Borrowed Employee Agreement: Everything You Need to Know
A borrowed employee agreement is a legal contract in which an employee is assigned by their employer to work for another employer for a period of time.3 min read
Borrowed Employee Agreement Overview
A borrowed employee agreement is a legal contract in which an employee is assigned by their employer to work for another employer for a period of time. This may occur when a company has a surplus of employees and not enough work to go around. Then the company may prefer to offer these workers to other companies on a short-term lending program rather than lay them off or have them sit around idle. The company borrowing employees will benefit in acquiring skilled workers for temporary projects without having to hire a full-time employee. The borrowed employee will get to continue working and receive payment. In many cases, such an arrangement will be the best for all parties involved.
Borrowed Employee Status
One of the most important issues related to borrowed employee agreements is what duties each party has. Generally, when an employee is loaned to another employer, the duty of providing worker’s compensation coverage will be retained by the original employer. The borrowing employer, on the other hand, will be expected to provide a healthy and safe working environment, ensure that the necessary resources are provided for the employee to complete their tasks, and that proper training is provided for similar purposes, if necessary. They are, in short, expected to provide borrowed employees the same workplace considerations as they would their regular employees.
As for the borrowed employee, they are expected to provide the same quality of service to their borrowing employer as they would to their original employer. If not, the borrowing employer may have the right to discharge the employee and send them back to the original employer.
Borrowed Employee Agreement Terms
Depending on the needs and desires of the companies involved, borrowed employee agreement contracts may vary a great deal in the particulars of how they are arranged. However, a typical borrowed employee agreement contract will cover the following topics in some form:
- Employee Payment. The agreement will cover how the borrowed employees will be paid during the period of the employee loan. Usually, the payment will be handled by the company borrowing the employees.
- Employee Status. Who the employees will be considered to be working for during the loan should be covered. The borrowing company will usually not be considered to be the employer.
- Employee Services. How the employees can work for the host company will be set out, perhaps with stipulations on what actions by the employee may constitute a termination of the loan. The provider company may offer logistical support if the work requires it, as well
- Term of Agreement. How long the loan will last should be stipulated beforehand.
- Compensation. What compensation the borrowing company will pay the providing company for the services of its employees should be set out.
- Expenses. Who will pay expenses related to the borrowing of the employees should be agreed upon. This may be handled on a case-by-case basis.
Suggested Borrowed Employee Guidelines
If you are an employer considering offering your employees as borrowed employees to another company, considering the following guidelines may be advisable:
- Make the period of the employee’s loan limited and for a specific time period.
- Do not recall your loaned employee before the end of the loan period.
- Decide whether your loaned employee should be kept on your payroll or put on a non-active employment status.
- Agree in advance with the borrowing company who will pay wages and offer benefits, including insurance coverage, if applicable.
- Have issues relating to any optional or extra benefits clarified, as well.
- Agree that if the loaned employee does not perform adequately, they may be returned before the loan ends.
- Clarify who will be liable for the employee’s actions during the loan period.
On the flip-side, if you are an employer borrowing employees, the following courtesies are recommended:
- If an extension of the employee loan is desire, ask for it before the current loan is ended.
- Do not try to entice the borrowed employee to quit their host company and join your own.
If you need help understanding issues related to a borrowed employee agreement, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.