Recruitment – Understanding Your Contractual Liability & Vicarious Liability Exposure

It is very important to establish what types of contracts are being used when placing temporary workers, as failure to inform your insurance provider correctly of your contractual liabilities can invalidate coverage.

To determine your contractual liability exposures you need to consider both aspects of the transaction ; your ‘terms of engagement’ between you and the placed personnel and your ‘terms of business’ between you and the hiring client.

Under your ‘terms of engagement’ the temporary staff will either be working under a contract for service, which engages an independent contractor to carry out work for a fee, or under a contract of service, which is a contract of employment. i.e. an employer – employee relationship.

Generally under a contract for service an employer is not liable for the negligent acts or omissions of an independent contractor.

If you are engaging staff under a contract of service, legally that ‘employee’ is subject to your supervision, direction and control and you are responsible for their primary liabilities in the course of their employment.

The full scope of your exposure to the temporary workers liabilities whilst they are working, can then be determined when entering into the contract with a hiring client.

Ideally, you want to trade under your own terms and conditions. You would have spent time and money creating them in order to cap the limit of your liabilities and reasonably restrict your indemnities from any potential exposures outside the scope of your negligence. In practice, understandably, this is not always possible.

It is essential to declare a split in wage roll and turnover between temporary workers placed under Standard terms of business and non-standard contractual terms, as any changes made can alter your insurance requirements and insurance providers chances of successfully defending a claim against you.

Standard terms of business include a liability clause which clearly states that you do not accept any liability in respect of any injury or damage caused by the temporary workers, and that you will not accept any liability for any errors and omissions made by the temporary workers while they are working for the hiring client.

Non-standard contractual terms could either represent your own standard terms of business where the hiring client has insisted on you changing the liability clause, or a third party contract which includes a liability clause that requires you to provide liability coverage in respect of any injury, damage or errors and omissions made or caused by the temporary worker that you are providing. Non-standard contract terms may also impose provisions such as additional named insured’s, service level penalty clauses and waiver of subrogation rights.

Your Vicarious Liabilities for the negligent acts of supplied temporary personnel in the course of their employment, are a by-product of signing up to non-standard contractual terms, that transfer the responsibility and control of the temporary workers back to you, effectively holding you contractually liable for their actions.

Here at Macbeth we offer insurance solutions which can provide coverage for contract certainty for all of the above scenarios.

For help and advice around insuring standard and non-standard contract terms contact Tony Gibbs on 0118 916 5485.

Author: Tony Gibbs | June 1, 2018

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