A NEW BOOK BY A. BERNARD FRECHTMAN

STAFFING INDUSTRY LAW

A Guide for the Personnel Professional


“What is considered a real job offer? What is considered sex discrimination? What staffing agencies are regulated in Arkansas? Is a recruiter entitled to a fee if a company initially rejects a candidate, but then hires a candidate after a lapse of time? If the answers to these questions don’t flow effortlessly off the tongue, then you need a legal expert – and the good news is; now you can put one on your bookshelf. Veteran staffing figure and attorney Bernard Frechtman has published his sixth book, Staffing Industry Law: A guide for the Personnel Professional, which deals with these and thousands more legal questions.”
— Staffing Industry Review


NOTABLE TOPICS
INCLUDE

  • Dealing with contingency contracts

  • What you need to know to collect your fees

  • Trade secrets and how to protect them

  • How to stop tempnapping

  • Understanding the laws against discrimination

  • Tips on training employees, selling your business, being franchised, picking a lawyer, preparing for succession and coping with catastrophe

  • As a special bonus, the book includes a CD with litigation and contract forms for easy downloading

A Bernard Frechtman’s sixth book Staffing Industry Law: A Guide for the Personnel Professional, is based upon his decades of nationwide practice as an attorney in seemingly every possible legal situation confronting the staffing industry. The 560 page, 30 chapter, fully indexed hardcover book includes legal contract and litigation forms, the latter also contained on an accompanying CD. It addresses the multitude of everyday legal problems confronting those engaged in the staffing industry, whether doing recruiting or temporary staffing.

“This book ought to be named ‘Everything You Ever Wanted to Know About the Staffing Industry and Had No Idea Where to Find It. This comprehensive treatise is an absolute ‘must’ in every owner’s library.”

— PAUL HAWKINSON
Publisher, Fordyce Letter

Chapters include such commonplace legal situations as: Dealing with contingency contracts; What you need to know to collect your fees; Trade secrets and how to protect them; How to prevent “Tempnapping;” Understanding the laws against discrimination; How to


train employees in the law; How to prepare to sell your business; How to prepare for succession; and How to cope with catastrophe. An integral part of the book is the citations to 250 judicial opinions addressing legal issues impacting the staffing industry categorized by both topic and state. Also descriptions of 50 of those cases easily understandable by the layman and helpful for comprehension of many of the issues discussed in the book.

STAFFLAW, INC.
P.O. Box 230672
New York, NY 10023
Telephone: (212) 580-7402
Facsimile: (212) 724-3761
Email: abflaw@att.net
www.frechtman.com


[ STAFFING INDUSTRY LAW ]



——— TABLE OF CONTENTS ———


ForewordXXV
PrefaceXXVII
About the AuthorXXXI
AcknowledgmentsXXXIII
IntroductionXXXV


  CHAPTER 1

What Is the Staffing Industry?1

§ 1.01 Introduction1
§ 1.02 Employment Agency1
§ 1.03 Executive Recruiter1
§ 1.04 Executive Search Firm2
§ 1.05 Temporary Help2
§ 1.06 Employee Leasing2
§ 1.07 Resume Writing3
§ 1.08 Career Counseling3
§ 1.09 Outsourcing3
§ 1.10 Out-Placement3
§ 1.11 Licensing4
§ 1.12 License Requirements4
§ 1.13 Regulation of Fees4
§ 1.14 Record Keeping and Other Requirements5
§ 1.15 Prohibited Practices5
§ 1.16 Applicable Law6
§ 1.17 License Statutes and Requirements7


  CHAPTER 2

Understanding Federal Discrimination Laws15

§ 2.01 Background15
§ 2.02 Introduction to the Law15
§ 2.03 Federal Law16
§ 2.04 Purpose16
§ 2.05 Title VII of the Civil Rights Act17
§ 2.06 What Is Considered Sex Discrimination18
§ 2.07 Religion20
§ 2.08 Federal Age Discrimination in Employment Law21
§ 2.09 Americans with Disabilities Act24
§ 2.10 Family and Medical Leave Act29
§ 2.11 Federal and State Law Differences29


  CHAPTER 3

Understanding New York State Human Rights Law31

§ 3.01 The New York Law31
§ 3.02 Directly Revelatory Inquiries32
§ 3.03 Indirectly Revelatory Inquiries34
§ 3.04 Enforcement35


