5 Types of Risks You Can Mitigate with a Contractor Compliance Program

We are at a time in society where social media, lawsuits, and preventable errors can cripple an organization almost overnight. The ability to share information, accurately or not, at a rapid speed is unlike that of any other generation before.

For any risk-focused organization, there are at least five notable risks that can be significantly reduced with the implementation of a Contractor Compliance Program.

What is a Contractor Compliance Program?

A Contractor Compliance Program governs the extent to which a contractor is operating per the terms of their contract with a Customer.

Such a program may include background screening (with a drug test and motor vehicle report check), insurance management (tracking and monitoring), license and credential tracking, Tax Identification Number(TIN) matching, and badging. PlusOne Solutions works closely with our Customers and their contractor networks to ensure the networks are meeting those requirements, and most importantly, remaining in compliance with those requirements for an extended period.

While each program can be tailored to meet the unique needs of that organization, a comprehensive program will address the following risks:

Reputational Riskrisk that an unhappy customer, product failure, negative press, or lawsuit can adversely impact a company’s brand reputation.

As noted, social media has amplified the speed and scope of reputational risk. Just one negative tweet, poor experience, or bad review can decrease your customer following and cause revenue to plummet. While no program or contract can completely prevent issues from arising, the ability for the Customer to respond effectively to situations, demonstrate due diligence has been followed, and ensure proper programs and protocols are in place are key to limiting the extent of reputational risk.

Financial Risk risk that a company will not be able to meet its financial obligations.

These situations are likely due to the inability to meet requirements, service contracts, or put the necessary protections in place – legally – to protect the financial viability of the organization. The general retaliation for many of the risks listed here is the litigation and financial penalties that can completely drain an organization. Tight contractual language, clear requirements, and limitations on liability can all help reduce the financial exposure of an organization in the case of an unplanned event or realized risk.

Operational Riskthe prospect of loss resulting from inadequate or failed procedures, systems, or policies.

This can be the result of employee/contractor errors, poor equipment or systems failures, fraud, or other criminal activity. While background screening cannot guarantee these incidents won’t happen, being able to explain the process and protect the organization against individuals who may not be well suited to the role they will hold is a straightforward way to reduce operational risk. Verifying the appropriate licenses, certifications and even the business status of contractors are additional means to address operational risk.

Legal Riskthe risk of financial or reputational loss that can result from lack of awareness or misunderstanding of, ambiguity in, or reckless indifference to, the way law and regulation apply to a business, its relationships, processes, products, and services.

When engaging in a contractual relationship and deciding to utilize a contractor network for delivering services, the contractual structure, requirements, and expectations of that relationship need to be documented and those terms agreed to. Whether the issue is to reduce the occurrence of a wage and hourly penalty through a joint employment claim, guarding against an unlicensed contractor working at a consumer site, or not following the proper consumer reporting act requirements for background screening, there are regulations and practices that a proper Contractor Compliance Program will address. Working with a partner that can help guide you through these requirements allows you to mitigate the legal risks of a contractor network.

Competitive Riskthe chance that competitive forces will prevent you from achieving a goal.

It is often associated with the risk of declining business revenue or margins due to the actions of a competitor who may be following a more robust Contractor Compliance Program than you are. If others in your industry are maintaining higher standards, thinking more strategically, demanding compliance with certain requirements, or protecting themselves and your organization is not, you are exposing yourself to the less attractive contractors and partners that others are not allowing in their networks. The result is lower quality work, higher operational and reputational risks, and ultimately greater chances that your organization will be dealing with the outcome of a lack of a comprehensive program.

 

How does your company reduce these risks?

Operating a business inherently involves risks, that is just a reality, but being able to understand, plan for, and mitigate those risks is what will set the stronger organizations apart from their competition.

People understand that mistakes happen but what they will not understand, or forgive, is that there was no plan or effort in place to reduce the risks. We often work with our Customers and legal counsel in situations and it comes down to a simple question, “What did you do to reduce the risk(s)?” If the answer is nothing, or very little, then it is time for you to consider putting a Contractor Compliance Program in place today.

 

Contents are provided for information purposes only and should not be construed as legal advice. Users are reminded to seek legal counsel with respect to their obligations and use of PlusOne Solutions services.


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Interested in learning more about implementing a contractor compliance program? Contact us at (877) 943-0100 or send us a message using the form below.



Why Managing Compliance for Your Contractor Network is NOT Joint Employment

Contracting is often considered the backbone of America’s economic success.

