An HR director at a Gwinnett County distribution center called us last spring in a quiet panic. Her company had been using temp workers through a staffing agency for about 14 months. One of those workers filed a wage claim directly against her company, not the agency, over unpaid overtime. The agency said it had paid correctly. The contract between the companies said the workers were employees of the agency. The claim went forward anyway.
The contract didn't protect her. The length of the assignment and the way her supervisors had been directing those workers day to day were the facts that mattered.
Co-employment risk is the legal exposure a client company takes on when it exercises enough control over a staffing agency's workers to be treated as a joint employer under federal law. Georgia employers face this exposure under the FLSA (wage and hour), the NLRA (labor relations), and the IRS's ACA employer mandate. Contract disclaimers don't protect you. What you actually do with those workers on the floor is what regulators look at.
What Co-Employment Means in a Staffing Arrangement
Co-employment is not a problem to eliminate. It's built into every staffing arrangement from day one. When you bring in workers through a temp agency, the agency employs them, runs payroll, carries workers' comp, and handles statutory benefits. You direct the work. That's a co-employment relationship by design, and it functions well when each party's responsibilities stay on their side of the line.
The risk question is different. It's whether your company's side of that arrangement crosses into joint employment, the point at which you become legally responsible for wage and labor obligations the agency was supposed to own exclusively.
Here's why the contract disclaimer fails. A staffing agreement saying "these workers are employees of the agency, not the client" addresses the legal form of the relationship, not its operational reality. Courts and federal agencies look at who actually makes decisions about hours, supervision, worksite conditions, and whether or when a worker leaves the job. If those decisions are mostly yours, the disclaimer is background noise.
The American Staffing Association puts it plainly: when a client is found to be a joint employer, both companies are 100% responsible for compliance. That's not a shared liability split. It's the full exposure for both. If the agency underpaid overtime, you're potentially liable for all of it.
The Three Tests That Determine Joint Employer Status
Georgia doesn't have its own state-level joint employer standard. Federal law governs, and three frameworks apply depending on what kind of claim you're facing.
NLRA (labor relations): The NLRB issued a final rule on February 27, 2026 reinstating its 2020 standard. Under this standard, to be a joint employer, a company must actually exercise control over essential terms and conditions of employment: wages, hours, supervision, and work rules. Rights reserved in a contract but not exercised in practice don't count. This is meaningfully better for client companies than the Biden-era 2023 rule, which a Texas federal court struck down in March 2024 as "unlawfully overbroad."
FLSA (wage and hour): The DOL's Wage and Hour Division published a proposed rule on April 22, 2026 establishing a four-factor test for vertical joint employment. The four factors: does the potential joint employer hire or fire workers, supervise and control schedules or conditions, determine pay rates, and maintain employment records? The comment period closed June 22, 2026. The rule isn't final yet. But the direction is toward an actual-control standard, similar to what the NLRB reinstated, and when it finalizes, it becomes the primary test for wage and hour co-employment claims in manufacturing and distribution.
ACA / IRS (employer mandate): The IRS uses a common law "economic reality" test to determine who is the true employer for ACA purposes. The terms in a staffing contract are, per IRS guidance, "only one of many facts" examined. If your agency-supplied workers regularly put in 30 or more hours per week at your facility and you exercise enough operational control, the IRS may count them toward your company's workforce size. A company with 40 direct employees relying on 15 or more temp workers at 30-plus hours per week could find itself above the 50-employee threshold that triggers the ACA employer mandate and its associated coverage requirements.
Behaviors That Create Co-Employment Exposure
The co-employment exposure that ends up in a claim almost always comes from what happens on the floor, not from the contract. These are the specific behaviors that courts and federal agencies pay attention to.
Giving direct task instructions. If your floor supervisors direct agency workers the same way they direct your permanent employees, that's a signal. The agency should handle performance counseling, discipline, and individual work assignments. You can tell the agency what outcome you need ("these pallets need to be sorted and staged by 2 pm"). Telling an individual temp worker exactly how to do the job is where the line blurs.
Deciding when a worker leaves. Removing an individual worker yourself, rather than asking the agency to pull the assignment, is one of the cleaner ways to establish joint employer status in a subsequent claim. Requests to remove a worker should go through the agency. Let them make the staffing decision.
