The New DOL Proposal Gives Employers More Reason to Say Yes to Contract Staffing

A Win for Employers Using Contract Staffing

The Department of Labor is proposing a new rule that could bring more clarity to joint employer liability, especially for businesses that use contract workers through staffing agencies. That makes this proposal important for employers and good news for contract staffing.

Contract staffing can be a flexible, convenient way to hire short-term talent, but employers still need to understand how joint employer liability works. When a staffing agency places a contract worker with a client company, both parties play a role in the working relationship. The staffing agency typically manages the employment side, while the client company directs the work that needs to be done.

That is where the question comes in:

Who is responsible for these workers: the hiring company or the staffing agency?

In some cases, it’s both.

And that’s where joint employer liability comes into the picture.

This legal concept establishes that if both parties share control over the hire, they may both be responsible for things like unpaid wages, workplace violations and employee rights claims.

Currently, joint employer guidelines are inconsistent, so the DOL is releasing a new proposal to address the rules. This new approach is designed to create more flexibility and clarity, which could help reduce exposure for businesses.

If you’re using contract workers through staffing agencies, it’s critical to understand your joint employer risk and how these evolving rules apply to your business.

The challenge is that many companies still don’t fully understand how contract staffing works, or where the legal responsibility actually sits when a staffing firm is involved. And that lack of understanding is what can make contract hiring seem riskier than it actually is.

What Is Joint Employer Liability?

Joint employer liability is when two companies are legally held responsible for a worker at the same time. 

Let’s say your company partners with a staffing agency to hire contract work. The staffing agency manages certain aspects like the worker’s payroll, while you’re in charge of their schedule. Because you and the staffing agency both have control over the hire, you could both be treated as employers, even if you didn’t actually do the hiring yourself. 

If you act like an employer, you could be treated like one. And if something goes wrong with the worker’s pay or rights, you could be on the line. 

Does Contract Staffing Increase Legal Risk for Employers?

There are many reasons contract staffing works well for both employers and workers, but one of the biggest questions we hear from clients is whether bringing contractors on through our firm exposes them to additional legal risk.

The truth is, our contract staffing model is built around clear boundaries. Our agreements define what we manage, what the client manages and where employment responsibility sits. In that sense, the proposal does not change the foundation of how we work. It validates the kind of structure we already have in place.

That matters because many organizations hesitate around contract staffing, even when the model is properly structured. They may understand the business value, but still worry about legal exposure, compliance or where responsibility ultimately falls. The DOL’s proposal gives employers a clearer framework for understanding that risk and reinforces why working with the right staffing partner matters.

The Four Factors Employers Should Know

Reputable staffing firms already build their agreements around clear roles and responsibilities but the gray areas surrounding joint employer status has been a point of confusion for many employers, especially around where the staffing firm’s responsibility ends and the client’s responsibility begins. That uncertainty is why many companies are hesitant to bring on contract talent, even when there is an agreement where the relationship is structured correctly. The DOL’s proposal is designed to more clearly define what it means to control key employment activities.

The new rule looks at:

• Who hires and fires the worker?
• Who controls the worker’s schedule and conditions of employment?
• Who determines the worker’s pay and method of payment? 
• Who manages the worker’s employee records? 

On the surface, these four items seem obvious in theory, but it starts to get messy in real staffing relationships because both parties are naturally involved in the worker’s day-to-day experience. The firm providing the employee may handle payroll, onboarding, records and employment paperwork. But the employer may still tell the worker where to report, what hours to work, what projects to complete, who to work with and whether the assignment is going well — and that’s where the gray area is. It’s hard to know where to draw the line between normal business direction and employer-level control.

Why Structure Matters When Using Contract Staffing

Contract staffing is becoming more valuable because companies need flexibility. But flexibility only works when the structure is clear.

If a company brings in staffing agency talent and then manages that person like a direct employee, the line starts to blur. The agency may process payroll, but if the client company controls the schedule, directs performance issues, changes pay, disciplines the worker or makes termination decisions, it can create joint-employment risk.

That defeats the point of using a staffing partner.

The whole purpose of contract staffing is to give companies access to talent without taking on every piece of the employer relationship. To protect that model, employers need clear boundaries with their staffing agency around who manages what.

How to Benefit From Contract Staffing With More Confidence

To get the full benefit of contract staffing, let the staffing firm be the employer. Follow the structure, keep the boundaries clear and let the firm do what you hired them to do.

When you define who owns what, communicate openly and keep management boundaries clear, contract staffing opens the door to skilled professionals you may not reach through a traditional search, including people who want flexibility, project-based work or a faster way to step in and contribute. It also reduces administrative burden, helps teams move faster and keeps important work from stalling while you search for a permanent hire.

That is the advantage of using contract staffing the right way, with confidence.

To learn more about building a contract staffing partnership through EZ Temps, our contract staffing division, contact us at Boutique Recruiting today.