  CHAPTER 4

Are You Responsible if the Employer Discriminates?37

§ 4.01 Applicant Testing for Selection and Referral37
§ 4.02 Affirmative Action by Employers41
§ 4.03 The Employer Affirmative Action Letter43
§ 4.04 Can You Place the Nonimmigrant Alien?45
§ 4.05 Are You Responsible for an Employer’s Discriminatory Actions or Language?47


  CHAPTER 5

EEOC Guidance on Contingent Workers53

§ 5.01 Contingent Workers53
§ 5.02 Who Is Covered?54
§ 5.03 Employee or Independent Contractor?54
§ 5.04 But Who Is the Employer: Temp Service, Client, or Both?54
§ 5.05 Counting Employees55
§ 5.06 Responsibility for Discriminatory Practices55
§ 5.07 Americans with Disabilities Act Guidance56
§ 5.08 Disability-Related Inquiries and Medical Examinations56
§ 5.09 Reasonable Accommodation and Undue Hardship56
§ 5.10 Qualification Standards, Employment Tests, and Other Selection Criteria56
§ 5.11 Conclusion57


  CHAPTER 6

Flirting with Disaster59

§ 6.01 The Law59
§ 6.02 EEOC Guidelines59
§ 6.03 Quid Pro Quo and Hostile Environment60



§ 6.04 Eliminating Workplace Sexual Harassment60
§ 6.05 Company Policy60
§ 6.06 Policy Introduction61
§ 6.07 Complaint Procedure61
§ 6.08 Establishing a Policy62
§ 6.09 Policy Statement62
§ 6.10 Complaint Procedure62
§ 6.11 Conclusion63


  CHAPTER 7

Understanding Contingency Contracts65

§ 7.01 Employment Agency Objective65
§ 7.02 Entering into an Agreement to Pay a Fee65
§ 7.03 The Basis of the Fee66
§ 7.04 The Contract66
§ 7.05 The Fee67
§ 7.06 Fee upon Termination of Employment67
§ 7.07 Contingent Fee Agreements68
§ 7.08 An Exception68
§ 7.09 The Oral Contract68
§ 7.10 The Written Contract71
§ 7.11 Terms and Conditions71
§ 7.12 Conclusion74
§ 7.13 The Fee Schedule Could Be a Contract74
§ 7.14 Typical Case74
§ 7.15 Schedule Is an Offer75
§ 7.16 Recommended Language76
§ 7.17 Keep a Record76
§ 7.18 Conclusion76


  CHAPTER 8

Understanding Efficient Procuring Cause79

§ 8.01 Being “Responsible” for the Placement79
§ 8.02 Efficient Procuring Cause. What Is It?79
§ 8.03 The “But For” Rule80
§ 8.04 Application of the “But For” Rule81
§ 8.05 More on Efficient Procuring Cause82


  CHAPTER 9

Other Fee Considerations85

§ 9.01 Job Order or Contract?85
§ 9.02 Contract or Acknowledgment?86
§ 9.03 “Fee Schedule” Notice86
§ 9.04 Typical Case87
§ 9.05 Contract Problems88
§ 9.06 Conclusion90
§ 9.07 The Fee Schedule Could Be a Contract90
§ 9.08 Typical Case90
§ 9.09 Schedule Is an Offer91
§ 9.10 Recommended Language92
§ 9.11 Keep a Record92
§ 9.12 Every Word Counts in Computing the Fee93
§ 9.13 A Written Agreement93
§ 9.14 Computing the Fee94
§ 9.15 An Actual Case94
§ 9.16 Ambiguity of Language95
§ 9.17 Reading the Plain Meeting97
§ 9.18 Conclusion98
§ 9.19 The Grey Areas98
§ 9.20 Some Examples99
§ 9.21 The “But For” Rule100
§ 9.22 Applying the Rule100
§ 9.23 How to Share Information101
§ 9.24 Avoiding Conflict102
§ 9.25 Custom and Usage102
§ 9.26 The Company Agreement: Beware105


  CHAPTER 10

Collecting the Fee You Think You Earned107

§ 10.01 If You Have to Go to Court107
§ 10.02 Defenses and Other Legal Considerations110
§ 10.03 Reach Out and Sue Someone115


