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New Year, New Rules: Evolving Legal Risks for Staffing Agencies in 2026
38 Plays2 days ago
A new year brings new opportunities for staffing agencies — but it can also bring new rules, increased enforcement, and more ways to get caught off guard. In this episode of Staffing Made Simple, we sit down with legal experts Lia Elliott and Joanna Monroe of Staffing GC to break down the toughest states for staffing agencies, emerging compliance pressure points, and the legal landmines tied to immigration changes, I-9 requirements, and non-competes as 2026 gets underway.
We also take a clear-eyed look at AI — where tools meant to improve hiring speed can quietly introduce bias and legal exposure if they’re not governed properly. If you own, lead, sell for, or recruit in staffing, this episode lays out what’s changed, what’s coming, and where to focus before small issues turn into big risks.
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Transcript
Exploring Staffing Pitfalls
00:00:00
Speaker
What if the contract you just signed with that dream client is quietly killing your margin? Or the state you're operating in is a legal minefield you didn't even know you were walking through.
00:00:11
Speaker
Or here's another one. What if AI, the tool ranking your candidates is quietly baking bias into every shortlist, putting your clients and your firm at risk? On this episode of Staffing Made Simple, we're digging into those and a couple other things like the states that are the toughest on staffing firms and potential legal landmines.
00:00:29
Speaker
the latest shifts on immigration and I-9 risk, and how AI and non-competes could quietly trip up your business.
Introduction and Guest Tease
00:00:37
Speaker
If you own, run, sell for, or recruit in a staffing firm, this might be a stop and take notes kind of episode.
00:00:45
Speaker
Welcome to Staffing Made Simple, a podcast series powered by Simple VMS. Welcome back to Staffing Made Simple, brought to you by SimpleVMS, the most agency-friendly VMS in the universe. Yes, I threw that in there.
00:01:01
Speaker
If you're new here, this podcast, we cut through the noise and talk about really what's going on in the staffing and recruiting industry. And we try to leave you with actionable tips and tricks that you can apply to your business.
00:01:11
Speaker
This is a special episode today because one of our guests was the first ever staffing made simple guest almost one year ago when we kicked this show off. So we're super excited to have her back on and hear what's
Meet the Hosts
00:01:24
Speaker
new since then. And of course I'm Casey Wagonfield, one of your co-hosts, senior sales executive at simple VMS, 16 years in the staffing industry.
00:01:32
Speaker
below average golfer and occasional karaoke enthusiast. And as always, joining me, my co-host, Rob Geis, the senior vice president at Simple Staffing Vet, also a below average golfer, but we have fun doing it. What up, Rob?
Introduction to Guests
00:01:47
Speaker
Casey, how's it going? Really appreciate the intro. Today, we're going to talk about something a lot of folks try to avoid, but they absolutely care. It's the legal side of running a staffing firm.
00:01:58
Speaker
state landmines, immigration, and non-competes. We're joined by Joanna Monroe and Leah Elliott from Staffing GC. They're outsourced general counsel built specifically for the staffing industry.
00:02:11
Speaker
Joanna has spent more than 25 years in the staffing industry as a senior legal executive and advisor. She's led compliance and risk at billion dollar organizations and helped grow large workforce solution businesses.
00:02:25
Speaker
She sat in the C-suite helping companies scale without stepping on those legal landmines we mentioned. And as Casey mentioned, Leah was our first ever guest. She spent years as a general counsel for one of the largest light industrial staffing firms in the U.S., helping steer it towards the billion-dollar mark across hundreds of branches and tens of thousands of contingent workers, all while keeping the organization disciplined and compliant.
00:02:52
Speaker
They've seen all the ugly stuff from inside and out, and now they help staffing firms of all sizes try to avoid all of those things. Joanna, Leah, thanks for hanging out with us.
00:03:02
Speaker
It's a pleasure to be here. Thanks, guys. Happy to be back. Yeah, we've come full circle. And obviously, Leah, you were our first episode, but this is also the first episode where we've ever had two guests on the episode. so Double trouble here. I know, right?
00:03:16
Speaker
But hey, it's going to be fun. We always enjoy hanging out with you guys.
