5 Legal Issues That Affect Every Staffing Agency

No area of the law is simple. This especially includes labor laws.

If you are operating a staffing agency, you need to be aware of the potential legal pitfalls that could affect your business.

By staying informed on all the legal issues that affect every staffing agency, and having competent legal counsel, you can give your agency a foundation for success. Review these tips below, intended to be used as a guide and not as legal advice, so that you are aware and can seek the necessary legal counsel you need for making these decisions for your agency.

5 Legal Issues that Affect Every Staffing Agency

1. Properly Classify Staff

The way you classify the employees brought into your staffing agency can make an enormous difference on the long-term legal and tax issues affecting your company. Essentially, you must always classify workers as employees, either full or part time, depending on the amount of hours they put into the client’s company.

The biggest trap here is a temptation to classify employees as independent contractors, which has gotten many staffing agencies in legal hot water. While there are instances where you might file certain positions as independent contractors, never attempt to intentionally misclassify an employee. In virtually all scenarios, the people you bring in must be classified as employees.

legal issues that affect every staffing agency

2. Local Laws Vary and Also Need Review

Another one of the legal issues that affects every staffing agency is the issue of local laws. In the U.S., federal laws, while certainly not simple, are at least consistent no matter which state you operate in. What often gets businesses and staffing agencies in trouble are the specifics of local laws, which can change by county, city and region.

Local law differences will affect more than just minimum wage. For example, some areas require fewer hours of employment before an employee must qualify for worker’s compensation. This often changes by the state, but could also vary if you are working in separate cities or counties.

3. Proper Use of Background Checks

Fortunately, the laws affecting background checks are mostly defined by federal policy, so at least they won’t change significantly by location. The most important issue for businesses and staffing agencies is to avoid discrimination when using background checks, and research candidates in a manner that is equal across the board.  Basically, if you use criminal background checks and credit checks on one person for a specific position, you should use them on all people for that position to avoid potential discrimination.

All staffing agencies will have certain requests from clients, but it’s important for your long-term legal footing to not let potential discrimination become an issue, even if a client makes a request that seems reasonable. As a simple example, if a client were to ask for credit checks only on people of a certain age, it would be considered discrimination.

4. Proper Writing of Contracts

Most staffing agencies are buried in a pile of contracts, and disputes can easily arise between you, the client or the employee. There are many issues that should be addressed in the contracts, and you’ll need the service of a qualified attorney to make sure everything is covered properly.

However, some of the most common issues include:

•   How long an employee must stay under your agency before being eligible to be hired by the client.

•   Who is responsible for worker’s compensation and other issues- the agency or the client?

•   Whether the employee is part or full time.

•   What happens if the employee is rejected or unable to meet the needs of the client?

These are a just a few of the issues that your contract should cover, and they all help to ensure total communication and foster a strong relationship.

5. The Complexities of Immigration Laws

While most staffing agencies deal exclusively with U.S. citizens, you may have the desire to move into hiring non-citizen workers who usually have visas of various kinds. If you are going to work in this field, be very aware of all the immigration laws and stick to them closely. Even an unintentional violation can bring costly fines and penalties.

Building Your Foundation for Success

Managing the legal issues that affect every staffing agency takes time, energy and financial resources. Work with Scale Funding and we’ll help you achieve financial success with factoring and payroll funding services for staffing agencies.

About Scale Funding

Scale Funding is an invoice factoring company serving businesses across the United States. For more information on factoring, call (800) 707-4845 for a free, no-obligation consultation and quote.


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