Protecting that Temporary Employee from being Transitioned (“Tempnapped”)
A. Bernard Frechtman, Esq., C.P.C. - July 24, 2017
Note: This article is not intended as legal advice. In all instances the reader is cautioned to consult with legal counsel when utilizing this information. A.B.F.
For loss of a nail the kingdom was lost
For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.
Who doesn’t remember the fable about the knight that needed a nail for the horseshoe of his horse and how a kingdom was lost as a result? And it still happens every day, no fable these times.
Several years ago I was called to act as an expert witness in a case in California where the plaintiff (my client to be) was located in New York. It was involved in the temporary placement of mortgage closers for a huge national bank with headquarters in California that was closing mortgages in different parts of the country and needed to be able to send closers to each place for varying periods of time.
To accommodate the bank and to expedite the sending of closers, it also set up a travel agency to make arrangements for air travel and lodging at each city to which it sent a temp to do closings for the bank. At one point its intake from this national operation approached ten million dollars ($10,000.000).
“We can do it cheaper”
About six months into the operation my client had dozens of closers operating in different parts of the country. At which time a competitor local to the client in California approached the bank and offered to do the same for less money. It did not take the bank long to figure out how significant the savings could be and so agreed to switch. It notified my client that it was moving all of its temps to this new vendor. For the new vendor it was a “no brainer” not having to recruit nor arrange for transportation and lodging as it was all in place and all they had to do was the pay rolling.
With that the lawsuit began in California using a law firm with offices in both New York and California. The New York office did the paperwork and the California office appeared in court. It was at the point where a trial was to happen shortly that I was called in to act as an expert witness to testify to what the bank and the new vendor engaged in was “Tempnapping,” by virtue of transitioning the temporary employees of my client to that of another temporary service and that this was actionable under the law.
In my role as an expert witness, I was fully briefed on the case and read the salient papers that I needed in order to give an opinion. After spending a day with the New York attorneys in preparation for my testimony and the writing of an opinion letter, I realized that no one had offered me the time sheets. So I asked to see them. It took a while before an associate could find any but a couple were finally produced and I began to read the small print on the back.
What I did not find did not surprise me. The time sheet had no language imposing a recruitment fee for transitioning a temporary employee to another vendor. So what I suspected as the reason for this enormous lawsuit was verified by its absence. A few little words would have made all the difference and obviated the need for this litigation.
What happened next in the lawsuit?
Just before the date for trial the bank and the other vendor decided to engage in further discovery and sent notices of depositions to all of the temps in the various cities around the country to be taken over a period of a month. This would have required my client to send attorneys to each of these cities and bear the expense of not only their time but also all of their expenses. The cost was so prohibitive that the client decided to opt out of the lawsuit and discontinued it.
“And all for the want of a horseshoe nail.”
Have you looked at your time sheet lately? What does it say, if anything, about your client transferring the temporary employee whom you have on assignment at its establishment, to the payroll of another temporary service which is going to charge a lower bill rate? These are two questions that should occupy your immediate attention.
While Tempnapping usually occurs on a large scale where there are industrial or factory workers involved, it also occurs in the case of individual assignments of clerical, executive and professional personnel and needs to be protected against. And protection is simple. Require the client to pay a placement fee in the event the temporary employee is transitioned (“Tempnapped”) to the payroll of a competing temporary service. Make your client responsible. Bill for it, and if necessary sue for the fee based on a contractual obligation.
Adia Service, Inc. v. Sansone
The courts have supported such litigation. In a Missouri case, Adia Service, Inc. v. Sansone, (793 S.W.2d 643, 1990 Mo.), Adia sent a temporary employee to Sansone, at its request, for two and a half weeks. It also sent a contract outlining all of the fee arrangements, which Sansone never signed. But Sansone did sign the time sheets that contained the following provisions:
We (the client) understand that the temporary help
supplied by Adia is the result of substantial expense
on the part of Adia in terms of time and money spent
for the advertising, screening, testing and training
of its personnel. Therefore in consideration for this
service, we agree that if any employee named herein is
employed by us, our associates or affiliates (either as
a salaried employee or as an independent contractor)
during a temporary assignment or within one year
after the temporary assignment, we will pay to Adia
a conversion fee as specified in the Adia Temporary
The court found that although Sansone never signed the fee agreement it had signed the time sheets that contained a provision for a “conversion” fee and decided that the contract came into existence when Sansone, having received the temporary service agreement, continued to employ the temporary employee. When Sansone’s agent signed the time cards which contained an acceptance of the conversion fees as specified in the temporary service agreement, Sansone had accepted all of the terms and conditions of the agreement relating to fees even though it had not signed the agreement itself.
Avanti Group (U.S.A.), Ltd. v. Robert Half of Atlanta, Inc.
In another case, Avanti Group (U.S.A.), LTD. v. Robert Half of Atlanta, Inc., (401 S.E.2d 576, 1991 Ga), the court enforced a conversion fee commitment set forth in the time sheet that stated:
After you evacuate the performance and potential of our
employee on the job you may wish to employ this person
directly. Our employees represent our inventory of skilled
professionals and in the event you wish them converted to
your employ a conversion fee will be charged. The Conversion
Fee Schedule has been furnished to you by mail and is
our standard placement fee ….A conversion fee will be
due us if you hire our employee assigned to you,
regardless of the employment classification , on either
a permanent, temporary (including temporary assignments
through another agency) or consulting basis within twelve
months of the last day of your assignment period or the
last day our employee was paid by us for your assignment
period (whichever occurs first). You also agree to pay a
conversion fee if our employee assigned to you is hired by
a subsidiary or a related company as a result of your referral
of our employee to that company.
As can be seen by the language inserted into the time sheet at the time in the year 1991, Robert Half was trying to cover all bases and possibilities of how the temporary employee might be referred further to another entity or transferred to a different temporary service, in an effort to preserve the right to the conversion fee.
Sample Time Sheet Conversion Fee Provision
We understand that the employee of Company Name is referred to us on a temporary basis while searching for employment through Company Name .
If our company, or an affiliate, employs this person on their payroll or in a consulting capacity, or if within 180 days after termination of this person’s temporary assignment, utilizes this person’s services through another temporary or outsourcing service, unless otherwise agreed to in writing, we agree to pay Company Name their permanent placement fee as follows:
One percent (1%) for each thousand dollars of computed annual salary (e.g. 20% for a $20,000 salary) multiplied by the annual salary, to a maximum of twenty-five percent (25%). If the employee is employed on a part-time basis the calculation will be made based on a full time equivalent but not less than $1,000.
We agree that payments made or due to Company Name for temporary service prior to said employment will not be applied against the permanent placement fee.
Whatever form of conversion provision is utilized it should be presented as a part of any agreement that the temporary service enters into with the client when first undertaking the assignment and as well in the time sheets that are utilized. There is still a number of temporary services that are actively engaged in attempting to increase their volume of business by inducing clients to change temporary services through a “lowballing” of fees thereby undercutting an existing service and transitioning the temps to their payroll without the cost of recruitment.
And there are still clients out there that will go along with such an arrangement. It is only through a contractual commitment to have to compensate for that act that will discourage it from happening. But if it does the transitioning client will have to pay the consequences. Do the math and see how it can hurt.
“People may not always say what they mean, but they always do what they mean” –Robert Half________________________________________________________________________________________________________________________________