A DAY & ZIMMERMANN COMPANY

Trusting your vendors to protect you

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Posted by Matt Rivera

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October 22, 2009

The newswires have been buzzing lately with stories about lawsuits involving staffing companies and independent contractor misclassification. These current issues are nothing new. However, the stakes are changing as state and federal governments look for ways to put more money in their coffers. Contingent labor still is a great way to get the skills you need on a flexible basis, but companies need to make sure their vendors understand the issues and put procedures in place to keep everyone protected.

We suggest auditing your program or vendors on a regular basis to assure you are protected in today's changing employment environment. Here are some key areas to focus on:

  • Screening. We've seen cases where vendors have dropped background checks without telling the customer. We've seen customers and vendors who don't follow consistent screening or testing procedures--a huge risk. And in an environment where unemployment is high, it's typical to see an increase in the number of discrimination cases, as more people go through the screening process, only to be continually frustrated by not getting the job. Make sure your screening and testing processes--even those implemented by your vendors--is not creating risk.

  • Paychecks. Make sure you are compensating employees for the correct hours and benefits according to federal and state laws. Again, there is just too much scrutiny out there to not make sure your vendors are complying with all the regulations. This also speaks to the financial health of the vendor. We haven't heard about it too much lately, but there has been times when a temporary vendor can't meet their payroll, or as in the Chimes case, where vendors were suddenly not paid by the MSP. Take time to understand a vendor's financial situation, and make sure they are paying their contractors and their bills.

  • Co-employment. Vendors should have consistent practices in place to assure you are protected. The vendor should take the lead with this issue and make sure the contractor knows to call the vendor, not the customer manager, when there are issues with paychecks, benefits, performance issues and records. By taking the lead, they can clearly demonstrate their understanding of the issues and their commitment to protecting you. Specific co-employment discussions should be part of any vendor review.

  • Insurance coverage. Insurance is like an invisible safety net for when something goes wrong. Trouble is, sometimes it's not audited on a regular basis to ensure the net is actually there and in good repair. A few years ago, our vendor management department started performing audits on vendors to make sure our associate vendors had appropriate worker's compensation current coverage, and guess what? We found some had let the coverage lapse (an oversight), or had dropped or reduced the limits to save money. Either way, they left us and the customer unprotected. Set specific insurance requirements in your vendor contracts and then audit them at least annually.






There's an old saying: "People respect what you inspect." It has a few meanings, but in this case, I think the bottom line is that staffing vendors need to know they will be audited and inspected to make sure they are protecting you, the customer. It's one of the key reasons to centralize this type of activity ... which brings me to my final point: If you do have a centralized contingent labor program, are you sure your MSP is auditing and watching the associate or sub-vendors, and are you sure they know what to look for?



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