Keep a Watchful Eye on Your Partners

Posted by Richard Jacobson

Ok, so fair warning: the title will be the most intriguing part of this post. What I am really talking about is contract compliance, specifically as it relates to staffing firms. First though, allow me a brief divergence to reminisce about the good old days…

I was Project Lead for a Data Center Consolidation project in Minneapolis in mid-January of 1997 when my father called to recruit me to join the small family business. It was Minneapolis; it was January; my father was a great recruiter – timing is everything. About six months into my tenure at The Jacobson Group, I took over the sales role for the provision of interim services to property and casualty carriers and agencies. We were about 18 months into the interim service offering and the business was starting to grow.

I don’t tell this to our new salespeople, but I really had it pretty easy. When someone needed a PIP adjuster, a CSR or an underwriting assistant, they told me what they needed, I asked a bunch of questions and we sent someone over. Sometime during the post dot-com bubble recession things changed. First came requests for resumes, then came requests for interviews, then came contracts on every assignment… and then every acronym you could think of: MSP, VMS, VoP, etc. Personally, I think a lot of these changes were the marketplace’s natural reaction to mistakes the staffing industry, as a whole, made in the ‘Roaring 90s’ (the 90s were very good to the staffing industry), but that is a different story for a different day. The end result (for now) is that we have a market that is contract-focused. That’s not necessarily a bad thing, though the people who sell staffing services might be hard to convince. The real issue I have is in what those contracts mean… or don’t mean.

Keep a Watchful Eye on Your PartnersA contract without a strong process to ensure that the clauses of the contract are clearly understood, tracked, implemented and audited, as they say, isn’t worth the paper it is printed on. Only if both parties are truly committed to living out the words written does a contract provide real value. That sounds fairly easy, but what if every significant client has its own standards they expect you to meet? There are lots of variables at play here…. Our typical pre-employment screening includes education verification, employment verification, criminal background checks (some combination of state, county, federal and municipal), for certain positions a credit check, for certain clients a drug screen, an MVR check and insurance verification if the employee will be driving for the job or even to and from the job, OIG search, GSA search, Social Security search, OFAC Watch List search, and, of course, I9 eligibility verification. We have our strict standards and then some clients want other specifics. Whew! How do staffing firms do it? Well, sadly not all do.

So here is my unsolicited advice to all of you staffing service buyers out there. Let’s call it Rick’s Rules for Engaging a Staffing Firm:

  1. Beware of anyone who doesn’t negotiate the contract and simply rolls over! I know we all like to win. I get it. I like to win – ask my kids, who have never beaten me at Hearts (well, almost never). The problem is that if a staffing firm accepts all of your language as-is, this is a major, major red flag. In almost all of these situations either a) the business is very small and they feel the risk of losing the business is worse than the risk of non-compliance or b) the business doesn’t intend on complying so will just say yes to anything. There is a real cost to compliance and any company who simply rolls over is likely not complying. If they aren’t complying with your contract, are they complying with the THOUSANDS of federal, state and municipal employment regulations? Do they know that staffing services are subject to sales tax in OH, CT, and PA? Do they know how the background check laws differ in each state? Are they experts in the application of the FLSA? Do they know that San Francisco; Washington, D.C.; Portland; Jersey City; and many other cities and states now or soon will have employer mandates for paid sick leave or leave accommodations? No matter how your contract is written, most of these laws call for joint and several liability; and if your staffing firm isn’t paying, you might be – with some fines and penalties on top.

  2. Unless you are an employment practice attorney or a very senior and wonkish HR executive, your staffing firm should know more about employment laws, regulations and standards than you – after all, they are professional employers. This does not fully apply to the salespeople – though if there is a culture of compliance at the firm the salespeople will be able to ‘talk the talk’ – but the firm better have pretty hefty HR and compliance functions. Test them and rely on them.

  3. Negotiate as a partner. Partnerships are a win-win. Your partner should have your back, and you theirs. This might sound naïve in a business environment, but we have grown through 42 years by believing in and committing to our client partnerships. If your staffing firm is negotiating in good faith, many of their suggestions will be based upon best practices that will ultimately protect you.

  4. Trust but verify. I am truly disappointed in the low volume of audit requests that we get. Many of our contracts call for audit rights on the part of our clients. I will never negotiate against this concept – I view it as one of our differentiators. When we do get targeted for the rare audit, we always ask for the client scoring – and then I post it internally so everyone can see how we did. We aren’t perfect, but I’ll proudly put our results against any of our competitors’.