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How to Select the Right Staffing Agency

By Nathaniel L. Story

Experienced staffing agencies can help contractors by providing workers and managing HR issues. However, the consequences of a bad hire through an inexperienced agency can be significant.

This article provides factors to consider when hiring a staffing agency and several potential land mines to avoid during the agency relationship.

Preliminary Research
Conduct online research beforehand. Be sure staffing agencies post jobs similar to what you’re looking for – otherwise they may not have the experience or depth of candidates to ensure a quality hire. Look for involvement in local, state, or national trade associations, which typically indicates a working knowledge of the construction industry.

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Learn tips on how to select a staffing agency + pitfalls to avoid.
 

Research how long they’ve been in business or in the construction industry. Developing industry knowledge, experience with HR, and a wide employee base requires time. Finally, ensure they licensed, registered, and insured in your state. States have different levels of staffing agency regulation and oversight. 

Questions to Ask
After you’ve narrowed down a selection, be sure to ask the right questions.

Is the staffing agency able to quickly provide references from similar local companies? An inability to quickly provide reputable local references may indicate inexperience in the market.

Does it have Affordable Care Act certification, and is it an American Staffing Association Certified Staffing Professional? Although the status of federal health care regulations is uncertain, certification is a good indicator of awareness of relevant regulations.

Does the firm obtain most of its employees through an established network and word of mouth, or does it only rely on traditional postings? Firms with established networks will likely provide opportunities that you may not be able to obtain on your own.

Does the agency track and maintain employee certifications? Maintenance of these records of skilled laborers demonstrates positive, long-standing relationships.

Does the firm perform skills testing and provide safety training? In addition to the value this provides the candidates, this can provide significant assistance in the event of government investigation into your worker classification.

What employee screening processes and testing are in place? Proper background screening of candidates is a must.

How many potential candidates do they anticipate providing for your position? A higher number of candidates may give you the opportunity to ensure you select the right fit.

Review Proposed Agreements
Once you’re ready to finalize the selection, be sure the firm’s proposed staffing agreements are clear, fair, and comprehensive. Complicated and one-sided contracts can signal an unwillingness to compromise or assist with later disputes, while overly-simplistic contracts can signal inexperience. Do employee agreements expressly exclude participation in company benefit plans and waive claims to any compensation from you? These provisions could protect you from regulatory liability for employee misclassification.

Also be sure the agency has identified the process for proceeding from a temporary to permanent employee. Miscommunication in this area is one of the leading causes of disputes with staffing agencies.

Monitor Level of Service
A staffing firm should initially obtain a significant amount of information about your daily operations, culture, project, and the required technical skills for the job that will enable it to obtain matching candidates.

Jobsite visits and follow-ups are critical. On projects with multiple hires, an agency representative should be visiting the jobsite to understand its specific requirements. He or she should also check in on long-term jobs and stay in the know about new project developments. Your job is not static and will require the candidate and staffing agency to change with the project.

Ensure Independent Contractor Status
Federal and state regulations including OSHA, FMLA, FLSA, ADA, as well as those governing unemployment, tax, wage and workers’ comp issues provide more stringent obligations on employers than those who engage independent contractors. The liabilities and costs associated with misclassifying an employee as an independent contractor are significant. Unfortunately, simply issuing a Form 1099 or even hiring a staffing agency will not insulate you from this liability. 

The IRS has issued multiple publications describing the level of behavioral and financial control and relationships that give rise to the finding of an employment relationship. An experienced staffing agency should demonstrate a working knowledge of these regulations. Evaluate that experience through how thoroughly it assigns and reassigns employees, sets rates, negotiates positions, supervises discipline and performance, and provides training and counseling. To avoid employee misclassification liability, you should expect the staffing agency to direct, control, train, insure, pay, reimburse, evaluate, and properly contract its employees.

As construction activity continues to increase, demand for skilled workers has also grown. Partnering with an experienced staffing firm will enable you to reach available workers, efficiently utilize them on projects, and comply with applicable regulations.


Nathaniel L. Story is a Partner at Hirschler Fleischer in Richmond, VA, where he represents suppliers, contractors, owners, and developers in various construction litigation matters. He may be reached at 804-771-9585 or at nstory@hf-law.com.

1: Matthew Frazer of Virginia’s Staffing Choice, a full-service staffing and executive search firm, was instrumental in contributing to this article.
2: www.dol.gov/whd/workers/MOU/irs.pdf.
3: www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee;
   www.irs.gov/pub/irs-pdf/p15a.pdf;
   www.irs.gov/pub/irs-pdf/p1779.pdf.