  CHAPTER 11

Case Studies119

§ 11.01 Table of Contents119
§ 11.02 Table of Cases122
§ 11.03 “Not Efficient Procuring Cause”125
§ 11.04 “Referral: It’s a Question of Fact”125
§ 11.05 “To Earn a Fee, You Need to Agree”125
§ 11.06 “A Deal Is a Deal”126
§ 11.07 “It Takes Two to Change Terms”126
§ 11.08 “One Percent Per Thousand”126



§ 11.09 “The Contract Speaks for Itself”127
§ 11.10 “When Is the Fee Owned?”127
§ 11.11 “Hiring as a Consultant Is Covered”127
§ 11.12 “Referral Sheet a Contract”128
§ 11.13 “The Third Party Referral”128
§ 11.14 “The Confirmation Letter”128
§ 11.15 “Licensed or Not”129
§ 11.16 “Referral Interrupted”129
§ 11.17 “Efficient Procuring Cause”130
§ 11.18 “Prior Resume”130
§ 11.19 “You Don’t Have to Arrange for the Appointment”131
§ 11.20 “Guarantee Ambiguity”131
§ 11.21 “A Temp-to-Hire Expire?”132
§ 11.22 “Resume Runaround”132
§ 11.23 “No Writing; Not Job Referred to; No Fee Agreement”132
§ 11.24 “Time Sheet a Contract”133
§ 11.25 “Apparent Authority Is Authority”133
§ 11.26 “Disloyalty Does Not Pay”134
§ 11.27 “Long Arm Not Long Enough”134
§ 11.28 “The Quasi Contract”135
§ 11.29 “Candidates a Trade Secret”135
§ 11.30 “Introduction Counts”136
§ 11.31 “Licensed–to Be or Not to Be”136
§ 11.32 “Employee Steals”136
§ 11.33 “Temp to Perm”137
§ 11.34 “New Jersey Licensure”137
§ 11.35 “Statute of Frauds”138
§ 11.36 “Hire Within a Year”138
§ 11.37 “Candidate–Confidential Information”138
§ 11.38 “Damage Difficult to Prove”139
§ 11.39 “Customer Lists Not a Trade Secret”139
§ 11.40 “Customer Lists Confidential”140
§ 11.41 “Memorizing Counts”140
§ 11.42 “A Break in Continuity”140
§ 11.43 “Embezzlement Not Covered”141
§ 11.44 “A Duty to Verify”141
§ 11.45 “Restrictive Covenant Enforcement Standards”142
§ 11.46 “Upholding a Restrictive Covenant”142
§ 11.47 “Eliminate Job; Still Owe the Fee”143
§ 11.48 “For a Guarantee, You Have to Agree”143
§ 11.49 “Hire Through an Agent, Still Owe the Fee”144
§ 11.50 “It’s Not a Trade Secret if It’s Readily Available”144
§ 11.51 “Overly Broad Restrictive Covenant”145


  CHAPTER 12

Overcoming Objections147

§ 12.01 Employer Defenses147
§ 12.02 Background148
§ 12.03 “There Is Not a Written Contract”149
§ 12.04 “Performance Was Not Satisfactory”154
§ 12.05 “The Contract Was Not Signed”155
§ 12.06 “You Are Not Licensed”157
§ 12.07 “We Hired Him for a Different Job”162
§ 12.08 “She Is Working at a Subsidiary”165
§ 12.09 “We Had No Agreement to Pay a Fee”166
§ 12.10 “The Time Card Is Not a Contract”169
§ 12.11 “The Manager Is Not Authorized to Pay a Fee”174
§ 12.12 “We Knew About This Candidate”174


