Exclusively from Foa & Son
Businesses often depend on staffing companies or temp agencies to supply workers. From filling temporary staffing needs during busy times, temp to hire strategies and other needs, there can be many advantages to using these types of services. The contract between the staffing company and the client business typically will have a provision for workers’ compensation insurance coverage, and its common to find the staffing company assuming the responsibility to provide this insurance.
You should be aware there is a potential downside to this type of arrangement for you as a client. Consider this scenario: you lease an employee from a staffing company. They are in your building, working for you and you are directing their activities, but their employer is in fact the staffing company, not you.
That employee suffers a work injury. Workers compensation benefits are properly paid by the staffing company’s workers compensation insurance policy. However, the injured worker turns around and files a liability suit against you, alleging it was your negligence that caused or contributed to their injury. Injured workers like to do this when they can, and its a no lose situation for them; they get workers compensation benefits, but they also get a shot at the legal lottery.
This is a situation that’s easy to imagine, and its a headache that’s just as easy to avoid with a little forethought and planning. There is a little-known endorsement available for workers compensation insurance policies known as the “alternate employer endorsement” that can allow businesses who hire temporary workers to have coverage under the staffing company’s workers’ compensation insurance policy. It extends primary coverage to employees of the named insured (the staffing company) while they are in the temporary or special employment of another company (you, the client business); it recognizes the client company as the alternate employer.
Workers compensation is intended to be the sole remedy in work injury situations. This endorsement brings that back, and can short circuit any effort by a temp worker to sue you as described. And because the alternate employer endorsement includes both workers compensation and employers liability, even if a suit should somehow find a way to proceed, you can look to the staffing company’s policy to defend you, rather than your own policy.
The way it works is simple. You want the staffing company to agree they will provide workers compensation coverage for temp employees they send you; you also want them to have you specifically endorsed on their WC policy with the alternate employer endorsement. You’ll want a copy of that endorsement for your records; you’ll also want a hold harmless clause in your agreement with the staffing company.
You still need to maintain your own workers compensation policy, but with evidence in your possession of a properly written alternate employer endorsement from your staffing company you should be able to confidently turn to them to handle any work injury claims from the temp employees they supply.