What are the policies concerning employees returning from workers' compensation leave? Since each...
Workers’ Compensation Claims for Leased or Temporary Workers
In the modern business landscape, an increasing number of companies are turning to staffing agencies to fulfill their personnel requirements. Whether driven by heightened workloads or the challenge of high employee turnover rates, this trend offers various advantages. By engaging with staffing agencies, businesses can curtail expenses associated with hiring and training full-time employees. Moreover, the reliability of agency-recruited workers fosters peace of mind, as employers are assured of consistent performance.
However, a pertinent question arises when a staffing agency worker sustains an injury while on the job: Who assumes responsibility for addressing the injury? If an injured worker contemplates suing the client company of the staffing agency for negligence, the situation gets even more complex. Answering these inquiries necessitates a comprehensive grasp of the intricate employment relationships that underlie staffing agency engagements. Additionally, the classification of employees significantly impacts the application of workers’ compensation and commercial general liability (CGL) policies in the context of work-related injuries.
Distinguishing Workers’ Compensation from CGL Coverage
In the realm of workers’ compensation, companies are mandated to provide coverage for medical treatment and wage loss sustained by injured employees. This mechanism operates as a no-fault insurance system, ensuring employees’ financial security while they recuperate from work-related injuries. In exchange for these benefits, employees relinquish their right to sue their employers for negligence or related damages(and if you're the employee learn about Your Right to Workers' Compensation). It is important to note that the provisions of workers’ compensation are relevant solely within the framework of an employer-employee relationship.
On the other hand, CGL policies serve to shield companies when non-employees (third parties) suffer harm due to the company’s negligence or misconduct. Given the engagement of staffing agency workers, the determination of an employment relationship between the company and these workers is often intricate. To fully fathom this complexity, companies must aptly categorize staffing agency workers as either leased or temporary workers.
Deciphering Leased versus Temporary Workers
The definitions of leased and temporary workers vary across different states, thereby requiring a solid comprehension of local and state requirements to classify staffing agency workers accurately.
For CGL coverage, a leased worker pertains to an individual leased to a client company by a labor leasing firm under an agreement stipulated between the two entities. This agreement mandates the leased worker to carry out duties associated with the company’s operations. It is crucial to underscore that temporary workers do not fall under the leased worker category. Under this delineation, leased workers are considered employees of the client company and are consequently excluded from the company’s CGL coverage.
In contrast, CGL policies define a temporary worker as an individual dispatched to a client company either as a substitute for a permanent employee on leave or to address seasonal or short-term spikes in workload. Temporary workers are categorized as employees of the staffing agency and thus fall under the purview of the staffing agency’s workers’ compensation policy. Depending on circumstances, they could also potentially be covered by the client company’s CGL policy.
Navigating the Coverage Gap
An insurance coverage gap emerges when a leased employee suffers an injury while working for the client company. While leased employees are considered client company employees for CGL coverage, they might not meet the criteria for employees as outlined in relevant workers’ compensation regulations.
This discrepancy leads to a situation where individuals injured in the course of their duties could potentially sue the client company for negligence, as they are not constrained by the provisions of applicable workers’ compensation regulations. If the client company lacks CGL coverage, it becomes responsible for covering court-ordered damages arising from such situations, as CGL coverage doesn't extend to the company's employees.
Resolving the Coverage Gap
To bridge the gap introduced by leased workers, companies have viable solutions at their disposal. Two effective strategies are:
Alternate Employer Endorsement: Client companies can engage in negotiations with staffing agencies to incorporate an alternate employer endorsement within the staffing agency's workers’ compensation and employer liability policies. This endorsement offers protection to the client company by extending coverage in the event of a tort action. It essentially provides the client company with the same workers’ compensation coverage that the staffing agency enjoys.
Coverage for Injury to Leased Workers: This solution involves augmenting the client company’s CGL policy to encompass coverage for leased workers. The language excluding leased and temporary workers from CGL coverage can be modified to accommodate this endorsement. However, it's essential to acknowledge that this solution might not be favored by insurance carriers, as it effectively undermines an exception purposefully incorporated into the CGL policy.
In summary, comprehending the intricate landscape of workers’ compensation and CGL coverage in the context of staffing agency workers is crucial for businesses. By accurately categorizing these workers and addressing potential coverage gaps, companies can navigate legal complexities and ensure robust risk management strategies.
Talk to a TPG Workers' Compensation Specialist if you have any further questions. You can reach us at 909.466.7876 or visit our office at 9485 Haven Ave, Rancho Cucamonga. We're eager to see how we can improve your business!