This article has been written by Samridhi Jain pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.
Let’s understand what a Staffing Agreement is. It is an agreement where an agency or a service provider is appointed by a company to bring in staff to work under that company for a temporary period. For example, an agency called Uplers employs their offshore remote teams to work for companies like Elite, the UK’s largest distributor of telecommunication products and services. Understanding the key clauses of a Staffing Services Agreement becomes crucial for every lawyer. Let’s take the example of a staffing services agreement between Fratelli Wines Pvt. Ltd, a winery that is, as they call it “Cultivating a landmark wine region from India, on the world map.” I shall refer to them as Company or Fratelli Wines and a hypothetical agency called Manpower Ltd whom I shall refer to as Agency throughout this article.
What is Fratelli Wines Pvt. Ltd and why do they need a staffing agreement?
Fratelli Wines Pvt. Ltd is India’s largest privately held wine estate and one of the country’s leading wine producers. Fratelli, which means “brothers” in Italian, is the result of a collaboration between three families and a Tuscan winemaker with over 50 vintages of experience. The plan has always been to have an estate vineyard that allows them to make high-quality wines from Indian terroir.
The 40,000 square-foot winery is a first for any Indian wine company, and it is outfitted with cutting-edge plant and technology. It has a capacity of over 2 million litres and is outfitted with multi-capacity tanks imported from Velo, Italy – a first for any Asian winery. Fratelli wines would require a Staffing Services Agreement as they would need many people in their widespread vineyards to produce great quality wines from the Indian terroir. Whether you’re a recruiter or a firm, you’ll deal with a variety of clients that use your services to find and manage temporary workers. To legally establish a commercial relationship, an agreement or contract is necessary. These can be simple, but it’s important to keep an eye out for situations that put your money at peril.
Important clauses for a Staffing Agreement between Fratelli Wines Pvt. Ltd. and Manpower Ltd.
A Preamble clause must clearly define what the agreement is and the date when it’s being entered into. A Parties clause must specify the details of the Company and the Agency like the work they do, addresses, their registration details like CIN number and their representatives. The above 2 clauses are integral to every agreement and must be clearly called out. The Recitals clause is what sets out the brief description of the Parties and also establishes the ‘why’ of the engagement briefly. For example, the Staffing Agreement between the Company and Agency will have recitals like:
- The Company is India’s largest privately held wine estate and one of the country’s leading wine producers.
- The Agency is a staffing and recruiting firm that specializes in delivering temporary labor to businesses in the wine industry.
- The Parties wish to engage in this agreement in order to use the Agencies’ temporary staff in vineyards to produce great quality wines from the Indian terroir.
1. Definitions and interpretation
This clause sets out the important terms used throughout the agreement to make it easier by putting all defined terms under one head and defining the interpretation to be considered for the agreement. For example, in this Staffing Agreement, the defined words could include a Winery, Vintage Period, Base Rate, Services, Assigned Employees, etc.
This clause sets out the reason for entering into the agreement and why the Parties wish to engage in the agreement. For example, this Staffing Agreement between the Company and the Agent is being entered into because the Agency is engaged in the business of providing staffing, recruitment services to the wine industry. The Company now wishes to engage the Agent’s services in the manner provided in this Agreement.
3. Scope of services
This clause sets out the work involved and the scope which means the extent of work to be performed. For example, the scope of services in this Staffing Agreement could include:
- The Agent will offer the Company 50 contractual labor for its winery.
- The Agent is responsible for screening, interviewing, and hiring the applicants.
- The Agent must guarantee that all candidates are subjected to a thorough criminal or background check.
- The Agent shall ensure that all statutory compliances are acquired in a timely manner for the purposes of this Agreement, including labor compliances, state compliances, and any other legal obligations under Indian law.
- The Agent undertakes to take all reasonable effort to guarantee that the Client receives outstanding service quality and will provide the best prospects to the Client.
- In the event that an Assigned Employee fails to report to work, make reasonable attempts to provide a similarly qualified replacement.
4. Nature of relationships
This clause describes the nature and extent to which both the Parties shall engage. For example, it can be drafted as:
The Parties’ relationship will be that of independent contractors. Nothing in this Agreement shall be understood to establish a relationship between the parties as Employer and Employee. According to the provisions of the Agreement, the Parties will have a principal-to-principal relationship.
5. Obligations of both Parties
This clause generally includes the list of activities to be performed by each Party under the Agreement. For example, in a Staffing Agreement between an Agent and a Company, these would be the obligations:
a. The Agency
- Recruit, screen, interview, and assign its personnel (“Assigned Employees”) to perform the type of work described on Schedule “A” attached hereto under Company’s supervision at the locations specified on Schedule “A”;
- Pay Assigned Employees’ salary and, if applicable, supply them with any benefits offered by the Agent. Pay, withhold, and transfer payroll taxes; offer unemployment insurance, general liability insurance, registry bond, and workers’ compensation benefits; and manage Assigned Employees’ unemployment and workers’ compensation claims.
- Make reasonable efforts to provide a similarly qualified replacement in case an Assigned Employee does not report to work;
- Require Assigned Employees to sign agreements as set out on Schedule “B” attached hereto, admitting that they are not eligible to any of the Company’s benefits, including holidays, vacations, disability benefits, insurance, pensions, or retirement plans; and
- Before starting their assignments with the Company, require Assigned Employees to execute confidentiality agreements as outlined on Schedule “C” attached hereto.
