CWS 3.0: June 26, 2013

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Workers’ Compensation: When Co-Employment Benefits You

Co-employment has long been dreaded when it comes to the use of contingent labor. With co-employment come added risks that can expose buyers to financial losses. However, co-employment has its benefits for buyers, and program managers should think carefully before attempting to rule out any co-employment relationship, through strict contract language.

Workers’ compensation coverage is one area where co-employment has a positive effect for buyers. Workers’ compensation insurance typically is carried by the staffing firm that supplies the workers, but because the staffing provider and client share a co-employment relationship, both entities are protected from further claims by what’s known as the “exclusive remedy.” Put simply, workers’ compensation is an injured worker’s only recourse in most cases — they generally cannot collect further damages in a lawsuit from the staffing firm or the client.

Of course, there are exceptions that vary from state to state. In many cases, workers’ comp exclusivity won’t protect a client company if an employee deliberately assaults a contingent worker in order to cause bodily harm. But for your run-of-the-mill workplace injury, the companies are protected — even in the event of a death. For example, the Texas Supreme Court ruled last year that a worksite employer was protected by workers’ comp exclusivity after a workplace accident killed a contingent worker. The family had been paid benefits from the staffing firm’s workers’ compensation insurer, and the court said that was their only recourse.

But clients that balk at the “co-employer” label can put that protection in jeopardy. Some companies do not want to be considered a co-employer under any circumstance and specify in their staffing contracts that there is no employer relationship with the contingents they use. Eric H. Rumbaugh, partner with the law firm Michael Best and Friedrich LLC, relates that some companies have actually argued successfully in court against any employer status — and lost their exclusivity protections in the process.

So think twice before running from co-employment. Should an accident take place, the relationship could save your company millions.

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