A staffing agency employs the worker on paper. The client controls the worker in practice. When something goes wrong, the law can treat both of them as the employer, and the contract decides who ultimately pays.
A staffing agency lives with a structural oddity most of its clients never think about. The agency is the employer: it recruits the worker, screens her, puts her on its payroll, pays her taxes, and carries her workers’ compensation. Then it sends her to a workplace it does not run, to be told what to do, when to arrive, how fast to work, and when to leave, by supervisors it does not manage.
Control, in other words, is split. And the law has a name for what that split can create. The American Staffing Association defines co-employment as a relationship in which two businesses each hold legal rights and obligations as an employer of the same worker; clients are generally co-employers of temporary workers precisely because they direct the day-to-day work.[1] Joint-employer status under the wage-and-hour laws turns on the same thing: who sets the schedule, who supervises, who controls the work.[2]
You can’t contract your way out of it, but the contract still decides who pays
Here is the part that matters, and the part that is easy to get wrong. A contract cannot override that analysis. If the client controls the work, a court or agency can find the client is a joint employer no matter what the agreement says, and joint employers are jointly and severally liable: each can be made to pay the whole wage-and-hour judgment, unpaid wages, overtime, liquidated damages, and attorneys’ fees, even the agency that cut every paycheck correctly.[3]
So the contract does not decide who the employer is. What it decides is who ultimately bears the cost when that liability lands, through the indemnity, and how much control and obligation the agency signs up for in the first place. That is not a small thing. It is the difference between a claim that comes home to the party whose conduct caused it and a claim the agency pays for alone.
Three places the split becomes the agency’s bill
None of these looks dangerous at signing. Each is a single term that was missing or pointed the wrong way.
A worker sues, and the indemnity runs one way. A temp claims a client-side supervisor harassed her, or that the client’s floor kept the crew off the clock. The agency is the employer of record, so it gets named. It turns to the indemnity, the clause that should send a claim about the client’s conduct back to the client, and finds it runs in one direction only: the agency indemnifies the client, and the client indemnifies no one. One-sided indemnification is the norm on client paper, and it puts the agency on the hook for client-caused injuries and client-directed labor-law problems; a balanced clause has each side answer for its own conduct, and mutual indemnification is increasingly the market standard.[4]
The client hires the placement for free. The agency sourced the worker, screened her, and carried the cost of finding her. Months in, the client hires her directly and the contract says nothing about it. A conversion or buy-out fee exists precisely to protect that sourcing investment, commonly a set percentage of the worker’s first-year pay, often prorated down as the assignment runs.[5] Silence doesn’t make the fee smaller. It makes it zero.
The overtime the agency didn’t schedule but still owes. The client’s supervisor keeps the crew late all week. The agency didn’t set that schedule, but it cuts the checks, and because the client controls the hours, both are exposed on the wage-and-hour claim that follows.[6] Wage-and-hour class and collective actions are the most-filed complex litigation in the country, with roughly 5,700 FLSA cases filed in federal court in 2025.[7] A contract that leaves timekeeping and overtime entirely on the agency, for hours a client manager decides to work, hands the agency the exposure without the control.
The standard keeps moving; the through-line doesn’t
Anyone waiting for the law to settle will be waiting a while. In 2026 alone the joint-employer standard moved twice: the National Labor Relations Board reinstated the narrower 2020 “substantial direct and immediate control” test, and the U.S. Department of Labor proposed a new joint-employer rule under the federal wage-and-hour laws.[8] Which way it finally lands is above any one agency’s pay grade. What does not change is the input: every version of the test turns on control, and control is exactly what a staffing contract parcels out, clause by clause. When the law is unsettled, the contract is the steadiest variable an agency has.
What belongs in every client agreement
None of this requires turning a branch manager into a lawyer. It requires a short list of things to be true in the paper, every time.
The workers are the agency’s employees, and the client directs and supervises them while they do the client’s work, stated plainly, so the record matches reality. The indemnity runs both ways, so the client answers for claims arising from its supervision, its site, and its people. The client verifies hours and authorizes overtime before it happens. A conversion fee applies if the client hires the worker. The agency carries workers’ compensation while the client keeps responsibility for the safety of its own site, which is where the ASA puts it, too: the client has primary responsibility for a safe worksite.[9] And on the commercial side: invoices due on receipt, interest when they run late, and, on a multi-year deal, the right to pass a minimum-wage or payroll-tax increase through to the rate.
