A staffing agency places a temporary worker for a six-month assignment. The client keeps extending the contract, and two years later, that “temp” still reports to the same manager and follows the same schedule as full-time employees. When the placement ends abruptly, the worker files a wrongful termination claim against both the agency and the client company.
Scenarios like this demonstrate why having an employment practices liability insurance (EPLI) policy is crucial for staffing firms managing long-term placements. This article helps brokers explain how extended contracts increase risks and how a staffing-specific EPLI policy can help reduce exposure.
Why Do Temporary Contracts Create Risk?
Temporary work isn’t always as short-term as the name implies. The growing reliance on longer-term temporary labor may help meet client demand, but it also creates legal uncertainty.
Over time, clients may begin treating long-standing temps like full-time employees. If the classification doesn’t change, though, that’s where problems begin. Staffing firms may start to ask: How long can someone remain temporary before the risks set in?
There’s no clear legal limit. Instead, courts and regulators consider how long the worker has been there, what tasks they perform, and who supervises them. If both the staffing firm and the client appear to share control, the chance of a co-employment claim increases.
Furthermore, recent joint employment rules from the National Labor Relations Board (NLRB) introduced a broader joint employer rule in 2023. It expanded liability to include situations where companies have indirect influence over scheduling, discipline, or supervision. Although the rule’s enforcement is currently on hold due to legal challenges, the risk still exists.
That’s why staffing firms must proactively review their contracts, job descriptions, and reporting lines. Even limited oversight can lead to shared legal responsibility.
Hidden Liabilities of Long-Term Temporary Placements
The longer a placement lasts, the murkier the employer relationship becomes. A worker hired for a three-month project could still be working two years later. They could be doing the same tasks, under the same manager, with no updated contract or wage review.
These situations can easily escalate into wage disputes, pay equity concerns, or discrimination and wrongful termination claims. The longer the assignment continues without changes, the more exposure it creates.
It gets more complicated when no one clearly defines who supervises the worker. In that case, both the staffing agency and the client company may be held responsible. The legal and financial burden doesn’t always land on one party.
So, if your staffing firm clients are extending placements beyond one year without reviewing their EPLI policy, they may face risks they didn’t expect.
For example, imagine a staffing agency places a warehouse associate on a six-month project. The client extends the assignment repeatedly, and the worker stays for two years. When the client terminates the placement, the employee files a wrongful termination claim. Because no one clearly documented who had termination authority, both parties are named, and both share the legal costs.
An EPLI policy designed for staffing operations helps contain this risk before it becomes a full-blown dispute.
How Does an EPLI Policy Protect Staffing Firms?
General liability and professional liability policies don’t cover employment-related issues like harassment, discrimination, or wrongful termination. That’s why EPLI coverage is essential.
These policies provide defense and indemnity coverage for claims brought by employees, job applicants, and, in some cases, third parties, such as clients or vendors, if the policy includes a third-party endorsement.
Typical coverage includes:
- Wrongful termination
- Retaliation
- Discrimination
- Harassment
- Workplace torts and wrongful business environment allegations
“Wrongful business environment” refers to hostile or discriminatory working conditions that may involve non-employees, such as clients, vendors, or contractors.
For example, the EPLI program from World Wide Specialty Programs is designed for staffing operations. It can include both the staffing firm and the client as insured parties — if the contract supports it and underwriting allows.
An important note: EPLI policies often exclude wage and hour violations, contractual liability, or punitive damages in certain states. These may require endorsements or additional lines of coverage.
Help Staffing Clients Manage Contract-Related EPLI Risks
For brokers advising staffing firms, an EPLI policy can deliver real value and forward-thinking risk management.
Longer contracts should always prompt a risk review. When that happens, brokers should ask questions like:
- Have you reviewed your long-term placement agreements for co-employment exposure?
- Do your contract terms align with your EPLI coverage obligations?
- Is the supervising party clearly documented in case a claim arises?
These questions help clients think ahead and avoid preventable problems. They also give brokers a reason to revisit EPLI coverage with a sharper focus on long-term risk.
Partnering To Manage Long-Term Staffing Risks
As staffing firms adapt to longer temporary assignments and evolving employment rules, brokers who understand how an EPLI policy benefits them will stand out.
World Wide’s EPLI program reflects how staffing firms actually work today. It covers scenarios involving shared employment, dual defense costs, and workplace environment disputes, while offering resources to support HR compliance and legal readiness.
Partner with World Wide Specialty Programs to deliver EPLI solutions that evolve with the staffing industry’s changing employment landscape.
About World Wide Specialty Programs
For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and are committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage we have available to protect your staffing business, give us a call at (877) 256-0468 to speak with one of our representatives.