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California Employment Law Commentary on Issues Facing California Employers

Do You Know What Your Vendor Contracts Say?

Posted in Employment Litigation

When you outsource certain functions at your company, do you actually know what the terms of the vendor contracts say?  Or do you just assume that because the employees work for the vendor that you are protected from liability?  Well, assume no more. Without a contractual provision for indemnity from your vendor, you are likely to be held responsible for your vendor’s misdeeds.

Let’s say you use a company for night cleaning or other janitorial services.  And let’s also say that the only contract you have with that entity is the fine print on the back of each purchase order.  If one of those janitorial employees gets hurt on your premises, or does not get paid overtime worked, can that employee come after you?

Or let’s say you hire a staffing agency to provide temporary workers.  And let’s also say that one of those workers complains a lot on the job, or is often late, or has called in sick too many times.  And let’s say that you call up your contact at the staffing agency and ask for that temporary worker to be taken off of your account.  When that employee sues for retaliation or disability discrimination, can that employee come after you?

In both cases, the answer is “Yes, they can.”  More importantly, yes they do.  In the reality of litigation from the plaintiff’s perspective, the more pockets the merrier.  When that employee sues the vendor and your company, the best leverage you will have for an expeditious exit is an indemnity provision.

So take a look at your vendor contracts.  Make sure they include terms to explicitly provide that the workers are solely employees of the vendor and not employees of your company.  Also make sure that the vendor indemnifies your company for any loss or harm (including attorneys’ fees) arising from claims by its employees.  If the vendor won’t sign such a provision, at least you can decide whether to enter the relationship with open eyes and can adapt your behavior accordingly.  Or better yet, you can engage a different vendor.