Consider this scenario: An attorney is defending an organization aggressively in a “personal injury” case involving multiple contingent workers. The “personal injury” related facts in the case are fairly clear that the company was not following established industry safety norms and even the company’s own defined and written safety protocols. These facts are not in dispute. The company’s defense attorney decides the best legal strategy is to define these contingent workers as non-employees who do not have any co-employment relationship with the company in any shape or form.
What should raise red flags, though, is the plaintiffs’ lawyers readily accept the proposition that the contingent workers are not co-employees. Why? Because of workers’ compensation and what’s called “exclusivity.”
One of the most prominent risks faced by businesses engaging talent — staff or contingent — has to do with personal injury. Enter workers’ compensation, which limits the amount owed to workers in the case of an injury. And in most states and circumstances, “co-employees” are covered by workers’ compensation both from the supplier and the client company. In most cases, an injured worker can collect workers’ compensation benefits once, usually from a contingent labor supplier (depending on state law); but the worker is usually barred from filing a tort/personal injury lawsuit against the contingent labor supplier, its client, or the employees of either entity.
The concept of exclusivity is when an injured worker is an “employee” as defined under state workers’ compensation law, businesses find it beneficial to be “employers” or “co-employers” of an injured worker, because they are handled under workers’ compensation law, rather than a negligence lawsuit against the employer. State tests for “employee” status under workers’ compensation make it easy for a worker to be an “employee” under most workers’ compensation tests.
Organizations should particularly guard against mistakenly avoiding co-employment responsibility and in turn losing workers’ compensation exclusivity and incurring a personal injury lawsuit with potentially uncapped damages.
In too many cases over the last few years, co-employment risk mitigation polices have been based on industry-rumored assumptions rather than legal case findings and published government employment test such as found in the Darden Common Law Test, The IRS Service (Three Factor) Test and/or The Economic Realities (FLSA) Test.
These erroneously biased co-employment mitigation policies versus co-employment risks mitigation strategies will miss out on the benefits of co-employment and potentially put an organization open to expensive unnecessary monetary and negative publicity risk.
In our opening scenario, the plaintiff’s attorneys know that if they allow the defendant to claim non-employer status, that company loses protections under workers’ compensation laws, opening the door to further and pricey litigation. Had the defendant accepted co-employment status, its financial repercussions would have been minimized.
Staffing Industry Analysts’ CCWP Certification program covers this and other benefits and proper risk mitigation strategies of co-employment.