Mission of Staffing GC
00:03:20
Speaker
and Now, before we jump into the fun landmines and the legal nightmares, for our listeners who maybe don't know you yet, can you tell them a little bit about Staffing GC, what it is, who you serve, and how this whole thing got started?
00:03:32
Speaker
You bet. First of all, thanks for being here. It's great to partner with you guys. We intersect with a lot of your clients. the Staffing GC was really built on the principle that we want to help staffing firms achieve their dreams, and we want to help them grow their business and make legal issues simple.
00:03:48
Speaker
Lee and I both spent 100 plus years inside large companies trying to help with that vision. And we thought, you know, there are many staffing firms out there that could really use that expertise, can use that practical in-house focus, and we'd like to bring that to them. And so we launched Staffing GC in 2021.
00:04:06
Speaker
And since then, we've served over 350 staffing firms, helping them navigate the multi-state environment, helping protect themselves through contracting, and really just helping them grow their business. And it's really a passion of ours.
00:04:18
Speaker
So we are a legal services firm that exclusively serves the staffing industry. And I'll say personally, I've had the pleasure of working with Staffing GC. So I came from 16 years in staffing and I had worked with several lawyers over that time because I had managed the contract process.
00:04:34
Speaker
And a lot of the lawyers I'd worked with had no staffing experience, didn't really know the industry, it would rewrite a whole contract when it wasn't necessary. So When I first started working with Staffing GC and really primarily with Leah, it was a breath of fresh air to have somebody who not only knows the industry, but has lived in the industry and knows what to look for in contracts, knows how to keep your agency safe. And I can't express how easy it is to work with them as well.
00:05:02
Speaker
Absolutely. and And we deal with a ton of staffing firms. And one thing I hear over and over again is I have a client that wants us to grow with them and we have to move into one of these states that are hard to do business in.
00:05:16
Speaker
And it feels like every time a staffing firm figures out the rules, the rules change. From your seats, what are the biggest landmines agencies need to know and look for when they're looking to do business in these states, specifically in the light industrial commercial space?
State-Specific Challenges in Staffing
00:05:33
Speaker
I think that's something we hear quite frequently as well, Rob, is folks heading into new states. They've seen kind of the headlines on the news. Maybe they've got a client that once will give them a lot of business and that's ah a great ramp into a new state.
00:05:48
Speaker
But it's important to go in in a thoughtful fashion. So states like Illinois, New Jersey, California, anywhere in the Pacific Northwest, the far Northeast, and there's a smattering in the middle with California, Minnesota, California. And really, from my perspective, the biggest landmines right now are those that are uninsured and potentially catastrophic.
00:06:08
Speaker
Most staffing firms have liability insurance that safety nets an awful lot of the potential liability out there. It's not that we want our insurance rates to go up because we make a bunch of claims, but we can at least sleep a little bit better at night knowing that that protection is there if something were to happen.
00:06:24
Speaker
But going into those new states, understanding that items like class action litigation is normally excluded from policies or understanding the regulatory environment that that state is operating within is really important. And particularly in today's environment with Federal government taking a little bit more of its foot off the gas, and we see a lot less regulation and legislation coming at the federal level.
00:06:51
Speaker
And so in response to that, you see states starting to take that on themselves. And so states having various challenges. minimum wage rates, for example, or different triggers for whether you can or can't ask an employee to sign a non-compete or what sort of notice do you need to provide them? Do you need to pay for sick leave, right? It's those types of things that we just like to get our arms around kind of the big high key risk issues before launching in those states, just to make sure that staffing firms are set up for success right out of the gate.
00:07:22
Speaker
And Lee, how would you coach like a multi-state agency on prioritizing that stuff? Because most people listening probably don't have unlimited legal budgets. You say like, hey, start with your top revenue states or do you say start with the states that are most aggressive on enforcement or is there another way to rank where to focus first?
00:07:39
Speaker
I think geographically, something that's interesting to me is that I don't always assume that staffing firms know what states they have employees within, particularly with remote workforces. So one of the first things to just check off the list is to say, do we know what states we have folks working in?
00:07:57
Speaker
Once we have that information, assume we know we're in a state, I do like to look at the higher risk states first. Now, if you have one or two people, maybe that's not worth a whole lot of time and effort. But with the things that are repeatable for a staffing firm, those processes that we repeat systemically across the organization,
00:08:17
Speaker
like capturing hours worked, calculating overtime, paying wages, administering the for my nine. Those are the types of things we wanna look at before entering into that new state to see, do they handle any of these things differently?