When the paper won’t move
Sometimes the agency cannot change a word: a national client’s master agreement, or a program run through a vendor-management system. Reading still matters, and here it matters more, because the term is going to bind and no redline is coming. Reading it before signing lets the agency price the risk instead of discovering it, ask its broker whether coverage reaches the obligation, and decide with open eyes whether the account is worth what it is asking the agency to carry. The only bad version is signing a term nobody read and nobody could have changed anyway.
The point is to sign, after reading
Client paper that tilts toward the client is where nearly every staffing deal begins, and agencies win by working through it, not walking away. The task is narrow: catch the two or three terms that decide who bears the cost when something goes wrong, settle those, and let the rest stand. The agency still takes the account. It just stops agreeing, by accident, to pay for a workplace it will never see.
What makes this hard is volume, not law. Reviewing every client agreement against the same set of positions, with the same attention on the hundredth order as on the first, is precisely the step a busy branch skips, and the one time the skip matters, it costs a claim the agency assumed was someone else’s. That is the case for a consistent review on every contract, and for tools like ReviewPro that run it in minutes, inside Word: they flag the supervision left silent, the indemnity that runs one way, the missing conversion fee, so the terms that decide who pays surface before signing.
Two employers, one worker. The law decides who the employer is. The contract decides who pays. Read it before you sign it, and that question stops being a surprise that arrives with a lawsuit.
ReviewPro is not legal or insurance advice. Confirm your positions with your counsel and your broker.
[1] American Staffing Association, “Co-Employment: Employer Liability Issues in Third-Party Staffing Arrangements,” which defines co-employment and notes that clients are generally co-employers because they direct day-to-day work, and that clients bear primary responsibility for a safe worksite. https://americanstaffing.net/workforce-solutions-for-staffing-clients/staffing-employment-law/co-employment/
[2] Under the FLSA, joint employers are jointly and severally liable for wage-and-hour violations, including unpaid wages, overtime, liquidated damages, and fees; the test turns on control over schedule, supervision, pay, and records. See U.S. Department of Labor, Wage and Hour Division. https://www.dol.gov/agencies/whd
[3] Under the FLSA, joint employers are jointly and severally liable for wage-and-hour violations, including unpaid wages, overtime, liquidated damages, and fees; the test turns on control over schedule, supervision, pay, and records. See U.S. Department of Labor, Wage and Hour Division. https://www.dol.gov/agencies/whd
[4] On limiting liability and allocating risk through indemnification in staffing agency agreements, including mutual indemnity under which each party covers claims arising from its own negligence. Strafford (attorney CLE), “Limiting Liability in Staffing Agency Agreements: Defining Key Provisions and Avoiding Risks.” https://www.straffordpub.com/products/limiting-liability-in-staffing-agency-agreements-defining-key-provisions-and-avoiding-risks-2023-01-17
[5] Temp-to-perm conversion/buy-out fees commonly run a set percentage of first-year salary (often cited around 15–25%, or lower for temp-to-perm), frequently prorated by assignment length; there is no single published industry rate. USA Staffing Services, “Temp to Perm Conversion Fee Guide.” https://www.usastaffingservices.com/temp-to-perm-conversion-fee-staffing-agency-guide/
[6] Under the FLSA, joint employers are jointly and severally liable for wage-and-hour violations, including unpaid wages, overtime, liquidated damages, and fees; the test turns on control over schedule, supervision, pay, and records. See U.S. Department of Labor, Wage and Hour Division. https://www.dol.gov/agencies/whd
[7] Wage-and-hour class and collective actions were the most-filed type of complex litigation in the United States in 2025, with roughly 5,700 FLSA cases filed in federal court. Seyfarth Shaw, Wage & Hour Litigation. https://www.wagehourlitigation.com/
[8] The NLRB reinstated the 2020 joint-employer standard by final rule effective February 27, 2026; the U.S. Department of Labor proposed a joint-employer rule under the wage-and-hour laws on April 22, 2026. U.S. DOL news release (Apr. 22, 2026), https://www.dol.gov/newsroom/releases/whd/whd20260422 ; Foley & Lardner, “The DOL’s New Proposal Could Reshape Joint Employer Liability” (2026).
[9] American Staffing Association, “Co-Employment: Employer Liability Issues in Third-Party Staffing Arrangements,” which defines co-employment and notes that clients are generally co-employers because they direct day-to-day work, and that clients bear primary responsibility for a safe worksite. https://americanstaffing.net/workforce-solutions-for-staffing-clients/staffing-employment-law/co-employment/