US staffing law can feel daunting even for experienced players given its multiple layers of overlapping law that together establish the parameters for permissible business. For instance, the conceptually simple action of properly paying an employee requires compliance with federal (national), state and, in certain instances, local law.

For global staffing companies, the complexity of US staffing law should not be a barrier to entry. Besides hiring a team of well-experienced advisors, it is useful to consider five basic staffing-specific questions in order to get going. Because staffing — regardless of where any company operates — is a business of relationships, that is how we frame the questions.

1) Are our relationships with our clients properly documented? The provision of US staffing services is generally a matter of private contract between the staffing company and its client. In broad strokes, those private parties are free to agree to the terms of service, the price of services, the terms of payment, which state’s law governs their agreements, and the method (court or arbitration) and location of resolving disputes.  Among these and other provisions, it is absolutely critical that staffing companies carefully consider and negotiate any potential indemnity flowing from the client to the staffing company as well as protections in the event the client files for bankruptcy.

2) Are our relationships with our competitors proper? Federal and state antitrust and unfair competition laws prohibit market behaviors aimed at limiting competition. It is unlawful in most instances, for example, for staffing companies to agree with each other on the price for their services or to divvy up regions for their respective businesses. Staffing suppliers must be mindful of these limitations when engaging with other staffing companies — a common practice in the US. Relatedly, many states restrict services agreements that limit the right of the client to try to hire the staffing employee or to charge a conversion fee in the event the client hires a staffing employee out of an assignment. Violations of these restrictions can result in both civil and criminal liability.

3) Are our relationships with our talent proper? Both federal and state laws require that staffing companies properly classify their contingent talent for employment and tax purposes. While the independent contractor model might be appropriate in limited cases, more often, staffing talent qualify as employees. Therefore, staffing companies must comply with minimum and overtime wage rules and must withhold taxes. Minimum wage varies by location because it is defined by federal, state and, in some places, municipal law. Staffing companies must pay at least the highest rate required by the applicable jurisdiction. Similarly, most employees of staffing companies are not exempt from federal or state overtime requirements. Federal law requires that nonexempt employees be paid 1.5 times their regular rate of pay for all hours worked beyond 40 in a workweek. While most US states follow the same rule, a handful of states, including California, require the payment of daily overtime for nonexempt employees who work more than eight hours in a day.

4) Are our relationships with the registering/licensing authorities in each state proper? Most states regulate, to some degree, the provision of temporary staffing. In recent years, a wave of legislation affecting staffing companies — particular affecting healthcare staffing companies — has imposed registration and reporting requirements. States also prescribe the professional licensure requirements for certain professionals. For instance, registered nurses must be licensed in any state in which they are placed on assignment to provide healthcare.

5) Are we managing our risk? Staffing companies are the regular target of litigation, the most significant of which historically being class actions. The Federal Arbitration Act permits employers to enter contracts with employees to mutually agree to bring any employment related disputes in arbitration on an individual basis only. It is now permissible in all US states for employers to requirement their employees to sign an arbitration agreement in which the waive their right to bring or participate in certain forms of mass action. As such, we strongly recommend that our clients require such agreements.