00:08:32
Speaker
Do I need to take that background question off? Do I need to do this? Do i need to do that? But those systemic items are the ones that can potentially create the most risk. Typically, we see that in and around the wage and hour space. And I would preface that with it can sound overwhelming, but perfection is absolutely not the goal here.
00:08:52
Speaker
We're really just trying to reduce risk where we can do so and to mitigate as much as reasonably possible.
Risk Mitigation in Staffing
00:09:00
Speaker
The elimination of risk is not possible.
00:09:03
Speaker
Business engages in risk every day. We all engage in risk every day, right? Every time I get in my car, I know that I could get hit by another car, but I make cost-benefit analysis, and the benefit of not having to hop, skip, and jump my way to the grocery store is worth the risk of getting in the car. And when I get in that car, I take steps to mitigate risk.
00:09:25
Speaker
I don't text while I drive. I put on my seatbelt. I have a car with airbags. I sort of follow the speed limit. And it's the same for business, right? We're equipping ourselves with the seatbelts and the airbags and the speed limit signs and the traffic signals, helping to just reduce risk where we can do so. Love it.
00:09:42
Speaker
And Joanna, not naming any real names or anything, but can you give us some real world examples where staffing firms got caught by a state-specific rule in one of these places and what you wish they had done six months earlier?
00:09:55
Speaker
You bet. And I think first to Leah's point about risk assessment is critical. Staffing firms are faced with so much regulation and it's constantly changing. And that's really accelerated over the last 10 years, this localization of regulation.
00:10:10
Speaker
And so
High-Risk Regulation States
00:10:11
Speaker
if we tried to comply with every single thing, know, you're not going to be able to make it. So you really do have to prioritize and looking at where your highest revenue, where your people are, and then the most regulated states, which we talked about, it's California, Washington, Oregon, New York, New Jersey, Illinois, and now probably Colorado and maybe Minnesota, I think are probably the highest risk states. So start there.
00:10:32
Speaker
Now we have two states that are particularly tough, Illinois and New Jersey, with statutes on the books that were designed to have you fall into a trap. In those states, Illinois New Jersey, we have special laws that are designed to protect temporary workers, but are really meant to put staffing from owners into a trap.
00:10:50
Speaker
And unfortunately, I did have a client that fell into a trap there. In Illinois, you are required to pay your temporary employees the same wages and benefits as your client's employees doing substantially similar work. In Illinois, that's after 720 hours on assignment.
00:11:07
Speaker
If you can't pay the same benefits, you have to calculate the cost of the benefits, add that onto the hourly rate, and then pay that. And I had a client who was very conscientious about compliance. They did all the right things. They went to the client. They said, do you have these employees? What are you paying them? Let's make sure we match them. And it was all great until it wasn't because change is the enemy of compliance. A Something changes and you don't know about it. And what happened is in that instance, you have to look at the client's comparator employee in terms of getting that wage rate.
00:11:37
Speaker
Well, it was the end of the year. That comparator employee, as part of their annual raises at the client site, got a raise that was never communicated to the staffing company. And then now they were not paying the same wages and it was discovered they had to do a back pay and a back bill.
00:11:54
Speaker
So that was ah a case where even with the best intentions and doing all the right things, there was a mess. So you have to be really diligent and have internal controls in place to check for those sorts of things.
00:12:05
Speaker
I would imagine it too, Joanna, that when you look at like a high volume company with low margins and it's industrial, when you have to match the same rates and benefits, it probably just kills your margins. Like, especially when you're matching the benefits of the full-time employer, when you're already running low margins because it's volume business, that's got to just cripple a company.
00:12:26
Speaker
Oh, it's it's highly problematic because when you're comparing against the client's employee, they're taking that wage, but then the cost of benefits is coming to them as the form of benefits. For the staffing firm, that's actually the wage. So the overtime rate is higher, whereas if they were paying it in benefits, that would be tax deferred. So it's really expensive and kind of a depressant, I guess, on the use of staffing in in Illinois.
