Many businesses need an extra hand every now and then…in fact, hiring temporary workers is part of some companies' status quo, simply to handle demand that peaks on a seasonal basis. These companies may look for additional workers themselves, or they may turn to a firm specializing in temporary workers. When they do, they certainly expect that the firms will do their due diligence before recommending a person for hire. Correspondingly, hiring firms would do well to take the time to screen the people they are funneling to the businesses to which they are providing this service, lest they find themselves facing an employment agency insurance claim.

For example, applicants who are desperate to find a job could falsify their resume, training, and other skills in order to obtain a position or secure a higher starting salary, hoping that they can fudge their way through; perhaps they might even be able to get through a quick interview or a simple skills test. However, the lack of core competency would probably be discovered days into a job, which in and of itself would reflect poorly on the hiring firm. But what if (as was the case with Acme Hires) the new hire also managed to steal some valuables in the office, ransacked the petty cash drawer, or rifled through the administrative assistant's purse? The theft was discovered and the new employee summarily dismissed, but imagine the hiring company's anger if it were discovered that the employee had a long history of theft and other crimes—convictions that could easily have been discovered if Acme Hires had only performed a background check?

A lawsuit could easily erupt

In a situation like this, the hiring company might decide to sue, which is why prudent firms purchase employment agency insurance. The policy offers coverage for companies that perform direct hire and personnel consulting services, including:

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  Human resources consulting
  
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  Career counseling
  
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  Resume writing
  

The policy covers professional liability for the firm, its in-house staff, independent contractors working for the firm, as well as interns, and volunteers in the event they are sued for wrongful acts, errors and omissions by either the potential/hiring employer and/or the employee who may be or is placed in the course of performing direct hire and personnel consultation services.

Seek advice from a professional

Firms should work with a professional insurance advisor to adopt a comprehensive program that offers protection for the risks they face in doing business. For even more protection, they should administer solid skills assessment tests and consider taking the time to perform background checks on the people they intend to send out into the workplace.