- The Agent will ensure that the shortlisted candidates have the required years of experience, knowledge, and educational qualifications.
- The Agent will ensure that potential applicants are aware of the nature of their work, the skill set required, the location of the manufacturing plant, and any other relevant information.
- Any and all obligations and tasks as an employer imposed by any applicable laws or regulations, including but not limited to the requirements of all statutory provisions and their compliance with relevant enactments, such as the Fair Labor Standards Act, Minimum Wage Act, Payment of Wages Act, Contract Labor Act, Minimum Wages Act, Payment of Wages Act, Industrial Disputes Act, Gratuity Act (Regulations and Abolition) shall be performed by the Agent.
b. The Company
- The Company must provide a detailed job description, including the number of workers and remuneration, in accordance with the requirements.
- The Company is responsible for providing a safe working environment for contractual workers in various production facilities.
- The Company must decide on the final list of applicants in accordance with its needs and standards within 5 working days of receiving the list from the Agent.
- The Company is responsible for ensuring that all labor compliances are achieved in accordance with the applicable legislation.
- If the contractual workers are unable to perform their obligations as per the terms of the Agreement, or if the contractual workers fail to comply with the Agreement’s obligations, the Company must notify the Agent, and the Agent must provide a replacement within 15 days of receiving such notice.
- Supervise assigned employees and be accountable for the company’s business operations, products, services, and intellectual property.
- Provide a safe work environment for Assigned Employees, as well as proper information, training, and safety equipment regarding any substances or situations to which they may be exposed on the job.
- Not modify Assigned Employees’ job responsibilities without prior written agreement from the Company.
- Exclude Assigned Employees from the Agent’s benefit programs, policies, and practices, and make no compensation or benefit promises to Assigned Employees.
- Without the Company’s express prior written approval or as strictly required by the job description provided to the Company, do not entrust Assigned Employees with unattended premises, cash, checks, keys, credit cards, merchandise, confidential or trade secret information, negotiable instruments, or other valuables.
- Terms of payment
This clause specifies the details on the calculation of fees, how and when the remuneration will happen, taxes, and payment schedules. Remember that sometimes certain details will be included as Schedules. For example, it can be drafted as follows:
Professional Fees will be paid by the Company as outlined in Schedule 1 of the Agreement. Once a month, the Company will pay all Assigned Employees their total payment for reported hours. The Agent will generate an invoice along with other dues at the end of each month.
Schedule D of this Agreement specifies the method for calculating the Professional Fee. Schedule E of this Agreement specifies the Payment Schedule.
The professional fee indicated in this Agreement is exclusive of any applicable taxes and will be paid to the Agent after TDS is deducted, if applicable.
This clause is drafted to ensure that the Parties adhere to the confidentiality guidelines and also usually has an attached Confidentiality Agreement as a Schedule that both the Parties have to sign. For example, a sample confidentiality clause would include the following:
Both parties may get proprietary or sensitive information about the other party, its connected firms, or their clientele. Both parties agree to keep such information confidential and not to disclose it to third parties or use it for any purpose other than completing their obligations under this Agreement or as required by law. As a result of Assigned Employees’ access to secret information, no knowledge, ownership, or use of such information will be attributed to the Agent.
- No Solicitation of Employees
This clause addresses the aspect of post-agreement terms where influence shall not be used to obtain something from the other party. For example, a sample clause could be as follows:
Consultant shall not, on his own behalf or on behalf of any other person or entity, directly or indirectly, solicit or encourage any person who is then an employee, contractor, or consultant of the Company to terminate their relationship with the Company for the purpose of forming another business during the term of the Agreement and for a period of 24 months following termination (for whatever reason).
- Boilerplate clauses:
Force Majeure, Release, Notices, Severability, Assignment, Modifications, Set off, Waiver, Entire Agreement, Term, Termination, Post-Termination Obligations, Consequences of Termination, Indemnity, Limitation of Liability, Counterparts, Governing Law and Jurisdiction and Dispute Resolution. These terms are typically always included in contracts, and they must be written expressly to meet the demands of the client, rather than being copied and pasted.
You can attach annexures or schedules for a description of services, professional fee calculations, confidentiality statement, or any additional provisions that you may deem fit or necessary for an agreement. For example, in the current agreement 3 schedules can be drafted:
- A description of services to be undertaken by the Agency
- A table clearly specifying the professional fee calculations and criteria for the same
- A confidentiality statement or contract sheet requesting for agreeing to the provisions of confidentiality and signing the same to bind the Parties.
A good Staffing Agreement is characterized by the following things:
- A clear cut scope of services.
- Setting out the term correctly.
- Clearly specifying the causes of termination and its consequences.
- A properly set out confidentiality clause to ensure the safeguarding of information.
- A clear description of the Company’s and Agencies’ responsibilities and obligations.
- Setting out the terms of payment, calculations clearly to avoid confusion and agreeing to them in the same sense during negotiations.
- Leaves no ambiguity of understanding between the Parties.
- Leaves no scope for misinterpretation of the work to be done.
- Leaves no scope for the hesitation of communication between the Parties.
- Leaves no scope for not carrying out the obligations on time.
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