The Role of Staffing Agencies in Warehouse Hiring: Who is Liable for Compliance?

For leaders in light industrial environments, meeting fluctuating labor demands amid workforce shortages while ensuring operational efficiency and complying with ever-evolving regulations is a delicate balancing act. Working with staffing agencies can help warehouse managers onboard workers quickly during peak seasons or unexpected surges in demand. While this approach offers flexibility and scalability, compliance liabilities represent a potential drawback. From workplace injuries to wage disputes to OSHA compliance in warehouses, who is responsible when something goes awry – the staffing agency or the warehouse? Misunderstandings in this area can expose supply chain employers to significant legal and financial risks.

However, partnering with a trusted staffing agency that’s committed to compliance can help you achieve your operational goals while maintaining peace of mind around safety and regulatory requirements. In this blog post, we’ll discuss the role of staffing agencies in light industrial hiring, the concept of joint employment liability, and the ways staffing agencies and supply chain managers can work together to protect themselves and their workforce.

Why Rely on Staffing Agencies?

Temporary warehouse labor needs shift frequently based on seasonal peaks, e-commerce trends, or unexpected disruptions. Staffing agencies can help meet these ever-changing needs by providing a ready pool of pre-screened workers, including pickers, packers, forklift operators, inventory specialists and more. By partnering with staffing agencies, warehouse managers can scale their teams accordingly without time-intensive traditional hiring processes.

However, there are still legal and compliance implications attached to talent hired through a staffing agency. Outsourcing labor does not absolve managers of responsibility for compliance issues like workers’ compensation, workplace safety, or fair employment practices. These obligations are often split between the staffing agency and the warehouse employer. Under the concept of joint employment, both parties can be held accountable, so it’s critical to understand where the lines of liability are drawn.

Understanding Joint Employment Liability

Joint employment is increasingly recognized by the U.S. Department of Labor and judicial system. In joint employment arrangements, both the staffing agency (the “primary employer”) and the warehouse employer (the “client employer”) can be considered employers of the same worker. This shared status means that both parties may be held responsible for compliance with federal and state labor laws, depending on the circumstances.

For example, if a temporary worker is injured on the warehouse floor, both the primary employer and client employer could be liable for workers’ compensation. The agency technically employs the worker, while the warehouse controls the day-to-day work environment. However, it depends on the specifics of the contract and the degree of oversight exercised by each party. Similarly, wage and hour violations, such as unpaid overtime, or discrimination claims may implicate both the agency and the warehouse if proper policies aren’t in place.

Legal frameworks that have led to joint employment include:

• The Occupational Safety and Health Act (OSHA): Regardless of whether employees are hired directly or by an agency, OSHA holds employers accountable for maintaining a safe environment in the workplace. If a staffing agency provides untrained workers and an accident occurs, the warehouse could still be penalized for failing to ensure proper training or hazard mitigation.
• The Fair Labor Standards Act (FLSA): FLSA governs minimum wage, overtime, and recordkeeping. If a worker’s pay doesn’t meet legal standards, both the agency and the warehouse could be held accountable.
• Title VII and Other Anti-Discrimination Laws: If a temporary worker experiences harassment or inequitable treatment, both employers may be held liable. This is especially likely if the warehouse supervisor directs the worker’s activities.

While warehouse managers can outsource hiring talent, they may not be able to fully outsource compliance. Active collaboration with staffing partners is a must to ensure all legal requirements and standards are met.

Joint Employment Liability: Who is Accountable for Compliance Obligations?

