If someone sues Gusto because of something you did while using the platform, you are responsible for covering Gusto's legal costs and any damages, not just your own.
This analysis describes what Gusto's agreement states, permits, or reserves. It does not constitute a legal determination about enforceability. Regulatory applicability and practical outcomes may vary by jurisdiction, enforcement context, and individual circumstances. Read our methodology
This clause means employer-customers could be financially responsible for defending Gusto in third-party lawsuits that arise from the employer's payroll data, HR actions, or compliance failures, even if Gusto is named as a co-defendant.
Interpretive note: The breadth of the indemnification and whether it includes a carve-out for Gusto's own negligence is not fully clear from the excerpt; the absence of a negligence carve-out would be operationally significant but requires full document review to confirm.
The updated terms make explicit that requesting a background check through Gusto creates a legally binding agreement not just with Gusto but also incorporating terms from Gusto's payroll service and Checkr's service agreement. This means customers are committing to multiple overlapping sets of terms when they initiate a background check request. The change does not appear to alter the substantive rights or obligations, but rather clarifies their scope and binding nature in writing.
View change record →Developers integrating with Gusto's platform are now bound by mandatory arbitration and class action waiver provisions, meaning they cannot join or file class actions against Gusto and must resolve disputes through individual, binding arbitration. The updated terms also grant Gusto the right to modify, update, or discontinue developer tools at its sole discretion without notice or liability, which could disrupt integrations and require developers to absorb costs of upgrading to new versions. Developers should review Section 19 of the updated terms carefully before creating or maintaining integrations with Gusto's platform, and consider whether the arbitration and modification provisions align with their business and legal risk tolerance.
View change record →Removal of explicit indemnification language may reduce employer obligations to defend Gusto, though liability may be addressed elsewhere in revised terms.
View full change record →An employer that submits incorrect payroll data leading to employee wage complaints, or that uses Gusto in a way that violates employment law, may be required to cover not just their own legal costs but also Gusto's defense costs in any resulting litigation. This creates significant financial exposure beyond the platform fee itself.
How other platforms handle this
Any claim that any user submission made by you has caused damage to a third party
Any access to or use of the Services or goods through your account by others, including your spouse, dependents, Recipients, and any access by AI Agents you enable or that operate on your behalf...
you agree to cooperate with Walmart if and as requested by Walmart in the defense and settlement of such matter.
"You agree to defend, indemnify, and hold harmless Gusto and its officers, directors, employees, and agents from and against any and all claims, liabilities, damages, losses, costs, and expenses (including reasonable attorneys' fees) arising out of or relating to: (a) your use of the Services; (b) your violation of this Agreement; (c) your violation of any applicable laws or regulations; or (d) any content or data you provide through the Services.Excerpt from Gusto's Terms of Service
REGULATORY LANDSCAPE: Indemnification clauses in commercial contracts are generally enforceable under US contract law, subject to public policy limits in some states.
Enforcement risk, jurisdiction flags, contract triggers, and due diligence action items.
Get the research letter
Companies change their terms quietly. We read every version and catch what actually changed. One email a week on the changes that matter and what they mean.
This clause means employer-customers could be financially responsible for defending Gusto in third-party lawsuits that arise from the employer's payroll data, HR actions, or compliance failures, even if Gusto is named as a co-defendant.
An employer that submits incorrect payroll data leading to employee wage complaints, or that uses Gusto in a way that violates employment law, may be required to cover not just their own legal costs but also Gusto's defense costs in any resulting litigation. This creates significant financial exposure beyond the platform fee itself.
ConductAtlas has identified this type of provision across 228 platforms. See the full comparison.
No. ConductAtlas is an independent monitoring service. We are not affiliated with, endorsed by, or sponsored by Gusto.