Engagement of contractors allows organizations to create better focus, increase efficiencies, lower costs, and expand product support and innovation while skilled individuals open their small businesses. Organizations then focus on core offerings while allowing others to provide important, and often demanded, support services for those core offerings.

Even with the known benefits of the contracting arrangement, one of the main concerns has always been the possible existence of a co-employment, or joint employment, relationship. Joint employment is the sharing of control and supervision of an employee’s activity among two or more business entities. The implications of a joint employer classification increase the risk and liability for both parties, which is a topic that has always been a little unclear, at best. Getting this wrong could be costly, creating situations where an organization may be obligated for tax, wage, and other benefit requirements.

In early 2020 the definition and test for determining joint employment came into focus when the US Department of Labor – Wage and Hour Division – updated its regulations for the first time in almost 60 years. Under the Fair Labor Standards Act (FLSA), there is now more helpful and definitive guidance on how to determine joint employer status under the Act. This final rule became effective on March 16, 2020.

The new federal rule has narrowed the requirements for what is considered a joint employer and provides a better structure for our Customers to follow when setting up their contractor network. The specific scenario our Customer contemplate is when an individual performs work for their employer that simultaneously benefits another individual or entity. Under the new rule, and stated simply, if the organization is not part of the day-to-day decisions of their contractors, they are not considered a joint employer.

Organizations should use a four-factor test for determining whether liability exists and if they qualify as a joint employer.

These considerations include who:

  • Hires and fires employees
  • Supervises and controls work schedules or conditions of employment
  • Determines rate and methods of payment including wages, benefits and hours of work
  • Maintains employment records

A key differentiator in this final rule is the control over work conditions to determine whether it is a right, or perceived right, of control or actual control that is being exercised.

The strength of contractor relationships is important to the success of the overall contracting model but now does not carry the same concern it once did when supporting a contractor network, or setting compliance requirements, would be construed as exercising control. This opens opportunities in the contractor relationship for help and guidance.

Some examples include the sharing of handbooks, providing training and guidance documents, participation in an apprenticeship program, investment in equipment, upholding brand agreements, quality control measures, or even requiring certain policies and health prevention programs to be in place.

As always, each case will have its specific facts to be considered however the need for significant control over the terms and conditions of the individual’s work needs to be evident for a joint employment relationship to exist.

Reviewing contract language and how the relationship between parties is structured can further reduce any liability for wage and hour issues. It is also important for each participant in the relationship to understand their role, restrictions that may be required, and how they work together to ensure compliance with the structure of the relationship.

PlusOne Solutions’ role in delivering Customer compliance programs has always been very clear that screening and requirements are for determining participation for contract purposes only. The actual employment decision for any individual always remains the decision of the service provider, agent, or contracting company. Our program does not direct a contractor to hire specific workers, as that would put us offside of the joint employer determination. PlusOne Solutions welcomes this new final rule and looks forward to the future for our Customers and their contractor networks to thrive under this new interpretation.

 

Contents are provided for information purposes only and should not be construed as legal advice. Users are reminded to seek legal counsel with respect to their obligations and use of PlusOne Solutions services.


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Interested in learning more about our compliance services? Contact us at (877) 943-0100 or send us a message using the form below.



How to Stay Safe Doing In-Home Service Work During COVID-19

To our Valued Partners,

Many of you are hard at work dispatching individuals from your company, especially if you specialize in the repair and maintenance of electrical systems, HVAC, plumbing and major appliances. We want to take a minute to say THANK YOU for everything you are doing to keep everyone home and healthy while meeting increased demand during the Coronavirus pandemic. Your team inspires us!

We do want to recognize those of you that have chosen to remain at home because you or a loved one are at risk during this time. We hope you stay healthy and thank you for your contribution to reducing the spread of the virus.

Here are some tips to keep your team safe and healthy while servicing consumers:

Before the visit

  • Have your office team screen callers in advance and delay a scheduled visit if anyone in the home is presently ill.
  • Staff a helpline by experienced personnel who provide free answers to service questions over the phone to help prevent an unnecessary service visit.
  • Add a handwashing station to service vehicles, and stock with masks, gloves, portable hand sanitizer, paper towels, and disinfectant. If these items are not available, substitute diluted Bleach in a spray bottle and rubbing alcohol.
  • Keep sick team members home until they are fully recovered.

