Developments in Use of Indemnity Agreements with Staffing Agencies

In many situations, employers utilizing staffing companies or other independent contractors to provide workers, enter into contracts with these staffing entities with an indemnity provision.  Indemnity provisions would provide, for example, should the entity be sued for a law violation in regard to the workers supplied by the staffing company, the staffing company would indemnify the entity for damages resulting from these situations.  While it is not always possible to secure an indemnity provision with staffing companies, most assume that such indemnity provisions are enforceable.

In a recent federal court ruling by a federal district court in Alabama, a company utilizing a staffing company was sued for employment discrimination by the employees of the staffing company, and brought a third-party complaint against three staffing companies relying on the indemnification clauses.  Under the circumstances of the case, however, the judge agreed with the plaintiff EEOC’s argument that allowing the company to dodge accountability under Title VII by invoking indemnification clauses with its staffing partners would be inconsistent with federal civil rights laws.  The judge stated: “Federal public policy would be undermined if TCI had the ability to tell others to help TCI violate federal law and then pay TCI if TCI got caught.”  EEOC v. TCI of Alabama LLC, Case No. 4:25-cv-00089 (N.D. Ala. 2026).  

Editor’s Note:  The fact pattern was that the defendant company had told the staffing companies to avoid hiring women.  Under these facts, the judge accepted the Equal Employment Opportunity Commission’s (EEOC) argument that the party seeking indemnification may not instruct a joint employer to violate federal law.

The court did not address a fact pattern that the company utilizing the staffing company’s employees did not direct the discriminatory practices.

This article is part of our April 2026 Newsletter. 

View the newsletter online

Download the newsletter as a PDF