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The staffing shortage faced by Minnesota's Community Residential Settings (CRS) has been exacerbated by the COVID-19 outbreak, making it even more challenging for CRSs to meet their staffing obligations. At the same time, COVID-19 has resulted in some day training and habilitation (DT&H) programs closing their doors, at least temporarily. This means that residential consumers who would routinely spend a significant portion of their day at their DT&H must remain at their residential setting, putting even more stress on the CRS's staff. This article provides an overview of how a DT&H program may use an employee lease agreement to lease employees to a CRS.

Key Takeaway

Under a typical employee lease agreement, sometimes referred to as a "secondment" agreement, the DT&H program would "loan" its employees to CRS in exchange for payment based on the number of hours worked by each leased employee. The CRS would likely oversee the day-to-day work of the employees, while the DT&H program would retain responsibility for paying wages, payroll and other taxes, and other benefits and costs typically incurred by an employer. An employee lease agreement may be an option for other organizations facing staffing shortages, such as skilled nursing facilities or assisted living facilities, if they can identify a willing employer who has furloughed their staff, and if that staff is trainable.

Until now, employee leasing agreements were not commonly used by residential providers in Minnesota, but this contractual arrangement has been relied on in many other settings.

What are key issues to address in an employee leasing agreement?

There are several important issues that the parties should address, including:

  • The duration of the agreement, scope of services to be provided and location where the services will be performed;
  • Rate of compensation for the leased employees;
  • Which party is responsible for workers' compensation coverage;
  • The CRS's ability to seek reimbursement from third party payers for the services provided by the leased employees;
  • Confidentiality obligations imposed on the leased employees;
  • Required experience, licensure or certification of the leased employees and the CRS's ability to approve or reject proposed leased employees;
  • Insurance coverage obtained by the DT&H program and/or the CRS;
  • Non-solicitation or non-hire obligations of the parties with respect to the leased employees;
  • Indemnification obligations;
  • Responsibility for payment of wages, benefits, payroll taxes and other costs typically borne by an employer; and
  • Training and supervision of the leased employees.

What about background checks or other regulatory requirements?

The parties should ensure compliance with Minnesota Statutes Chapter 245C governing background checks, which may require a background check initiated by the CRS prior to commencement of services by the leased employee, even if he or she has already been vetted by the DT&H program. Be mindful, however that CMS, DHS and MDH are all in the process of relaxing certain regulatory standards in response to the COVID-19 crisis. The parties to any employee leasing agreement should track and adhere to all shifting standards.

For more information or for assistance in preparing an employee lease agreement, please reach out to Andrew P. Holm or Katherine B. Ilten.


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