Logistics Companies: You May Still Be Legally Responsible—Even If You Use a Staffing Agency

Many logistics businesses rely on staffing agencies to supply warehouse workers and drivers—expecting more flexibility and lower labor costs. But using a staffing agency doesn’t automatically protect you from being considered an employer in the eyes of the law.

Under the “joint employer” doctrine, your company may still be on the hook for wage violations, unpaid overtime, missed meal breaks, or workplace injury claims—even if another entity handles hiring and payroll.

Need help reviewing staffing agency agreements or managing joint employer risks? Contact Attorney Susan Shu at susan.shu@consultils.com for tailored compliance strategies.

What Is a “Joint Employer”?

A joint employer is when two or more separate companies share control over a worker’s job duties or working conditions. This is common in logistics: even if the worker is officially hired and paid by a staffing agency, the logistics company may decide where they work, what they do, and how their performance is judged. That practical control makes the logistics firm a likely joint employer.

Under federal law, joint employer status is determined when multiple entities share authority over employees. For example:

• Sharing or rotating staff between companies

• One company acting on behalf of another

• Shared decision-making power

The current federal standard under the National Labor Relations Act (NLRA) is relatively strict: only companies that actually exercise substantial and direct control over workers are considered joint employers.

The Ninth Circuit (which includes California) adds clarity in the Bonnette case by highlighting four key factors:

1. Power to hire or fire

2. Control over work schedules and conditions

3. Authority to set wages and payment methods

4. Responsibility for maintaining employment records

However, California has a much looser—and stricter—definition. In Martinez v. Combs, the California Supreme Court ruled that anyone who directly or indirectly controls wages, hours, or work conditions may be considered an employer—even if that control is minimal or exercised through an agent.

Can a Staffing Agency Shield You from Liability?

Short answer: No. Not in California

Under federal law, joint employers can be liable for:

• Overtime and wage violations under the FLSA

• Family leave violations under the FMLA

That said, the federal standard is harder to meet, which gives employers more breathing room.

But California Labor Code §2810.3(b)(1) is much tougher. It says that client employers (like logistics firms) share legal responsibility for staffing agency workers’ wages and workers’ compensation. If the staffing agency fails to pay minimum wage, overtime, or provide legally required meal/rest breaks, your company may have to pay too.

Worse yet, in the Benton v. Telecom Network Specialists case, California’s appeals court ruled that even if the staffing agency has a compliant meal/rest policy, the logistics company isn’t off the hook unless it can prove it took steps to make sure the agency actually enforced it. The court didn’t define what those “steps” are—creating major compliance uncertainty.

How to Reduce Risk When Using Staffing Agencies

You can’t completely eliminate joint employer risk—but you can manage it with a well-crafted staffing agency agreement. Here’s what logistics companies should focus on:

Define Control Boundaries and Compliance Responsibilities

Clearly assign daily HR control (hiring, payroll, timekeeping, discipline, etc.) to the staffing agency. Limit your own role to task assignment and workplace safety supervision. Require the agency to contractually guarantee full legal compliance and provide regular proof.

Build Audit Rights and Oversight Mechanisms

Reserve the right to audit the agency’s:

• Wage and timekeeping records

• Employee handbooks and policies

• Labor law training documentation

Make sure you can demand corrective action if violations are found. This helps meet the Benton court’s requirement that you “ensure” policy enforcement.

Require Broad Indemnification

This is critical. Your contract should obligate the staffing agency to:

• Cover all legal costs, settlements, and penalties

• Pay for wage, overtime, meal/rest violations

• Cover discrimination, retaliation, or injury claims—even if your company is also found jointly liable

Insurance and Termination Clauses

Demand proof of:

• Workers’ compensation

• Employment practices liability

• General commercial liability

Your company should be listed as an additional insured. Also, include a right to immediate contract termination if serious labor violations are discovered—without penalty.

Final Takeway

In California, using a staffing agency won’t shield logistics companies from employer liability. You must treat staffing contracts like any other core business function: manage the risks through smart contract terms, active oversight, and professional legal support.

Need help reviewing staffing agency agreements or managing joint employer risks? Contact Attorney Susan Shu at susan.shu@consultils.com for tailored compliance strategies.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Partner and Head of Transactions at ILS, Fiona delivers professional legal and strategic support to tech companies—with a focus on AI, medical devices, and fintech. Beyond full-spectrum technology law, she specializes in export control and compliance: supporting tech firms at all growth stages, aiding startups in scaling operations, and helping mature enterprises address regulatory challenges.

Previously, Fiona gained hands-on experience building legal frameworks from scratch. She advised unicorn companies on global expansion and regulatory hurdles, developing deep insight into clients’ growth challenges. Combining legal expertise with commercial judgment, she helps clients establish sustainable legal processes and provides clear guidance to advance their business.

Email:  fiona.xu@consultils.com | Phone: 626-344-8949

Susan is specialized in employment law and compliance, with additional experience advising logistics and supply chain companies on workforce compliance and risk management, as well as cross-border investments. With years of experience advising multinational clients, Susan focuses on workforce structuring, employee transfers, terminations, compensation and benefits, and workplace policies. She has extensive experience helping companies navigate complex labor regulations, manage cross-border employment issues, and resolve workplace disputes.

In addition, Susan advises on M&A, private equity, venture capital, and cross-border investments, including VIE frameworks, and prepares due diligence reports and transaction documents.

Email:  susan.shu@consultils.com | Phone: 626-344