Automobile Liability Insurance

 

Provision of Equipment, Supplies, and Training –

Client typically must provide all equipment, facilities and supplies necessary for Assigned Employee to undertake such work for Client

Notifications of Complaints and Incidents –

Client typically must provide prompt notice to Company as it pertains to any and all formal and informal complaints, allegations or incidents relating to Assigned Employee, including:

Workplace safety, including, without limitation:

Sexual harassment

Threats of violence

Violations of OSHA (Occupational and Safety and Health Act)

Discrimination, including, without limitation:

Age, gender, sex, etc.

Title VII

Conversion

Client will typically promise to not hire away any Assigned Employee

If Client permanently hires any Assigned Employee, then Client must typically pay Company a Conversion Fee (see below)

Mutual Duties:

Regular Review Meetings

Typically, both parties will meet regularly to discuss the progress of their work relationship as well as review the progress of Assigned Employees

Cooperation

The parties also typically agree to cooperate with one another by providing assistance to each other as well as give prompt notice with anything relevant related to their agreement and Assigned Employee (including health and safety issues, work progress, etc.)

Confidentiality

Define what information is “Confidential”

What are the obligations of the parties regarding Confidential Information?

Safety and OSHA Compliance

Client will typically warrant compliance with OSHA and well as provide a safe workplace

Company will typically educate the Assigned Employee on such matters

Compliance with Law

Both parties represent and warrant they will comply will all applicable laws (state, federal, etc.), including matters of data and privacy

Both parties represent that they will maintain applicable licenses and permits to continue their respective businesses

PAYMENT

What payment must Client provide to Company for the provision of labor services?

This might be a flat rate, percentage of Assigned Employee’s income, or some combination thereof

What payment must Client provide to the Assigned Employee for such labor services? Some relevant issues to consider:

Flat/Hourly Rate

Overtime Pay

Pay Increases

Reimbursement for Expenses

Taxes (including income and sales)

Government Rates

Client should notify Company when Assigned Employee is performing work under a government contract covered by the Service Contract Act of 1965, the Davis Bacon Act and Related Acts or any applicable federal, state or local governmental requirement

Assigned Employee’s rate is typically offset by such government rates

Conversion Fee

If Client permanently hires away Assigned Employee, Client must typically pay Company a fee for Conversion

Such fee is usually spelled out in a relevant Exhibit to the Agreement

What are the costs of late payments?

Consider: interest, costs of collection, including attorneys’ fees

TERM AND TEMINATION

Term/Initial Term

How long is the Agreement?

When does the Agreement start running? Upon the Effective Date?

Extension; Renewal Terms

Is the Agreement renewable?

Does the Agreement extend automatically?

Is written notice needed for any extensions or renewals?

Termination

Are there any specified events where the agreement automatically terminates (e.g. incurable breach vs. material breach)? Is there Termination for Convenience? What about Termination for Cause?

What is the timeline and notice required for termination?

Is there any period where breaches can be “cured” before termination occurs?

What is the effect of termination? Consider ongoing payments, intellectual property rights, licenses, etc.

INDEMNIFICATION AND LIMITATION OF LIABILTY

Indemnification:

How and to what extent to the parties indemnify each other?

Does this include officers, directors, employees, agents of the Parties?

Is indemnification mutual/reciprocal between the Parties?

What are the conditions for indemnification to trigger (e.g. threat of a lawsuit)?

How does such indemnification relate to intellectual property rights (see above)?

If any of the above representations or warranties turn out to be false, will that trigger indemnification?

Limitation of Liability:

Are there any types of claims, damages or other causes of action for which one Party will not be liable to the other Party? To a third party? What is the scope of such a limitation (i.e. does it cover tort, strict liability, contract)? Consider the following:

What warranties are express or implied?

Are implied warrantied disclaimed?

Is this provision reciprocal (i.e. does it apply to both Parties)?

INSURANCE

Company Insurance

What sort of policies must Company maintain?

What are the limits of such policies? Consider:

The limit for each “occurrence” triggering such insurance; and

The total cap (umbrella) limit for all claims.