00:12:51
Speaker
Fortunately, at least in Illinois, you have 720 hours before that comes into play. In New Jersey, that requirement comes into play on day one. So it's really made an impact on light industrial in New Jersey. You're seeing a lot more direct hire or you're seeing clients of staffing firms eliminating comparator positions entirely. That doesn't work in Illinois, but it does in New Jersey.
00:13:12
Speaker
So Leo, one thing we've talked about offline is a lot of staffing agencies just take whatever new law or regulation comes at them and they scramble to react instead of having a ah voice in the process.
Advocacy in Staffing
00:13:24
Speaker
From your perspective, where do staffing firms need to do a better job of advocating for themselves, whether it's with state lawmakers, regulators, or even been big clients pushing one-sided terms? Yeah, I think now is definitely the time to really make the industry's voice heard. And maybe 10 years ago, most of us probably felt comfortable relying on some of the big trade groups speaking for us.
00:13:48
Speaker
And they do an excellent job in doing that, but they simply can't cover it all. And all politics is local. And so those politicians and representatives in the districts where your staffing firms have business, where they have locations, where they employ people, where they're headquartered, those representatives want to hear from the business owners. And they want to know what's important to their voters in their districts.
00:14:14
Speaker
And you can rest assured that the labor organizations and pro-employee groups are very skilled and very chatty with those representatives. And they make their side known every day, all day long, right? And so if our legislators, our senators, our representatives, even at the state, county, city levels, if the only messaging they're receiving is from groups whose interests pro-employee, probably not very well aligned with the staffing industry's interests, they don't have anything to counterbalance it against, right? The legislators and representatives don't have an endless amount of time to do research into every business sector and industry.
00:14:56
Speaker
And so they really do rely on hearing from their constituents. So that grassroots activity can be as simple as writing letters, making a couple phone calls, hosting a fundraiser during election season, right? Those kinds of things really go a long way.
00:15:11
Speaker
And if nothing else, don't wait until some sort of bill is pending, because we saw that in Illinois and New Jersey, where it was a tidal wave all of a sudden that just like, where did this come from and how did we get here?
00:15:24
Speaker
You want to be proactive in communicating the benefits of the industry and the jobs you create and the contributions you make to your community. And in the differences you make in so many people's lives who are voters in those districts. And that way, if and when a bill starts to get talked about, potentially, there's mutterings about, you know, a new bill in your state or in your city.
00:15:50
Speaker
Representatives will say, you know what, I remember talking to Joanna about this a couple months ago at that fundraiser about the staffing industry. And I'm going to call and pick her brain and see what she thinks the impact of this might be. And that's what happens.
00:16:03
Speaker
And so this is always the easiest can to kick down the road because I think all of us are a little exhausted with news feeds and politics, but it really is so important to prioritize and advocate for ourselves to avoid these bills that ultimately pass and then you're scrambling to get amendments plugged in and it's never a good fit. It's very, very messy. And so every opportunity a staffing firm has, whether it's an owner or a leader or an executive within the organization, to talk about staffing should absolutely jump at it. And then obviously always advocate for yourselves with contracts. I mean, you asked about nasty contract terms coming from clients, and we see those every single day.
00:16:43
Speaker
We have a lot of client contracts we go through. And if I could say one thing is that we can dispel for anyone listening that when a client tells you that every other staffing provider is signing this agreement, it's not true.
00:16:57
Speaker
They're not. I promise. Thank You're not the only one who's pushing back on incredibly one-sided indemnity or terms that are going to sink your business if something goes wrong.
00:17:10
Speaker
It's a very common kind of response that we hear from those end-using facilities. But at the end of the day, there's plenty of discussion around contracts. It's reasonable to have those. And I really feel strongly about staffing firms building confidence and competence within their sales professionals and recruiters to facilitate having those discussions professionally, obviously, with those end-using clients.
00:17:35
Speaker
It's like everybody's got an opinion on laws and regulations and they hate them. But very few people actually do anything about it or call their state or do anything And I know that agencies, they have to speak up and they have to take action for change to really happen.
00:17:50
Speaker
Joanna, switch gears a little bit. And I've heard you both talk about um arbitration agreements as we've prepared for this. I know you've mentioned that every staffing firm should have one in place.
