As more companies rely on contingent workers to drive flexibility, innovation and cost efficiency, the line between employer and staffing partner can get blurry. That’s where co-employment risk management becomes not just important but essential.
At its core, co-employment refers to a situation where two or more entities have shared legal responsibilities for the same worker. Typically, this happens when a staffing firm supplies contingent workers to a client, but both parties end up influencing employment terms like supervision, schedules or termination decisions.
While co-employment relationships are common in modern workforce models, they come with real legal and operational risks if not managed correctly. In 2023, the U.S. Department of Labor increased scrutiny on joint employment arrangements, issuing guidance that put more emphasis on shared responsibilities in wage, hour and benefits compliance (source: U.S. Department of Labor). And in 2025, this scrutiny isn’t slowing down.
Why Co-Employment Risk Management Matters
Mismanaging co-employment can result in costly liabilities such as wage and hour violations, tax complications and worker misclassification lawsuits. Companies might unknowingly take on obligations like paying overtime, providing benefits or handling claims under Title VII or the Family and Medical Leave Act (FMLA).
Even when a staffing agency handles payroll and benefits, the client company may be held responsible if they exert significant control over a contractor’s day-to-day activities. That’s why co-employment risk management must be part of any organization’s workforce planning strategy.
At Suna Solutions, we’ve helped businesses of all sizes leverage the benefits of contingent talent while maintaining compliance and mitigating risk. Our teams are trained to proactively guide clients through this complex space, so they can scale their workforce confidently.
Common Scenarios That Trigger Co-Employment
Several situations can increase co-employment exposure:
- Direct supervision of temporary employees by client managers
- Lengthy or indefinite assignments without clear documentation
- Contractors performing core business functions
- Shared responsibility for training, discipline or performance management
- Use of client equipment, tools or badges that create a sense of internal employment
While these scenarios aren’t automatically problematic, they require clear boundaries and communication between staffing firms and client stakeholders.
Key Strategies for Managing Co-Employment Risk
When done right, co-employment doesn’t have to be a liability. Here are proactive ways to strengthen co-employment risk management across your workforce:
1. Clear Role Definitions
Define and document who is responsible for each employment function. For example, your staffing provider should own onboarding, payroll, and performance discussions. Your internal teams should focus on project scope and deliverables, not employment matters.
2. Consistent Policies
Ensure staffing providers have compliant HR policies in place. Suna, for instance, ensures that contractors follow policies aligned with both employment law and client requirements without creating co-employment confusion.
3. Training for Hiring Managers
Often, managers don’t realize that casual oversight can trigger legal exposure. Train internal leaders to avoid language like “you’re part of our team” or including contractors in internal reviews or events meant for W2 employees.
4. Formalize Assignment Terms
Set assignment limits, renewals and expectations in writing. When contractors stay on-site long-term without structure, co-employment claims become more likely.
5. Work with an Experienced Partner
Partnering with a staffing firm that understands co-employment risk management is crucial. At Suna Solutions, our consultative approach goes beyond talent delivery. We help clients build defensible workforce strategies that align with both short-term needs and long-term compliance.
Companies that fail to manage co-employment properly may find themselves entangled in lawsuits or audits that damage both their finances and reputation. Just ask any organization that’s dealt with retroactive tax assessments or class-action wage claims due to misclassified workers.
On the flip side, organizations that prioritize co-employment risk management enjoy peace of mind and operational agility. They can bring on specialized talent, scale teams quickly and maintain compliance with confidence.
With the right approach, co-employment doesn’t have to be a risk, it can be a competitive advantage. Whether you’re scaling your team for a project launch, building a new contingent workforce program or reviewing your vendor contracts, it’s critical to understand the legal and operational risks of co-employment.
Let the experts help you get it right. At Suna Solutions, we partner with companies to ensure that co-employment isn’t a liability—it’s a well-managed piece of the workforce puzzle.