Must Company provide Client with evidence (certificates) of such insurance policies? Typically, yes.

Typical insurance policies include:

Workers’ Compensation Insurance

Comprehensive General Liability and Property Damage Insurance

Excess Automobile Liability Insurance

Umbrella Coverage

What about insurance for Company Sub-Contractors?

This will often include Workers’ Compensation Insurance, Comprehensive General Liability and Property Damage Insurance, and Excess or Umbrella Coverage

Client Insurance

Consider all of the above and whether or not it applies to the Client

INTELLECTUAL PROPERTY RIGHTS

Intellectual Property Rights

Consider trademarks, trade names, trade secrets, copyrights and patents.

Who owns such rights? What about modifications, adaptations, derivative works, etc.?

Assignment/Work for Hire

Typically, Company will assign all such rights to Client, as it pertains to Assigned Employee’s work for Client

In the alternative, all work provided by Assigned Employee to Client can be deemed a “work for hire” (under the Copyright Act) that is owned by the Client

GENERAL/MISCELLANEOUS PROVISIONS

Force Majeure. What events (beyond the control of either Party) relieve the Parties of their respect obligations under the Agreement? Consider such events as: war, floor, epidemic, civil unrest, tumult, etc.

What sort of notice is required (e.g. certified mail, overnight delivery with tracking)? What are the respective addresses or other contact information of the Parties to where notice must be sent?

Entire Agreement (Merger Clause). Does this Agreement reflect the entire agreement of the Parties and supersede any prior agreements (oral or written) between the parties? Are any exhibits, specimens, attachments, etc. to be included as part of the Agreement?

Amendments. May the Agreement be amended? If so, how? In writing, signed by both Parties?

If one Party fails to enforce its rights under the Agreement, will that count as a waiver of such rights? Typically, the Parties will agree to the opposite. If either Party fails to enforce its rights under the Agreement, it will not constitute as a waiver of such rights or any other rights under the Agreement. Is this a reciprocal right between the Parties?

Obligations of Third Parties. Does each party represent that its undertaking under this Agreement does not violate any of its contractual obligations, express or implied, undertaken with any third party and that such party has the right and authority to enter into this Agreement?

May the Agreement be assigned or delegated in any way? If not, is the prior approval of the other Party required for such assignment? Must such approval be in writing? Does non-assignment apply to both Parties?

May either party subcontract any of their obligations to secondary vendors?

Governing Law; Venue. Under what laws will the agreement be interpreted and/or governed? What about conflicts of laws? What is the venue for this Agreement? Does this include state and federal courts in that venue?

If any part of the agreement is illegal or unenforceable, does that affect the rest of the Agreement? Typically, the parties will agree that any such unenforceability or illegality will not invalidate the rest of the agreement.

Headings; Interpretation. Are the headings of the agreement meant solely for information purposes? Do the headings affect the interpretation or enforcement of the agreement in any way? Typically, the parties will agree that the headings do not affect the agreement.

Can the Agreement be executed in multiple counterparts?

Independent Contractor; Relationship of the Parties. Are the parties independent contractors to each other? Does this Agreement create any sort of joint venture between the parties?

What sort of remedies (e.g. injunctive relief, damages) are the parties entitled to under the Agreement?

Exclusivity. Is this a non-exclusive vs. exclusive relationship between the parties? Carefully consider this.

CLOSING RECITALS/WITNESSETH/SIGNAGURES

The parties have caused this Agreement to be executed by their duly authorized officers.

The parties understand they are entering a binding agreement.

The parties represent and warrant their signing parties can bind them to this Agreement.

EXHIBITS

Job Description

Spell out the Labor Staffing Services being provided in greater detail

Spell out additional specifications related to the workplace, safety, etc.

Payment Terms

Spell out the payments, pricing and other relevant specifications related to wages (e.g. wage increases)

Additional Background Checks and Testing

Spell out what sort of employee screening will take place (typically by the Company)

Conversion

Specify what constitutes “Conversion” of an Assigned Employee as well as the fees for such Conversion

 

 

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