Employment Law: Setting the Rules

While no employer is immune to employment-related lawsuits, HR can help minimize the risk by forging the right relationship with vendors and their employees from the outset. Here are some suggestions that can help to define your relationship with and your expectations of contractors:

• Before a contract is signed, ask to see the potential vendor’s anti-discrimination policy and other employment policies. If they’re not up to par, suggest changes—or find another contractor. “Do your due diligence on the contractor, but don’t fill its shoes,” says Laura Schneider, a senior partner at Boston-based law firm Hale and Dorr LLP.
  
• Check public records for employment-related lawsuits, judgments and regulatory actions against potential contractors. “Due diligence in contractor selection requires input from HR in the employment and safety areas,” says James W. Gray, SPHR, a Charleston, S.C., HR consultant.
  
• Require, in writing, that contractors comply with all employment laws, and state that violations are grounds for termination of the contract. Internal audits of contracts can ensure they properly define the vendor relationship and each party’s responsibilities.
  
• Require indemnification so the contractor pays the employer’s legal costs in case of actions stemming from the contractor’s noncompliance. “That’s only as good as the financial health of the contractor,” but it is standard practice, notes Barbara A. Lee, dean of Rutgers University’s School of Management and Labor Practice in New Brunswick, N.J. (For suggested language, see SHRM’s sample independent-contractor agreement.)
  
• Develop written procedures for the supervision of contract employees, such as whom to talk to when labor problems arise. Train company managers so they understand joint liability and recognize actions that can lead to legal problems—and that they should avoid —Gray recommends.

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SHRM Featured Article: Are your Contractors Legal (HR Magazine)