 

During and after the visit

  • Have your staff wash or sanitize hands before, during and after the visit, and avoid touching their faces during the day.
  • Staff should limit the items taken in and out of the house and minimize contact with any surfaces other than the direct work area; touched areas should be disinfected before and after use.
  • Staff should wear a mask and gloves during the visit, if available. Not only will this help to keep them safe, but it will also reassure homeowners your company is trying to keep them safe as well.
  • It’s OK to ask the homeowner to step away during the job or keep a safe distance of at least 6 feet from your staff while they work.
  • Have staff sanitize frequently touched areas in the service vehicle as well, such as door handles, cell phone, steering wheel, and dashboard.

 

Returning home

  • Your team should remove their shoes, spray them with disinfectant if possible, and set them aside before re-entering their homes.
  • To keep others safe, they should touch as few surfaces as possible when entering the home, sanitizing any surfaces they may have touched in the process. Put clothing in the wash and take a shower immediately.
  • Once the above steps are complete, they can hug their healthy family members, snuggle their pets, and relax! Great work today!

 

 

PlusOne Solutions is here for you

As you know, our mutual customers are counting on both PlusOne Solutions and your company to stay operational during these turbulent times.

At PlusOne Solutions, your compliance is our priority, and we are happy to report the following:

  • Screening turn-around-time has been minimally impacted by the COVID-19 pandemic.
  • Our recertification process ensures an old background screen is still valid until a new screening is completed.
  • We are processing any documentation sent to us within our normal turnaround times.

Thank you again for everything you do. We appreciate you and look forward to continuing to serve you during this challenging time and please reach out should you need any assistance we are here to help.

 

Contents are provided for information purposes only and should not be construed as legal advice. Users are reminded to seek legal counsel with respect to their obligations and use of PlusOne Solutions services.


Questions or comments? We want to hear from you.


Does an Indemnification Clause Really Protect Your Brand’s Reputation?

When asked about risk mitigation, too many times companies fall back on the common belief: “We are covered with our contractual Indemnification Clause.”

However, even in the legal and business communities, there is discussion about how much the indemnification clause actually protects the holders.

An indemnity clause is a contractual transfer of risk between two parties to prevent loss, or compensate for a loss, which may occur as a result of a specified event such as a contractor error.

The problem with this is twofold; the first is based solely on a financial remedy, and the second is the assumption the other party can correct the error and pay the costs as required in the indemnification clause.

In today’s digital world, reputations and brands can be shattered within weeks, even hours. When individuals, especially contracted individuals, are in the picture, the risks are even higher because they are unknown individuals who may not share the company’s culture and same concern for the brand or customers as a direct-hire employee.

How is reputational risk addressed in the indemnification clause? In most cases, it is not and cannot be addressed.

What if a contracted person, through their actions, creates a reputational or brand loss? In the contracting industry, or the ride-sharing industry, we see this happen all the time with headlines stating “XYZ Ride Sharing sued after driver charged with sex assault.”

What amount of financial settlement can ever be reached to correct the negative impact to the XYZ’s reputation and brand?

To mitigate this risk, companies need to focus on prevention before an incident, rather than reacting after a loss, such as identifying potential contractor risks before they repeat themselves.

When employees are hired, employers spend a lot of time on due diligence, including criminal background checks and driving checks to reduce risks caused by the employee.

Are we applying the same due diligence when using contractors or contracted individuals to represent our brands when delivering our services? A lot of risks are preventable, including reputational risks. Look at how you can prevent risks associated with your contracted individuals or networks and put steps in place to reduce these risks which are not coverable under an indemnification clause.

It is almost impossible to estimate a financial value on a negative impact to your firm’s reputation and even harder to extract that payment from the other party even with an indemnification clause. Preventative steps not only reduce the financial impact an indemnification clause cannot cover but also proactively protects a company’s brand and reputation.

Contents are provided for information purposes only and should not be construed as legal advice. Users are reminded to seek legal counsel with respect to their obligations and use of PlusOne Solutions services.

 

ABOUT PLUSONE SOLUTIONS:
For more than 15 years, PlusOne Solutions has been an industry leader in the risk management field by specializing compliance programs that meet the complex challenges of geographically dispersed contractors, vendors and employee networks. PlusOne Solutions protects companies from possible financial, legal and reputational risks associated with contractor and vendor relationships while creating safer work environments for everyone and is an Accredited Background Screening Agency by the Professional Background Screening Association.

 

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