  CHAPTER 13

The Cookie Cutter Contract177

§ 13.01 What Is It?177
§ 13.02 Is It a “Form” or an Agreement?177
§ 13.03 Staffing Industry Agreements178
§ 13.04 Cresting the Agreements179
§ 13.05 Time Sheet, Fee Schedule, Sub-Vendor Agreement179
§ 13.06 Warning179
§ 13.07 Table of Contents180
§ 13.08 Temporary Employee Time Sheet181
§ 13.09 Temporary Employee Assignment Confirmation and Conditions184
§ 13.10 Vendor Client Temporary Staffing Agreement185
§ 13.11 Sub-Vendor Preliminary Confidential and Non-Solicitation Agreement195
§ 13.12 Vendor’s Long Form Sub-Vendor Agreement198
§ 13.13 Sub-Vendor’s Own Short Form Sub-Vendor Letter Agreement209
§ 13.14 Client Notification of Permanent Fee Obligation211
§ 13.15 Client Letter Notification of Permanent Fee Obligations213
§ 13.16 Recruiting Contingency Fee Agreement214
§ 13.17 Search Retainer Agreement215
§ 13.18 (A) Split Fee Recruiter Letter Agreement219
§ 13.18 (B) Another Form of Split Fee Letter Agreement221
§ 13.18 (C) Virtual Recruiter Document Checklist222
§ 13.19 Permanent Recruiter Employment Agreement223
§ 13.20 Restrictive Covenant Letter Agreement233
§ 13.21 Employment Restrictive Covenant Provision235
§ 13.22 Temp Service Employer Agreement238
§ 13.23 Acknowledgment of Employee Awareness of Trade Secrets248



  CHAPTER 14

Litigation Forms251

§ 14.01 Background251
§ 14.02 Contingent Fee Collection Complaint251
§ 14.03 Retainer Fee Collection Complaint255
§ 14.04 Temp Fee Collection Complaint258
§ 14.05 Conversion Fee Collection Complaint260
§ 14.06 Trade Secret Violation Injunction Complaint262
§ 14.07 Trade Secret Violation Fee Complaint271
§ 14.08 Restrictive Covenant Violation Injunction Complaint275
§ 14.09 Tempnapping Complaint279
§ 14.10 Long Arm Statute Complaint290


  CHAPTER 15

Protecting Trade Secrets295

§ 15.01 Protection Needed295
§ 15.02 Trade Secret Accessibility295
§ 15.03 Restrictive Covenant296
§ 15.04 Are Restrictive Covenants Enforceable?296
§ 15.05 Requirements Necessary to Enforce297
§ 15.06 Defining Trade Secrets298
§ 15.07 State Statutes299
§ 15.08 Other Enforcement Considerations300
§ 15.09 Uniform Trade Secrets Act301
§ 15.10 Enforcement Based upon the Act301
§ 15.11 Enforcing a Restrictive Covenant Against Soliciting Clients303
§ 15.12 Injunction to Protect Trade Secrets Based upon Common Law304
§ 15.13 Is It a Trade Secret?305
§ 15.14 Conclusion306


  CHAPTER 16

Tempnapping: Saga & Solution307

§ 16.01 Background307
§ 16.02 Employment Agency Licensing307
§ 16.03 From “Temp to Perm”308
§ 16.04 Permanent vs. Temporary Service Profit308
§ 16.05 Changing Practices308
§ 16.06 Combined Operations309
§ 16.07 Single Operations309
§ 16.08 An Expanding Industry310
§ 16.09 Cost of Expansion310
§ 16.10 The Transitioning Process310
§ 16.11 The “Transitioned” Service Investment311
§ 16.12 The Switch312
§ 16.13 The Problem of “Tempnapping”312
§ 16.14 Problem Defined313
§ 16.15 Lost Contract313
§ 16.16 Notice of Termination314
§ 16.17 Protecting Your Investment314
§ 16.18 Temp and Client Contracts314
§ 16.19 Legal Remedies317
§ 16.20 Protecting Yourself318
§ 16.21 Sue for the Fee319
§ 16.22 What to Do if It Happens?320
§ 16.23 Conclusion322
§ 16.24 Case Law322
§ 16.25 Protecting Yourself327


  CHAPTER 17

Checking References329

§ 17.01 Recruiters’ Responsibilities329
§ 17.02 To Check or Not to Check–That Is the Question334
§ 17.03 Is There a Duty to Check References?335
§ 17.04 What to Do So They Don’t Sue336