00:18:01
Speaker
For people who think maybe only though that arbitration is when you already have a problem, why is it so important to have this in place ahead of time?
Arbitration Agreements
00:18:08
Speaker
So just to clarify for folks who may not know what arbitration agreements are, when somebody wants to pursue a staffing firm like for a wrongful termination claim or maybe because they haven't been paid correctly or think they haven't, they would go and sue you in court. And what an arbitration agreement does, if we have an agreement with our temporary workers in place, then we can require them not to sue us in court but take their claims into private arbitration. And that's a really great benefit for staffing firms for a million reasons just on individual claims. But we also advocate for the use of arbitration agreements that contain class action waivers.
00:18:43
Speaker
And what that does is if a staffing firm is being sued by a plaintiff's attorney because of a systemic error, maybe they had an issue that was replicated over time, and you're dealing with not just one person suing you, but a class of everybody who worked for you at that site for the last three years,
00:19:01
Speaker
You can use that arbitration agreement and class action waiver and take it out of court and take it away from being a mass action with all these people and make it just an individual action.
00:19:12
Speaker
And you know what that does from the plaintiff's attorney's perspective? They lose all interest. So you can take what is potentially a $10 million dollars problem down to maybe a $10,000 problem.
00:19:22
Speaker
So that's what arbitration agreements are. And with class action waivers, they can really protect business from catastrophic uninsured risk. So i would guess that most staffing firms have these in place, but the trick now is keeping them updated because the plaintiff's bar is a huge source of revenue for them.
00:19:40
Speaker
And now that they're losing that source of revenue, they keep chipping away at them. And the courts, especially courts in California and more liberal states, they keep finding reasons to not put these things into arbitration.
00:19:52
Speaker
And so you have to have those arbitration agreements updated annually to make sure that they have the best language to make sure that they're enforceable to protect the company. The beauty of this is arbitration agreements give you the opportunity to have some grace so that if you do have one of those mistakes, it's just a mistake vis-a-vis an individual worker and not 10,000 workers over the last three years.
00:20:14
Speaker
Yeah, I remember that being a big deal. And Leah, I'm going to kind of switch over to immigration, i nine Last time you were on as the first ever guest, we spent a lot of time on I-9s and immigration compliance.
00:20:27
Speaker
It was a huge topic at the time, right? It was right after the election. Everybody's wondering what was going to happen. So since that episode a year ago, what's changed? Are there any new enforcement priorities, policy shifts, any gotchas that staffing firms should have on their radar next year?
Importance of I-9 Compliance
00:20:42
Speaker
And it's crazy to think that it's only been a year, right? It feels like it's been a long time that we've been talking about immigration and compliance and just that entire environment has just been turned on its head. we all see it on the feeds.
00:20:56
Speaker
There's a lot of activity around raids and detentions. That's still happening. Temporary protected status being removed, lawsuits being filed, court decisions being made, appeals happening. i mean, it's just, it's this constant nonstop.
00:21:12
Speaker
What I would say from the employer perspective is, and this doesn't make the news, but I-9 audits are also up. And so even just three years ago on the kind of the priority and risk matrix, I-9s would have been a little bit low for me. They're important. You have to have them for every employee.
00:21:33
Speaker
You can go in and audit and make certain corrections from year to year if you find mistakes, but I wouldn't lose sleep over them as much. Today, I feel like it's more important to make sure Your I-9s are being completed in a timely manner, being completed correctly, because there really is this buzz around immigration and this desire to make examples of companies, of people, of states, right? We're seeing specific states being targeted.
00:22:03
Speaker
And so it's become a little more important in my mind that Form I-9 compliance be fine-tuned and put in place. Typically, a staffing firm won't necessarily be a target of a I-9 audit from ICE as the primary.
00:22:19
Speaker
We usually get brought along with our client companies, right? So usually your big client company has a location responding to ICE and Department of Homeland Security providing their I-9s.
00:22:31
Speaker
And the federal agents are asking who else works here and who do they work for? And so that's how they get the name of the staffing firm. And so we typically are in a little bit of a better situation, at least least worst, in the sense that we can probably negotiate the production of I-9s only related to the employees at that client company and within a certain time frame and that type of thing.
