In today’s complex employment landscape, staffing agencies play a critical role in helping businesses quickly fill labor gaps. They supply temporary, seasonal, and contract workers across multiple industries — from healthcare and manufacturing to logistics and construction. But when one of those workers gets injured on the job, a big question arises: Who is actually liable — the staffing agency, the client company, or both?
That’s where the issue of shared liability under workers’ compensation becomes crucial. Determining responsibility can be complicated, especially when two entities — the staffing firm and the host employer — share control over the worker’s duties and safety conditions. Each side has its own legal and financial obligations under workers’ comp law.
At Redvo Workers Comp Brokers, we specialize in helping staffing agencies navigate these gray areas. Our brokers understand how liability is assigned, what coverage you need, and how to protect your agency from costly claims or compliance issues. In this guide, we’ll unpack the realities of shared liability in staffing arrangements — including legal precedents, insurance best practices, and ways to minimize exposure for both staffing firms and their clients.
Understanding Workers’ Compensation in Staffing Arrangements
Workers’ compensation is designed to protect employees who suffer job-related injuries or illnesses. In traditional employment relationships, the employer is clearly responsible for providing coverage. However, staffing agencies create a joint employment scenario — where both the agency and the client company may influence work conditions.
The Dual-Employer Relationship
Staffing arrangements usually involve:
- The staffing agency – Official employer of record; pays wages and maintains workers’ comp coverage.
- The client company (host employer) – Controls day-to-day supervision, workplace safety, and training.
This dual control means that both entities share some level of responsibility for worker safety and compliance.
| Role | Primary Responsibility | Workers’ Comp Implication |
| Staffing Agency | Employment, payroll, coverage | Must provide workers’ comp policy |
| Client Company | Supervision, worksite safety | Can be held liable for unsafe conditions |
Redvo Insight
Redvo helps agencies structure contracts and policy terms to clearly define who covers what. This prevents disputes and ensures that, in the event of a claim, your agency is legally protected and fully compliant.
When Liability Becomes Shared
Shared liability under workers’ comp arises when both the staffing firm and the client company contribute to the circumstances that caused the injury. This often depends on who had control over the work activity and who provided the unsafe condition.
Common Scenarios Leading to Shared Liability
- Unsafe workplace conditions – The client failed to maintain safe equipment or proper training.
- Improper worker placement – The staffing agency placed a worker in a role without confirming adequate qualifications.
- Lack of communication – Neither party properly shared safety protocols or hazard information.
Legal Framework
Most states follow the “borrowed servant doctrine” or “dual employment rule,” which means:
- The staffing agency remains responsible for maintaining the workers’ comp policy.
- The client company may still face civil liability if negligence contributed to the injury.
Redvo Insight
At Redvo Workers Comp Brokers, we guide staffing agencies through state-specific laws to clarify their exposure and avoid misclassification errors that can lead to shared liability or denied claims.
How Courts Determine Liability
Courts typically examine several factors when deciding if liability should be shared between the staffing agency and client company.
Key Factors Considered
| Factor | Description | Implication |
| Control | Who directed the worker’s actions? | Greater control = higher liability |
| Payment | Who paid wages and benefits? | Staffing agency remains employer of record |
| Training | Who provided safety or job-specific training? | Shared responsibility possible |
| Worksite Ownership | Where did the injury occur? | Host employer likely shares exposure |
Case Example
A temporary forklift operator placed by a staffing agency was injured due to defective warehouse equipment. The agency’s workers’ comp policy covered medical costs, but the court also found the host employer partially liable because they failed to maintain safe machinery.
Redvo Insight
Redvo assists staffing firms in crafting clear indemnity clauses and client agreements that specify how risk and control are distributed. This helps minimize liability disputes and ensures your coverage aligns with actual on-site realities.
Workers’ Comp Coverage Responsibilities
In most cases, the staffing agency must carry the workers’ compensation policy. However, the client company’s actions can still influence how liability unfolds.
Who Must Provide Coverage?
- Staffing Agency: Always required to maintain a valid workers’ comp policy for its temporary employees.
- Client Company: Typically covered through the agency’s policy, but may still be liable if found negligent.
Why Proper Coverage Matters
- Prevents lawsuits by ensuring injured workers receive benefits quickly.
- Demonstrates compliance with state and federal labor laws.
- Reduces financial exposure for both parties.
Redvo Insight
Redvo Workers Comp Brokers works with both new and established staffing agencies to find competitively priced, compliant policies that align with client risk levels — especially in high-hazard industries like construction or manufacturing.
Indemnification Agreements and Contract Clauses
The foundation for avoiding shared liability lies in the staffing contract between the agency and the client company. These agreements outline who is responsible for workers’ comp coverage, claims handling, and safety obligations.
Key Contract Provisions
- Indemnity Clause: Specifies which party will reimburse the other in case of a loss or claim.
- Insurance Verification: Confirms that both parties maintain required policies.
- Safety and Training Requirements: Establishes expectations for workplace protection.
Example Indemnity Clause
“The client company agrees to indemnify and hold harmless the staffing agency from any liability arising from workplace safety violations or negligence occurring at the client’s worksite.”
