Beware of contracting risk

Please don’t sign, or let your salespeople sign, a non-standard contract to supply staff without taking advice first.

Why not? Because non-standard contracts are usually non-standard for a reason. Larger companies are particularly keen to reduce risk and, therefore, devise contracts that specifically reduce their liabilities, passing them on to suppliers including recruitment agencies. Contract terms are likely to assign to agencies the obligations of an ’employer’ and social responsibility for the temps. Accepting terms such as these without the approval of the insurance broker could mean a ‘material breach of cover’ and could lead to a claim being refused by the insurer. The logic is the agency has agreed to terms that remove protection for itself and the insurer. The agency may have invalidated its insurance covers. We strongly advise you to always clear non-standard contracts with your lawyers and insurance brokers before signing.

Worst case

Imagine this scenario: your salesperson signs the client’s non-standard contract to supply factory workers. The workers accidentally drop equipment resulting in serious injury and damage. Under normal industry standard contract terms you have no liability for their actions. However, in the non-standard contract you indemnified the end-user against injury or damage resulting from the actions of staff supplied by you. In addition, the terms of the client contract could override your contract with the temporary workers with the consequence that you are responsible for injuries suffered. These circumstances would not be so bad if you could fall back on your insurance.

Then, on checking, you find the non-standard contract was not approved by your insurer and your agency is in ‘material breach of cover’. So any claims may have to be borne by your agency.At Dallas Kirkland (Professions) there has been a doubling of non-standard contracts being referred to us over the past 12 months. We have established the most extensive database of them in the UK – numbering more than 2,500. When clients refer terms to us we can compare them to those logged. This speeds up the approval/guidance process.

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