00:22:55
Speaker
But still pretty important to keep eyes and ears open and listening for cues from clients who are maybe the subject of an audit or a demand letter and just keeping those I-9s tight and in place.
00:23:08
Speaker
That's a big one. So Leah, follow-up question. When you get a new client and you dig in and start looking at their I-9 and immigration practices, what are the top red flags you see people making the same mistakes with over and over again?
00:23:21
Speaker
What comes up most often with you guys? Yeah, I think the lack of written process on something that's so repeatable across the organization is something I'm generally surprised at. That a lot of firms, if they don't have a centralized vendor that it's tied into the ATS and it's automatically... engaging in this process for that they utilizing automation. If they're not using automation and you've got humans in the mix there, having a defined simple process, because the I-9 really is the most complicated form, in my opinion, in the country. I mean, I i think I could fill out my tax returns easier.
00:23:55
Speaker
is Just the employer guide alone for the Form I-9 is like 200 pages long, right? I mean, to tell you how to fill out what was a one-page form. So there is just a lot baked into those things. And so developing that process and having one in place is important.
00:24:12
Speaker
And then the other thing I would caution folks on is We're seeing a lot of knee-jerk reactions from end-using clients in response to a lot of the executive orders, the temporary protected statuses expiring, asylee status being revoked, all the things we're hearing about.
00:24:28
Speaker
And so staffing firms want to be cautious and really serve as a partner and a expert resource to their end-using clients to help them from stepping in it when those clients ask for a list of every employee working here who's not a citizen.
00:24:45
Speaker
Or I want you to give me a copy of all your I-9s. They start to make requests that we can get around in different ways and help to get to what they're actually looking for. But they might be asking for unlawful information, right? They might be asking for personally identifiable information.
00:25:02
Speaker
And so remaining cautious of client requests that might increase risk for both is important. I remember being scared to death when I first got into staffing with I-9s because it was like, oh, if one letter is wrong on their last name, that could be a $10,000 fine, right? like Joanne, I want to ask you, so a lot of firms, they're not trying to cut corners, but maybe they just think things are just messy and confusing.
00:25:24
Speaker
So if a staffing firm wanted to do kind of a quick 30-day mini immigration audit, what are a couple things they could do to move the needle before they call you, of course? Yeah, so I think to Leah's point, under the Biden administration, it was all about making sure you didn't have over-documentation and discrimination of folks. And under this administration, it's all about not having undocumented people on your payroll.
00:25:47
Speaker
And so I think if you're going to do a mini audit, you would want to focus on your highest risk areas. states where you know you might have some issues that you want to remediate or maybe sites that you have issues and want to remediate. And you would focus on that.
00:26:01
Speaker
If you're going to do an I-9 audit, don't have to go back two years. I'd focus on the people who are currently on assignment because those are your highest people. You don't need to oil the ocean here. Let's just make sure that everybody who is out today is authorized to work, that we have the documentation to prove it and that we have a good process going forward.
00:26:18
Speaker
So Leah, I kind of want to shift gears again here.
AI and Legal Implications in Staffing
00:26:22
Speaker
Let's talk about AI and recruiting. It's the hot topic right now. Sourcing tools, chatbot, all the things.
00:26:30
Speaker
We've already seen places like New York City require bias audits and public disclosure for automated employment decision tools. And state and local regulators are stepping into the AI void with their own rules.
00:26:43
Speaker
From a legal and risk standpoint, how should staffing leaders be thinking about AI and their tech stack? Yeah, they should absolutely be focused on it, right? I mean, it's what we're all talking about. It's the topic of the year for sure. Your employees are using it every single day, whether you've approved them to or not. So we need to really come to terms with the fact that it's here and it has a lot of really great benefits that can parse resumes, it can recruit, it can serve to automate answering and routing phone calls and giving responses in some instances.
