Immigration Risks for Staffing Agencies

February 1, 2025

For decades, staffing agencies have relied on immigrant labor for a wide range of tasks, particularly in the light industrial and hospitality industries. In fact, the immigrant workforce is a key economic driver in the United States. As regulatory challenges loom on the horizon, staffing agencies need to ensure that they manage the risks associated with immigrant laborers, including securing appropriate insurance coverage.

In this article, we explore how staffing services can protect their interests while meeting emerging regulations. To learn more about insurance solutions for the staffing industry, visit our Staffing and PEO Services page.

The Immigrant Workforce in Decline

At the dawn of the twenty-first century until about 2010, the immigrant workforce numbered around 14 million. That number declined sharply until 2020, when numbers stabilized near 10 million workers. For staffing agencies, a sizable portion of the three million temporary and contract workers are immigrants.

That number is likely to drop in the coming four years with the introduction of federal and state laws limiting immigration into the United States. Fewer immigrants are crossing the border, particularly the southern border between the U.S. and Mexico. Those who do cross are far more likely to be deported, potentially leaving staffing services in the lurch as they seek candidates to fill temporary or contract roles.

How can staffing agencies prepare? Here is a look at several strategic steps:

• Focus on Domestic Talent Development: Agencies can partner with local training programs, community colleges, and workforce development organizations to upskill domestic workers for roles traditionally filled by immigrants.
• Enhance Recruitment in Underserved Areas: Expanding recruitment efforts to rural areas, economically distressed regions, or untapped urban communities can help identify a hidden labor pool.
• Invest in Automation and Technology: For industries like manufacturing or logistics, agencies can guide employers toward adopting automation to address labor shortages while retaining human jobs where possible.
• Advocate for Policy Adjustments: Collaborate with industry associations to lobby for pragmatic immigration reform or worker visa programs, emphasizing the economic necessity of immigrant labor.
• Offer Competitive Benefits: To attract domestic workers, staffing agencies can encourage clients to improve compensation, provide better benefits, and create worker-friendly environments.
• Target Different Demographics: Engage non-traditional labor pools, such as retirees, stay-at-home parents reentering the workforce, or individuals with disabilities.

Staying Protected with Staffing Insurance

Professional staffing insurance can help protect against risks associated with employing immigrant workers by addressing specific exposures staffing agencies might face. These protections include:

1. Employment Practices Liability Insurance (EPLI): Covers claims related to discrimination, wrongful termination, or harassment, which could arise from cultural or language misunderstandings or perceived biases against immigrant workers.
2. Professional Liability Insurance: Also known as Errors & Omissions (E&O) insurance, this policy can protect staffing agencies from claims related to errors in placement, such as failing to confirm work authorization or making improper hiring recommendations.
3. Workers’ Compensation Insurance: Ensures that immigrant workers are covered for workplace injuries or illnesses, regardless of their background or status, aligning with labor laws.
4. General Liability Insurance: Protects agencies from liability claims related to third-party bodily injury or property damage involving placed workers, including immigrants.
5. Legal Defense Coverage: Provides legal resources and defense for compliance issues related to immigration laws or audits by government entities, such as E-Verify compliance problems.

Professional staffing insurance serves as a critical safeguard for agencies navigating the complexities of employing immigrant workers. By providing coverage for risks such as employment practices liability, compliance errors, and workplace injuries, these policies not only protect agencies from financial and legal repercussions but also foster trust and confidence among their workforce and clients.

It is imperative for staffing agencies to work with experienced insurance underwriters who can guide employers with the coverages and limits that meet their needs and the needs of their workforce, which includes millions of immigrants.

As anti-immigration laws reshape the labor market, having robust insurance solutions in place ensures that staffing agencies can continue to operate effectively, comply with regulations, and provide opportunities to all workers, regardless of their background. In a time of uncertainty, professional staffing insurance offers the stability and protection agencies need to thrive. ◼