Redvo Insight
Redvo helps staffing firms review and revise indemnification language to ensure enforceability. Our brokers coordinate with insurance carriers and legal teams to prevent hidden coverage gaps that could lead to shared liability.
OSHA and Safety Responsibility
Even though the staffing agency provides the coverage, OSHA considers both employers responsible for maintaining a safe work environment. The agency must ensure its workers are properly informed about hazards, while the client company must manage on-site safety.
Shared Safety Duties
| Party | OSHA Role | Key Obligation |
| Staffing Agency | Co-employer | Ensure worker awareness of hazards |
| Client Company | Host employer | Provide a safe workplace and PPE |
Common OSHA Violations in Staffing Scenarios
- Failure to train temporary workers on site-specific hazards.
- Lack of communication about chemical exposure.
- Inadequate personal protective equipment (PPE).
Redvo Insight
Redvo Workers Comp Brokers educates staffing clients on how strong safety collaboration reduces claim frequency — directly impacting their workers’ comp premiums. Our approach helps agencies document compliance and lower audit risks.
Misclassification and Coverage Gaps
Liability issues often arise from employee misclassification, when a staffing firm or client incorrectly labels workers as independent contractors or assigns the wrong job code.
Common Misclassification Errors
- Listing a high-risk worker under a low-risk class code to reduce premiums.
- Classifying temps as independent contractors without coverage.
- Failing to update policies when job duties change.
Consequences
- Policy cancellations or non-renewal.
- Retroactive premium increases after audits.
- Potential civil penalties for noncompliance.
Redvo Insight
At Redvo, we specialize in correct classification and policy structuring to help staffing agencies maintain accurate records, minimize audit surprises, and avoid unexpected liability sharing with clients.
How to Minimize Shared Liability Risk
Reducing shared liability begins with clear communication, documentation, and proactive safety management between the staffing firm and client company.
Best Practices
- Use written agreements that clearly define responsibilities.
- Audit client worksites to ensure compliance before placing workers.
- Maintain open communication about incidents and hazards.
- Provide dual safety training — from both the agency and the client.
- Document everything — from training to incident responses.
Sample Checklist
| Action | Responsible Party |
| Provide PPE | Client Company |
| Verify insurance coverage | Staffing Agency |
| Maintain injury logs | Both |
| Report claims promptly | Staffing Agency |
Redvo Insight
Redvo supports staffing agencies with risk assessment and claims consulting, helping them implement strong safety protocols and prevent costly joint liability outcomes.
State Variations in Liability Rules
Workers’ compensation laws are state-specific, and liability rules differ depending on where the injury occurs. Some states recognize exclusive remedy protections, while others allow third-party lawsuits if negligence is proven.
Examples of State Variations
| State | Primary Liability | Notable Rule |
| California | Staffing agency | Dual employer recognized |
| Texas | Optional coverage | Client may bear more risk |
| Florida | Staffing agency | Co-employer model enforced |
| Illinois | Shared | Indemnity agreements required |
Redvo Insight
Our team at Redvo constantly tracks state-level regulatory updates so agencies remain compliant across jurisdictions. Multi-state staffing firms especially benefit from our nationwide carrier network and legal partnerships.
The Role of Insurance Brokers in Managing Shared Liability
Working with an experienced workers’ comp broker can dramatically reduce liability exposure. Brokers serve as intermediaries between staffing agencies, carriers, and clients — ensuring all parties understand their obligations.
What Brokers Like Redvo Provide
- Policy structuring and classification guidance
- Safety program consulting
- Claims management assistance
- Contract review and risk allocation support
Why Redvo is Different
Unlike general insurance agencies, Redvo Workers Comp Brokers specializes in staffing industry coverage. Our experts understand the nuances of dual employment, OSHA compliance, and industry-specific risks. We help agencies negotiate better terms, avoid coverage gaps, and build trust with clients through transparent documentation.
Real-World Example: Avoiding Liability Through Proper Planning
A mid-sized staffing agency in Georgia placed workers at a packaging facility. After an injury, the client’s insurer claimed the staffing firm was liable because the worker was under their payroll. However, Redvo’s structured indemnity agreement and clear classification documentation helped shift liability to the negligent host employer. The result: no premium increase, no lawsuit, and continued business with the client.
Lessons Learned
- Clear contracts prevent disputes.
- Proper safety records strengthen defense.
- Working with a specialized broker ensures compliance and protection.
Wrapping It Up
Shared liability under workers’ compensation doesn’t have to be a gray area. With the right contracts, coverage, and broker guidance, staffing agencies can protect their businesses while maintaining strong client relationships.
At Redvo Workers Comp Brokers, we help staffing firms navigate every aspect of workers’ comp — from policy placement and compliance to risk reduction and cost management. Whether you staff construction crews, healthcare workers, or administrative professionals, Redvo ensures your coverage aligns with your actual exposure and legal responsibilities.
Visit Redvo Workers Comp Brokers today to learn how we can help your agency reduce liability, secure affordable coverage, and stay compliant across every industry and state you operate in.