Joint employment scenarios call for clarity on exactly how compliance responsibilities are divided. Every staffing arrangement and contract is unique. Here are some examples to illustrate common situations:

• Workers’ compensation: Staffing agencies usually carry workers’ comp insurance for their employees. However, the client employer must verify whether this coverage is active and sufficient. If an injury occurs due to unsafe conditions that are within the warehouse’s control, the warehouse could face scrutiny.
• Workplace safety: Per OSHA, the warehouse employer is expected to maintain a safe environment, including proper equipment, signage and training. However, the staffing agency must ensure workers are qualified and have been briefed on general safety protocols before arriving.
• Employment practices liability: On Time Staffing provides each of our clients with a dedicated onsite manager who collaborates closely with the warehouse manager to ensure their specific workforce management needs are met. This includes helping the client stay ahead of employment practices liability, offering guidance on compliance with labor laws, safety regulations, and fair hiring practices. To maintain operational efficiency, On Time Staffing’s onsite manager addresses any concerns that arise in real-time while anticipating potential challenges going forward.

Compliance requires dedication from both the primary employer and the client employer. Miscommunication or assumptions can lead to gaps that regulators or litigators are quick to exploit.

What Are The Risks of Non-Compliance?

Failure to comply can lead to severe consequences. Serious violations of OSHA compliance in warehouses carry fines of up to $16,550 per incident, with repeat offenders facing greater penalties of up to six figures. Workplace injuries tied to inadequate training or equipment could result in workers’ compensation claims, lawsuits, reputation damage, or all of the above. In 2023, the average cost of a workplace injury was about $44,000 per incident between medical expenses, lost productivity, and workers’ compensation, according to the National Safety Council. Wage disputes could lead to class action lawsuits, particularly if temporary workers feel unfairly treated compared to permanent hires.

In addition to financial risks, non-compliance has other costs, including higher turnover and lower productivity. Failing to uphold regulatory standards can also result in reputational damage and broken trust. A Deloitte survey found that 87% of executives consider reputational risk from noncompliance more significant than other strategic risks.

Choosing the Right Staffing Agency Partner

Teaming up with the right staffing agency can reduce your liability exposure, streamline operations, and provide peace of mind. Here’s why choosing a partner with a strong track record of compliance makes a difference:

1. Legal Expertise and Proactive Compliance

Top-tier staffing agencies understand OSHA standards, FLSA requirements, and other regulations, building compliance into its processes. At On Time Staffing, 100% of our onsite team is OSHA certified. Our managers put associates’ safety first, without exception. Our proactive approach,  , minimizes the risk of violations before workers even step onto your floor.

2. Risk Mitigation Through Partnership

The right staffing partner will collaborate with you to address safety, supervision, and performance. On Time Staffing works closely with managers to align temporary warehouse labor with your operational needs and compliance goals, reducing the likelihood of oversight gaps.

3. Industry Experience You Can Trust

With years of experience in warehouse and light industrial staffing, On Time Staffing brings deep, specialized knowledge of the industry. Supply chain staffing is all we do. From understanding peak-season demands to navigating the nuances of forklift certification, our expertise ensures your workforce is both capable and compliant.

By choosing a partner with a proven track record of compliance, you can you can focus on what matters most: running an efficient, productive warehouse.

Practical Steps for Warehouse Managers

Here are actionable insights you can take to minimize the risks and maximize the benefits of working with an agency:

• Review contracts carefully. To eliminate ambiguity, ensure your agreement with the staffing agency clearly defines roles, responsibilities, and insurance coverage.
• Conduct joint safety audits. Work with the staffing agency to assess your warehouse for hazards and confirm that temporary workers are prepared to operate safely.
• Communicate expectations. Set clear standards for performance and compliance, making sure that your supervisors understand their role in managing temporary staff.
• Partner wisely. Choose an agency that demonstrates a commitment to compliance, transparency, and industry expertise.

The Path Forward: Partner with On Time Staffing

Staffing agencies provide warehouses with the flexibility and speed necessary to thrive in a fast-paced, competitive market. However, shared accountability and due diligence are required for a beneficial partnership.

On Time Staffing is dedicated to delivering warehouse-ready workers who meet your needs while upholding the highest legal and safety standards. Contact us today for a consultation and learn more about how we can support your hiring goals with compliant, efficient staffing solutions. Take the next step toward building a partnership that keeps your warehouse running smoothly—and safely.