In today’s unstable economy filled with requirements and regulations associated with employment, your company may be relying more and more on temporary workers. It seems like the best of both worlds: the temporary workers are employees of the staffing agency; they are covered by the staffing agency’s workers compensation insurance; the staffing agency makes sure the workers are paid correctly; the staffing agency worries about the worker’s unemployment claims; and, the staffing agency deals with insurance and leave. Meanwhile, your company can focus on its business without the headaches associated with employing the workers themselves. But, as with life, so it is with employment law, when a solution seems too good to be true…well, it likely is.
A recent N.C. Court of Appeals decision allowed an injured temporary worker to collect workers compensation from the staffing agency’s carrier and then sue the company where the temporary worker was performing his work for his injuries alleging negligence. So get the full story below and then check your staffing contracts.
Typically when an employee is injured on the job due to unintentional conduct, the employee’s sole recourse is through his employer’s workers compensation insurance carrier. This is commonly referred to as the “workers compensation bar” meaning the availability of workers compensation coverage for the injury “bars” the employee from seeking any other remedies through court action. When an employee is working at the site of an employer different from his own, the courts have established what is known as the “special employment” doctrine. If the requirements of this doctrine are met, both the employee’s actual employer and his “special” employer may rely on the actual employer’s workers compensation insurance as a bar to any lawsuit brought against the “special” employer.
The special employment doctrine requires three tests to be met:
1. The employee has made a contract of hire, express or implied, with the special employer;
2. The work being done by the employee (at the time of injury) is essentially that of the special employer; AND
3. The special employer has the right to control the details of the work.
In the past, courts have relied on the special employment doctrine to find, under facts in which a temporary worker is working at a company and is injured, that the company where the temporary worker was injured is a “special employer” and cannot be sued for the employee’s injuries, so long as the temporary worker is covered by the staffing agency’s workers compensation insurance.
However, in Gregory v. Cleveland County, the North Carolina Court of Appeals allowed the estate of a temporary worker killed on the job to sue Cleveland County for wrongful death. In Gregory, the employee was employed by WorkForce Staffing, Inc. Workforce had assigned the employee to work at the landfill in Cleveland County pursuant to a Staffing Vendor Agreement between Workforce and Cleveland County. According to the Agreement, Cleveland County paid Workforce and Workforce paid the temporary workers who were employed at County locations. The County provided the temporary workers with safety equipment and had the right to terminate any Workforce employee from the location at any time. However, the Agreement between Workforce and the County also contained a provision specifically stating that the Workforce employees were not employees of the County.
Based on this provision in the Agreement, the Court of Appeals found that the first test of the special employer doctrine could not be met. The Court held that if the Agreement specifically provided that the worker was not an employee of the County, the Court could not find an express or implied contract for hire between the worker and the County. Thus, the County could be sued by the worker’s estate, despite the fact that the estate had collected the maximum amount available from Workforce’s workers compensation insurance.
I can see several reasons why a company using temporary workers would want a specific provision in its Agreement with the temporary staffing agency setting forth that the agency’s employees are not employees of the company. However, a company will now need to weigh the benefit of such an express provision against the likelihood that the provision would prohibit it from qualifying as a special employer and thus the company could be sued by a temporary worker who is harmed on the job.
Companies which currently have contracts with staffing agencies should review them to determine if the contracts contain a provision like the one in Gregory. A careful discussion with counsel about the pros and cons of such a provision is advised. While that provision does provide some protection, it now likely opens the company up to litigation from its injured temporary workers.