In the past, employers were able to enter into valid agreements to lease employees, and the agreement could be drafted to protect the employer from liabilities including workers’ compensation coverage.

California law imposes liability for the failure to obtain workers’ compensation coverage on both the labor contractor as well as the contracting business.1

If a staffing agency fails to secure workers’ compensation coverage, you as the contracting employer may be held responsible for an employee’s injury, regardless of whether you controlled working conditions or wages.

Employers are cautioned to consult with legal counsel to ensure the validity of any leasing agreement, and especially to ensure that the staffing agency with whom you contract for employees carries full workers’ compensation insurance.

Homeowners, home-based businesses, public employers, businesses with five or fewer staffing agency workers, and businesses with fewer than 25 employees overall are exempted. For more information, see “Leased Workers” in Contingent Workers.

1. Lab. Code sec. 2810.3(b)

Covered Employers and Employees

Workers' Compensation Coverage Agreements Between Employers

Covered Employers and Employees