  CHAPTER 18

Negotiating the Sub-Vendor Agreement337

§ 18.01 Going from Vendor to Sub-Vendor337
§ 18.02 Consider Your Rights337
§ 18.03 Your Temps Become Their Temps338
§ 18.04 New Burdens and Responsibilities338
§ 18.05 The Costs to You339
§ 18.06 Additional Economic Impact339
§ 18.07 Issues to Check on340
§ 18.08 Check Economic Impact341
§ 18.09 Analyzing the Sub-Vendor Contract341
§ 18.10 Payment for Services343
§ 18.11 Indemnification344
§ 18.12 Insurance344
§ 18.13 Incorporation of Contract Between Vendor and Customer345
§ 18.14 Notices345
§ 18.15 Alternative Dispute Resolution346
§ 18.16 Governing Law346
§ 18.17 Solicitation of Employees347
§ 18.18 Error or Omission in Payment347
§ 18.19 Notice of Non-Payment348
§ 18.20 Conclusion348



  CHAPTER 19

Co-Employment349

§ 19.01 Background349
§ 19.02 Co-Employment Defined349
§ 19.03 Employee-Related Law350
§ 19.04 Compensation, Benefits, and Employment Practices350
§ 19.05 Definitions351
§ 19.06 Employer: General or Special352
§ 19.07 Conclusion355


  CHAPTER 20

Cases357

§ 20.01 Introduction357
§ 20.02 Table of Cases358
§ 20.03 Categories of Cases372
§ 20.04 Cases by Category373
§ 20.05 Cases by State391


  CHAPTER 21

Legal Training of Staffing Personnel407

§ 21.01 Back to Basics407
§ 21.02 Training Staff407
§ 21.03 The Law of Contracts408
§ 21.04 Training Outline: Collecting the Fee You Think You Earned409
§ 21.05 Discrimination Law410
§ 21.06 Non-Immigrant Alien412
§ 21.07 Reference Check413
§ 21.08 Trade Secrets414
§ 21.09 Sexual Harassment414
§ 21.10 Employee Handbook415
§ 21.11 Case Studies415
§ 21.12 Testing Your Knowledge415
§ 21.13 Training Outline: Negotiating Third Party Contracts; The Sub-Vendor Agreement415


  CHAPTER 22

The Employee Policy Handbook: It’s a Commitment425

§ 22.01 Beginning425
§ 22.02 A Rising Need425
§ 22.03 Definition426
§ 22.04 Content426
§ 22.05 Keep It Current431
§ 22.06 Handbook Outline431
§ 22.07 Suggested Opening Paragraph434


  CHAPTER 23

Coping with Catastrophe437

§ 23.01 Preamble437
§ 23.02 Disaster Is Always Possible437
§ 23.03 Have a Plan438
§ 23.04 Embezzlement438
§ 23.05 Permanent Recruitment439
§ 23.06 Malpractice (Errors and Omissions)442
§ 23.07 Losing Trade Secrets444
§ 23.08 Sexual Harassment445
§ 23.09 Conclusion446


  CHAPTER 24

Selling a Staffing Service449

§ 24.01 Basis and Potential Sales449
§ 24.02 Past Practices450
§ 24.03 Past Is Prologue450
§ 24.04 Can You Sell a Franchise Unit?450
§ 24.05 Establishing Price451
§ 24.06 Positive Characteristics452
§ 24.07 Franchise Agreement Elements452
§ 24.08 Selling Price and Payment453
§ 24.09 Establishing Value453
§ 24.10 Preparing for Sale454
§ 24.11 How to Market It455
§ 24.12 How to Create a Pro-Forma Statement455
§ 24.13 Other Records456
§ 24.14 Confidentiality Agreement457


  CHAPTER 25

Nothing Succeeds Like Succession461

§ 25.01 Early Developments461
§ 25.02 Growing the Business461
§ 25.03 The Temp Business462
§ 25.04 Protecting the Business462
§ 25.05 Providing a Substitute462
§ 25.06 Having a Plan463
§ 25.07 You Need a Vision463
§ 25.08 Know Your Own Limitations463
§ 25.09 Stick with a Plan464
§ 25.10 Make Employees Partners464
§ 25.11 Think “Out of the Box”465
§ 25.12 Provide Substitute Leadership465
§ 25.13 Use Administrative Help466



§ 25.14 Building a Dedicated Staff466
§ 25.15 Share Equity467
§ 25.16 Getting Started467


  CHAPTER 26

So You Want to Go into the Temporary Service Business469

§ 26.01 Asking Questions469
§ 26.02 Financing the Enterprise470
§ 26.03 Being an Employer471
§ 26.04 Permanent Placement Opportunity472
§ 26.05 Resale Value473
§ 26.06 Conclusion473