Running indefinitely long assignments. The longer a temp worker stays on your floor in the same role, the stronger the argument that your company is functionally their real employer. Across our 27 Georgia accounts, we've watched claims develop where assignment length at the 12-month-plus mark became a meaningful fact in the record. That's not a legal threshold. It's a pattern we've seen enough times to take seriously. For contingent roles you genuinely need long-term, a contract-to-hire structure is usually the cleaner path.
Folding temps into your permanent employee environment. Safety orientation specific to your facility is fine and expected. The issue arises when agency workers get access to your internal benefits portals, employee perks programs, or onboarding identical to your direct hires, giving the appearance they're in the same employment category.
One thing we used to tell clients that we've pulled back on: we'd say that keeping assignments under six months was a reliable way to limit exposure. That's not accurate. The actual-control analysis applies on day 30 the same way it does on day 300. Shorter assignments reduce how much control-pattern evidence accumulates, but they're not a safe harbor.
What the 2026 Rule Changes Mean for Georgia Operators
Two regulatory moves in early 2026 changed the co-employment landscape in ways that are worth understanding before your next staffing contract review.
The NLRB's February 2026 rule is favorable to client companies. By reinstating the 2020 actual-control standard and confirming that reserved-but-unexercised contractual rights don't create NLRB joint employer status, it narrows the exposure for companies whose staffing agreements contain broad supervisory language that's never put into practice. If your contract says you can direct work but you route everything through the agency in reality, you're on better footing under this rule than you were under where the 2023 rule had pointed.
The DOL's April 2026 FLSA proposed rule is the active concern to track. The four-factor test covers the most common claim type in light industrial and distribution environments: wage and hour violations. Both the agency and the client company would be jointly and severally liable for FLSA violations, including unpaid wages, overtime, liquidated damages, and attorneys' fees. The rule isn't final yet, but the direction has been consistent across the comment process, and building your operational practices now toward the actual-control standard is the right hedge while it finalizes.
The ACA exposure doesn't shift with either of these regulatory changes. If you're at or near the 50-employee ALE threshold and rely on agency workers to cover regular operational volume, the IRS common law analysis is worth reviewing with a benefits attorney before an audit forces the conversation. Retroactive reclassification, after years of ACA non-compliance, creates compounding penalty exposure that's much harder to manage than a proactive compliance check.
What to Require Before Your Next Staffing Contract
A well-structured staffing arrangement doesn't make co-employment disappear. It places the exposure where it belongs and gives you real protection when a claim appears. These are the things worth doing before you sign or renew.
Get the contract to specify who handles discipline, terminations, and pay disputes. Not just a clause saying "agency employees are employees of the agency." It should spell out that the agency is responsible for responding to workers' pay questions, scheduling disputes, and performance concerns. The American Staffing Association publishes model contract language on this worth reviewing.
Confirm the agency carries its own workers' comp policy, pays its own payroll taxes, and can document its FLSA and OSHA compliance practices. The indemnification clause in your contract should protect you specifically in cases where the agency's own employment practices create the liability, not just cases where you're blamed for theirs. Indemnification doesn't help you if the agency can't make you whole after a judgment.
Talk about long-duration placements before they start. If you know a contingent role is going to run more than 90 days, discuss upfront whether it's better structured as contract-to-hire. The direct-hire placement fee is typically less expensive than managing a co-employment claim that builds over a year.
Build a habit of routing supervisory communication through the agency. In practice, this means that when your floor supervisor has a performance concern about a temp worker, they tell your site contact at the agency rather than addressing the worker directly. It takes about two weeks to build the habit. It matters if you ever have to defend against a claim.
For the specific contract clauses worth requiring when you sign with a staffing agency, the staffing agency SLA guide covers the language that shifts liability correctly between the parties. The workforce planning template also includes a vendor scorecard section that tracks the six agency performance metrics most relevant to compliance: fill rate, 30-day retention, no-call/no-show rate, time-to-fill, billing accuracy, and communication response time.
If you're building a longer-term contingent workforce plan for your Georgia operation, the contingent workforce planning guide covers the 12-month framework we use across our Georgia accounts, including how to structure vendor relationships to keep the compliance and supervisory responsibilities clearly on the agency's side.
If you're adding contingent workers to your Georgia facility and want to build the arrangement with the co-employment boundaries in the right place from the start, Schedule a Call. We staff 27 accounts across Gwinnett, Hall, Douglas, Henry, Cobb, and DeKalb counties and can walk through the contract structure, placement duration, and supervisory practices that keep the arrangement clean.