00:27:15
Speaker
So really helping to drive accuracy, automation, efficiency, all the things that are good. And what staffing firms, I think, want to be cautious of are state by state to the extent that there are regulations and laws coming into play. And obviously there's some conflict there between federal government and states. But what folks want to be cautious about with ai at a 30,000 foot level is to make sure that if it is being utilized in any way to make decisions,
00:27:45
Speaker
that you're reviewing and ensuring that those decisions are not inadvertently discriminating against individuals or have any built-in bias. And so all very important in order to remain compliant is for firms to conduct those audits and reviews themselves so that those things can be fixed proactively. The last thing you want is for a state regulator to come in. do the audit, find the problem, and then give you the big penalty bill. So mapping out where does AI exist in our organization? Because every vendor and every supplier has it plugged in somewhere. It's like everything you know now has an app. Everything we use now has AI somewhere within it. So just understanding and mapping out where the AI is being used and then really ensuring that the bias and discrimination piece is taken care of.
00:28:34
Speaker
I know you both see a lot of vendor contracts and a lot of quote unquote cool tools that agencies want to plug in. What are the biggest mistakes staffing firms make when they adopt AI driven tools, especially around, like you mentioned, hidden bias or lack of documentation and business continuity.
00:28:49
Speaker
If that tool suddenly disappears or becomes noncompliant. I think you discussed a couple of them, but number one, I think most important is we can't do AI in a vacuum. Companies need to really take this brave new world seriously and have some sort of governing board to make sure that all AI that is being used by the company is sanctioned. And they need to have a very strong policy, train on it, and take discipline if people are using unsanctioned tools. So that's number one.
00:29:14
Speaker
The second is dealing with these vendors. We've got to work with vendors, and I know there's a lot of new folks in this space, and they're wonderful, but we've got to make sure we're working with vendors who are going to be around. they're not fly-by-night, that they've got good backing, and that they can stand behind the protections that they're promising you.
00:29:30
Speaker
In terms of the contract, we should be asking for them to do two really important things. Number one, warrant and represent that this tool is not going to break the law. We can't promise that. We don't know what they're doing in terms of how the algorithms are working. They have to do the bias testing and then promise it to us. So we need to rely on the vendors that they are going to comply with all the different laws and that they're going protect our data, that there's going to be protection in the case of a data breach. And if the vendor is not willing to put that in the contract and indemnify the staffing for that, I'd really question whether or not they're a good partner.
00:30:01
Speaker
anda So we're all watching the headlines and the federal government's talking about trying to preempt state AI laws. We're talking about executive order that would effectively block most state-level AI regulations for a decade. You create a national framework.
00:30:16
Speaker
If something like this actually does land, what does it change for staffing firms that are trying to stay compliant? Does it make life easier? Or do you still plan on trying to work around a patchwork of the different state expectations as well?
00:30:30
Speaker
Yeah, who knows, right? I mean, it's a little bit anybody's guess right now. Just a few days ago, we saw an executive order come out to restrict and prohibit states from regulating in the AI space.
00:30:42
Speaker
We know that 36 states, their attorneys general objected to that prohibition before it was signed. It's not clear constitutionally if that's going to withstand. So we're getting into this cycle of litigation again. We've got states that have AI regulation in place. We've got a little patchwork going on.
00:31:01
Speaker
Then we have an executive order that may or may not withstand the test of legal scrutiny. So we have to wait and kind of watch these legal challenges take place. And depending on when this airs, everything could be a complete 180.
00:31:13
Speaker
If it airs tomorrow or in an hour, we're in this fire hydrant type scenario where things are just coming left and right and changing day to day. I do feel like, and I feel like this around a lot of things, if there were a federal standard, it would be simpler operationally for every company to comply and to meet that. Otherwise, you're just always going to be stuck in having to comply with the strictest version, because how else can you possibly control this digital world we live in? It doesn't recognize geographic borders. right So I do think it would be simpler in that sense, just like I would say the same thing about paid sick leave or... Minimum wage. that there If there was a standard that the states couldn't come in and regulate.
00:32:00
Speaker
And so it'll be interesting to see where that lands. but Right now, if I'm sitting in New York, I'm probably going to comply with New York's AI law. If I'm in California, I'm going to comply with it because I think they're going to be the most aggressive about enforcing, regardless of whether or not there's an executive order.
00:32:18
Speaker
And so if the executive orders withstand scrutiny, i think we might see some of the states drop their AI regulation because they're going to lose federal funding. Who knows? Right. I wish I could magic eight ball that.
00:32:30
Speaker
Go on to what you originally said of just focus on the most at risk states first. Right. If you got a lot of states you're in, look at the a laws in California first. That's the state that's going to knock on your door first.
