An employment agency is an organization or individual whose purpose is to assist persons in obtaining employment, and to provide employers with employees. They can be viewed as a sort of “go-between” or middle party that facilitates a connection between employers and employees.

Employment agencies usually charge their clients a fee for their services. Sometimes they may charge prospective employees a fee for helping them secure a job. The employment agency may also charge the employers a fee for providing them with workers.  Whether the agency charges the employer, employee, or both depends on the specific arrangement between the various parties involved.

The relationship between the employment agency and its clients is contractual in nature. A contract will be created that identifies the parties and specifies the services provided by the agency. Employment agencies are regulated by various federal and state statutes.  Some state agencies may also provide employment services for free.

Employment agency laws will differ from state to state. For instance, California employment agency liability laws may have different provisions than other states, such as Texas.

Can Employment Agencies Be Held Liable for Employees?

Employment agency liability depends largely on what is stated in the contract between the two parties. In general, employment agencies have a duty to truthfully disclose information about employers to prospective employees.

Some legal issues that often arise between an employment agency and its employee clients include:

  • Negligent Misrepresentation: An employment agency may be held liable if they make a false representation about an employer. For example, the agency may be subject to a civil suit if they misstate information regarding wages or salaries.
  • Breach of Contract: The agreement may contain specific details about the employment, such as the amount of fees the client will have to pay. A breach of any contract provisions may be grounds for liability.
  • Violation of Statute: State statutes govern the operations of private employment agencies. Such statutes often dictate the relations between the agency and its clients. Discrimination claims and failure to obtain an operating license are common examples of violations

It should be noted that a client who uses the services of an employment agency is generally not considered to be employed by the agency. Therefore an employment agency is not vicariously liable for the crimes or wrongful actions of the employee client, since an employee-employer relationship has not been formed.

On the other hand, liability may be found under laws governing responsibilities in agency relationships, especially where the client has authorized the employment agency to act as their agent in securing employment.

The contractual duty between the parties is terminated once the agency is successful in finalizing employment between the employer and employee.

Are Employment Agencies also Liable to Employers?

Yes- employment agencies may be held liable to employers in the same way that they are towards employees. An agency may be held liable under the legal issues mentioned above (negligent misrepresentation, breach of contract, violation of statute).

In fact, an employment agency must exercise extra caution when making representations about employees to an employer. This is because some employment positions require that the employee be qualified for hire. Public safety may be compromised if, for example, an employment agency refers an unlicensed person to an employer. In such situations the agency may be liable for damages resulting from an improper hire based on a misrepresentation.

Do I Need a Lawyer for Legal Issues with an Employment Agency?

Employment agency arrangements can often be complex because they involve several different parties. Also, the laws governing employment agencies may vary from state to state. Thus, it is important that you speak with an employment lawyer if you have a legal issue involving an employment agency. Your attorney can handle various tasks such as contract drafting and review, document preparation, and litigating in court.