of contention will be over payment of those debts,
judged either by comparison with the history of billings and collections between the staffing firm and
client or by comparison with industry standards.
Thus, this defense puts a premium on consistency in business practices, including billings and
collections. The defense is most easily invoked
where a client and staffing firm have a clearly
written agreement on credit terms and the staffing
firm and client have consistently complied with
those credit terms.
Subsequent services. The Bankruptcy Code
provides an additional defense that applies when a
staffing firm has provided new value, or additional
services, subsequent to those at issue in the preference claim, and has not been paid for them.
In essence, the new value can be netted against
any payment the staffing firm might have to return
in a preference claim. This defense is not one that
creditors plan for. It simply mitigates the unfairness
of a staffing firm being left with unpaid invoices and
also having to return payment.
Employee wage protection. Staffing firms may
question whether they are protected from preference
claims on the theory that payments from a bank-
rupt client would constitute payments of employee
compensation, which are protected under the Bank-
ruptcy Code.
Unfortunately, because temporary and contract
employees generally are employees of the staffing
firm, and not employees of the client, most debtors
or trustees would be quick to argue that such protection does not apply.
Infinite Variability
The facts and circumstances relevant to the application of the legal principles outlined here are infinitely variable, making the principles difficult to
apply. As a result, most preference claims can be
settled in the demand stage (i.e., before trial). n
Lee W. Stremba is a partner at Troutman Sanders LLP in
New York. This material is not intended, and should not
be relied on, as legal advice. ASA members should consult
with their own counsel about the legal matters discussed
here. Send feedback on this article to success@americanstaffing.net. Follow ASA on Twitter @Staffing Tweets.
