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Keep an eye on your contractors
By Lauren | October 23, 2009
Continuing my Friday series on keeping your business out of court, let’s reach beyond your employees. In the wake of the recession, many businesses are trying to cut costs by making greater use of independent contractors. That can save on employee benefit costs, for sure, but independent contractors come fully equipped with their own litigation risk.
For one thing, it’s easy for relationships with independent contractors to “morph” over time. The original services that the contractor was retained to provide sometimes evolve to the point where they no longer fit the initial contract. Or the contractor and the company develop a pattern of conduct that’s inconsistent with their original agreement. All of a sudden, a conflict arises, the contractor sues, and the company is left trying to explain why it either violated the contract or tolerated the contractor’s violations.
A separate problem can arise when contractors act as the company’s representatives in dealing with third parties. Let’s say, for example, that you hired a contract recruiter to find a new CEO for your company. That recruiter is your company’s agent, which makes your company responsible for his actions on your behalf. If the recruiter mishandles candidates for the position, misrepresents the job or otherwise fails to do a competent and ethical job, your company may be legally responsible. (And, if your contractor engages in unethical conduct outside the U.S., your company may be in serious trouble under the Federal Corrupt Practices Act.)
The moral of the story? By all means, use independent contractors. But make sure that you and your contractors stay in compliance with your contractual agreements, and amend your contracts as necessary to reflect what’s really going on. And, if your contractor will be acting as your agent, make sure the contract requires ethical, appropriate conduct, then monitor your contractor’s on your behalf. It’s a little more work, but it beats a lawsuit.
Topics: Business Ethics, Risk Management, business communications, corporate responsibility, ethics |