  CHAPTER 27

How to Find and Select a Lawyer475

§ 27.01 Reasons to Pick a Lawyer475
§ 27.02 Industry Experience a Factor476
§ 27.03 Copying from Competitors Without a Lawyer476
§ 27.04 Addressing Specific Needs477
§ 27.05 The First Step477
§ 27.06 Copying Is a Big Risk478
§ 27.07 Educate Your Lawyer478
§ 27.08 What You Risk479
§ 27.09 Characteristics to Look for479
§ 27.10 Your End of the Bargain480
§ 27.11 An Overall Observation480


  CHAPTER 28

How to Investigate a Franchise Company483

§ 28.01 Use a Franchisor’s Own Documents to Determine Whether to Buy into Its System483
§ 28.02 Know the Contract483
§ 28.03 How to Investigate484
§ 28.04 Asking Questions484
§ 28.05 Where to Start Looking485
§ 28.06 Your Earnings Potential486
§ 28.07 Territory Concerns487
§ 28.08 What Is the Exit?488
§ 28.09 Conclusion488


  CHAPTER 29

Testing Your Knowledge491

§ 29.01 Employment Discrimination491
§ 29.02 Contract and Referral493
§ 29.03 Reference Checking495
§ 29.04 Trade Secrets496
§ 29.05 Answers to Questions497


  CHAPTER 30

Reflections503

Index509


A. Bernard Frechtman, Esq., CPC

A. Bernard Frechtman is recognized as the leading member of the staffing industry bar. His wide range of corporate and litigation experience has touched upon every aspect of the recruiting and temporary staffing industry from the creation of new staffing services to developing nationally franchised and public companies as well as engaging in litigation as both attorney and expert witness. In recognition of his outstanding achievements the National Association of Personnel Services made him the first inductee into its Hall of Fame. His articles written for staffing industry publications are widely read and often quoted.

Phone (212) 580 7402
abflaw@att.net
www.frechtman.com

WHAT  THEY  ARE  SAYING
» “This carefully cross-referenced easy to read and understandable publication provides value on every page. Every office should have a copy for both reference and training.”
          TERRY PETRA, Trainer, Consultant
» “This will be the Bible for the industry. Bernie Frechtman has a great talent for making things understandable to a layman. I will make this must reading for our people.”
          TOM FOUGHT, CEO, Cardinal Staffing Services, Toledo, OH
» “Bernie Frechtman has written a book which should be of great use to both industry practitioners and their attorneys. For staffing industry professionals, he presents, in an easily understood fashion, solutions to problems they deal with every day. Even experienced staffing industry attorneys can benefit from the case citations and summaries, as well as the suggested forms useful for both litigation and contract drafting.”
          ROBERT STYLE, ESQ., General Counsel, National Association of Personnel Services
» “As someone that deals with staffing industry issues daily, Bernie Frechtman’s book ‘Staffing Industry Law’ has in a short time become an indispensable desk reference. The publication successfully blends technical and practical advice. The reader is given a thorough exposure to identifying problems facing a business owner or account executive before they occur, and if those problems have happened, useful advice to solve them. I know of no other publication that is as comprehensive and useful as this one. I highly recommend it.”
          MAURICE BRESENHAN, ESQ., Zukowski & Bresenhan, LLP,
          General Counsel, Houston Area Association of Personnel Services
» “Bernie Frechtman’s Staffing Industry Law: A Guide for the Personnel Professional is a ‘must have’ for anyone who is an owner or manager in the staffing industry. It is filled with legal resources (contracts, forms, lists of legal cases, etc.) presented in an ‘easy to understand’ way and legible format rendering them exceptionally useful. It continues to be a valuable tool that I recommend to my colleagues in the staffing industry.”
          THEODORE L. ANGELUS, JR., CPC, President & CEO, The Tuttle Agency, New York, NY
          Board Member, National Association of Personnel Services
» “Staffing Industry Law will pay for itself over and over again each time there is any kind of a legal issue relative to the staffing industry. Whenever you retain an attorney without experience in staffing law, this book is an excellent reference, and is one of the best investments you can make in our business today.”
          BRAD BARICK, Management Recruiters franchisee, Stevens Point, Wisconsin