Some of you may have come across the recent LinkedIn posts calling out a Virginia based recruiting firm called Cynet Systems for job postings that included “Caucasians preferred” and “female candidate only”. And your first reaction was probably something like “This isn’t legal, right?” Right. While I’m not going to get into the details of the federal and state employment laws clearly violated here — I did start to wonder what in the world was going on behind the scenes of a recruiting company that would allow such a job advertisement to be disseminated. Posting jobs and sourcing candidates is their core business. These job descriptions were not a “mistake” but a blatant disregard for recruiting law by one or more individuals in the company. Whether that’s due to intentional acts or lack of training doesn’t really matter; either factor has created liability that has severely damaged this company’s reputation and may destroy the business.
Liability Associated With the Hiring Process
Staffing companies and recruiting firms are hired, most commonly, to take on the front-end burden of sifting through resumes to find the candidates most likely to fit their client’s needs. However, a second reason why companies use outside staffing agencies is to avoid some of the liability associated with the hiring process. We see this issue come up a lot when a staffing company’s client requires a background check and states that they will not hire any person with a felony. If the staffing company complies with this request, they are violating federal and state employment laws — they must push back against their client’s wishes to protect themselves. Another route is to choose to have the client evaluate the results of the background check to avoid this potential conflict. It’s important as a staffing or recruiting company to understand that the shifting of liability is a part of the perceived benefit your clients get from hiring you.
Mitigating Risk as a Recruiting Company
Rather than simply serving as a scapegoat for your clients’ hiring liabilities, there are steps you can take as a recruiting or staffing agency to do your job well, comply with federal and state employment laws, and protect your business.
Contracts to protect you. The contract between the client and your business will spell out what activities are the responsibility of the hiring company and what activities are the responsibility of the recruiting firm. It will also require “indemnification” or reimbursement of costs for a party if they are sued due to the actions of the other party. For instance, if Cynet’s client provided the job posting with the discriminatory language and Cynet posted it, it’s likely that both companies will be sued by individuals who may have been discriminated against in the hiring process. The contract will determine whether the client or Cynet was responsible for the job posting language creating the liability and which party will have to reimburse the other for their defense. How the terms of the contract and services are worded can determine whether you’re liable for the damages even if you’re not the one who took the violating action.
Insurance as a line of defense. Insurance is another line of defense to protect your business; however, if your actions are illegal, you often won’t have the benefit of the insurance coverage and defense. In addition to exclusions for illegal acts, commercial insurance policies also often exclude intentional wrongdoing and breaches of contract. If you agree in your contract that you’ll comply with all laws, your violation of law would be a breach of the contract and excluded from coverage on those grounds as well. It’s essential that you know what your coverage provides and whether your insurance company requires certain language in your contracts.
Training. Employment law is an area where it’s easy to make a mistake. We’ve seen many companies take action thinking it’s a logical business activity but it turns out to be illegal. Therefore, training on local, state and federal laws is essential for any employees in the human resources department. Areas that should be covered include anti-harassment and anti-discrimination, wage and hour, hiring compliance, drug and background testing, policy compliance and termination and severance procedures.
Know Your Company’s Risk
Every business needs to be aware of the anti-discrimination laws with respect to recruiting employees. Companies in the recruiting and staffing industry are more at risk because of the legal and contractual obligations the recruiter has with the client and the candidates. Staffing businesses must have enough knowledge to comply with the law, even when its clients may expect otherwise. Having the right protections in place through training, insurance and contracts will help your recruiting team to navigate these conversations and protect you and your clients from liability.
If it feels like your staffing agency or recruiting company is potentially at risk for hiring liabilities, learn more about getting the right protections in place. Get started today by speaking with one of our business-minded attorneys — contact us here.