The issue of who is the employer in an employee leasing relationship is subject to some debate.
The issue is likely decided by an agreement between the employer and the employee leasing service. In another word, the employer and the employee leasing service agree that for certain purposes one or the other is the employer.
For example the employee leasing service may agree to offer benefits and workers compensation for the employees, but by agreement may leave the payroll service to the client company. Some Employee Leasing services do not offer such options. If an employer wants their services, they have to go with their workers comp policy and benefits. Having said this, some employee leasing companies allow a company to maintain their own workers comp policy but they do the administration of the policy.
Under the usuall Employee Leasing service relationship, for certain matters, the employee leasing service is the employer of record such as:
1- Making payroll deductions and paying employer payroll taxes
2- Filing quarterly and annual payroll tax filings
3- Maintaining employee files for the mandatory periods under the law
4- Checking for sufficiency of documentation in compliance with I9 and W4 requirements
5- Wage garnishments
For certain other matter, both the employer and the employee leasing company are the employers. This is because the statute says so. For example under American with Disabilities Act, an aggrieved employee or prospective employee may bring an action against both the employer and the employee leasing company. This is because the statute says so.