00:32:42
Speaker
Absolutely. you're breaking anybody. So, Joanna, let's pretend I'm a staffing owner. I'm listening to this in my car. I'm using at least one AI-powered sourcing or ranking tool.
Best Practices for AI in Staffing
00:32:52
Speaker
And now i'm wondering, are we exposed? So, there are a couple practical guardrails that you would want in place as far as policies, audits, contract language, so that if a regulator or plaintiff's lawyer or a big client comes knocking, they can show they weren't just blindly trusting the algorithm.
00:33:09
Speaker
I think there's two main things, well, three. One is having a policy in place, a governing committee not using unsanctioned ai And then in addition to that, doing some auditing or requiring the vendor to produce auditing to show that the decision-making is not having a disparate impact on protected classes. And number three, making sure that you have access to the data if and when a claim comes. That's a real big question mark.
00:33:32
Speaker
If an algorithm is making decisions about who moves forward in a recruiting process and we get an EEOC claim, Is the vendor going to be able to pull the data and be able to demonstrate why it ranked one candidate higher than another? So we want to make sure that we have access to that information.
00:33:46
Speaker
Those are three really important things you can do to protect yourself. So Leah, our industry people jump around
Non-Competes and Confidentiality
00:33:52
Speaker
a lot. And I think if we asked 10 different staffing employees, we'd probably get 10 different answers on this. And it all relates to non-competes.
00:34:01
Speaker
And we've seen the roller coaster with the FTC attempt to have a nationwide band. and then the courts stepping in from your vantage point, where are we now and not compete with staffing firms?
00:34:13
Speaker
You know, I feel a little bit like they're going the way of the fax machine. They're dated now. There is such a state by state patchwork of regulations and restrictions and prohibitions that you have to create one for every state. They all have different notice requirements. They might have different salary requirements. Colorado criminalizes it in some instances.
00:34:34
Speaker
Some are limited by professions. Sometimes you can't enforce them until you hit a certain tenure. And a lot of firms have realigned and focused on what's most important to them, which is the protection of their confidential information and the non-solicitation of their employees and their customers.
00:34:52
Speaker
Most clients I'm having experiences with in and around the non-compete space now are to strengthen those two provisions because they feel, and and correctly so, that that will help enhance the enforceability of the restrictive agreement.
00:35:08
Speaker
Whereas if you lop in that non-compete on top of that, they are still strongly, strongly disfavored. I don't care what state you're in Judges don't like non-competes. That's who you have to go to to enforce them.
00:35:20
Speaker
The only time we see these non-competes enforced is when it's accompanied by bad acts, which is the non-solicitation or the stealing or misappropriation of confidential information.
00:35:32
Speaker
So that's really where you can build a document that is as enforceable as possible and can look like the more reasonable party when you go to try to enforce it Awesome. Well, I can't say how much we loved having you both on first episode with two guests, and I couldn't think of two better guests to have on. just We appreciate the way you really take complicated, scary stuff and turn it into, okay, here's
Connect with the Experts
00:35:57
Speaker
what to do next. So for folks listening and thinking we need this kind of brain in our corner, what's the best way they can get in touch with you both and learn more about Staffing GC?
00:36:06
Speaker
Thank you so much for having us. And we'd love to connect with your listeners at any time and feel free to find either one of us on LinkedIn. Connect with us there, whether you want to send a message and talk now or not, but get on our LinkedIn page, get up-to-date information.
00:36:21
Speaker
You can also go through our website, which is staffinggc.com. And there's a contact us and get us an email. And we're more than happy to connect with people. And for everybody else listening, if this help episode helped you out, do us a favor, share it with your other staffing leaders or somebody needs a little legal reality check.
00:36:40
Speaker
And make sure you're subscribed. Don't miss out on future episodes. You can also connect with us on LinkedIn. Check out the Staffing Made Simple group where we keep these conversations going. See how you can partner with Simple VMS to differentiate your agency, grow sales, and add new revenue stream.
00:36:55
Speaker
Thanks for hanging out with us today. And we'll see you on the next episode of Staffing Made Simple. This has been an episode of Staffing Made Simple powered by Simple VMS, the vendor friendly VMS.