The importance of the temporary worker has increased during the past 10 years due to gaps in staffing caused by downsizing, mergers and acquisitions. A temporary worker can be hired to fill in for an employee on leave, or they can be used to augment a company's permanent staff during seasonal fluctuations. Regardless of the reason for their employment, any business owner who hires temporaries should understand that they are entitled to certain considerations even though they will only be with you for a short time.
That entitlement rests on the answer to an important question of whether or not the temporary is an "employee" or an "independent contractor."
This is especially relevant when it comes to the area of discrimination. The Equal Employment Opportunity Commission (EEOC) says that temporaries are covered employees under the federal and state anti-discrimination laws if the right to control the means and manner of their work performance rests with the hiring company, rather than with the temporaries themselves.
It's important to note that even though the staffing agency pays the temporary based on the number of hours reported by the business owner, it is the hiring company that oversees the temporary's work. Moreover, the temporary uses the hiring company's supplies and equipment and works on-site. In this instance, the liability for providing a discrimination-free environment is not transferred to the staffing agency, as most companies would believe. The EEOC says the liability is shared by both the staffing agency and the hiring firm.
The issue of safety in the workplace is another area of vulnerability when it comes to hiring temporary workers. The Occupational Safety and Health Review Commission has taken the stance that companies employing temporary workers are primarily responsible for compliance with the Occupational Safety and Health Act with regard to those workers' safety. The rationale for this position is again based on the fact that the hiring company controls the means and manner of their work.
Employing temporary workers also has ramifications for the hiring company when it comes to the Family and Medical Leave Act (FMLA). This law requires employers with 50 or more employees to allow any eligible employee to take up to 12 weeks of unpaid family and medical leave in any 12 month period, while still maintaining the employee's health insurance benefits and usually, to restore the employee to the same or equivalent position upon his/her return. Although the hiring firm does not grant FMLA leave to temporaries, they do have to count temporary workers as part of their contingent when determining if they meet the 50 or more criterion. They must also allow a temporary employee returning from FMLA leave to continue working at their site, even if that means letting another temporary worker go who was hired to replace the worker on leave.
The National Labor Relations Board considers hiring companies and staffing agencies to be joint employers for purposes of the National Labor Relations Act (NLRA) when both make determinations that affect the terms and conditions of the temporary worker's employment. An important consequence of this joint employer determination for the hiring company is that it may be held liable for the staffing agency's unfair labor practices toward the temporary worker it has hired.
And finally, hiring companies must include most temporary employees in their employee headcounts to see if their benefit plans qualify for a favorable tax treatment under the Internal Revenue Code. However, several courts have ruled that there is no provision in either the Internal Revenue Code or the Employee Retirement Income Security Act that hinders hiring companies from excluding temporary workers from their benefit programs.
CHECK YOUR COVERAGE FOR ON-THE-JOB INJURY CLAIMS BY TEMPORARY WORKERS
If you use workers from staffing or leasing agencies to supplement your workforce, how adequately do your current insurance policies protect your company in the event that one of these individuals is injured on the job?
If you're covered under an Insurance Services Office, Inc. (ISO) Commercial General Liability (CGL) policy and your Workers Compensation and Employers Liability policies are written on National Council on Compensation Insurance (NCCI) forms with no additional coverage endorsements, you might not be as protected as you think. You should consider adding the Coverage for Injury to Leased Workers (CG 04 24) endorsement to your CGL policy.
A potential gap in coverage arises from the way the CGL policy defines "temporary" and "leased" workers. A leased worker is a person leased to your company through an agreement with an employee-leasing firm to perform duties related to the operation of your business. A temporary worker is a person furnished to you to fill in for a permanent employee on leave or to meet seasonal or short-term workload conditions. Under the terms of the CGL policy, "employee" includes a leased worker, but does not include a temporary worker. The distinction is important, because the CGL policy's Exclusion E: employers liability, excludes from coverage bodily injury claims made by an employee of the insured.
Thus, if your CGL policy definitions consider the worker to be an "employee" - even though that worker is provided by a staffing agency - the policy will not cover any bodily injury claims by that worker. If the worker is not specifically substituting for a permanent employee who is on leave, or meeting a seasonal need or short-term workload conditions, the worker is not a "temporary worker" in the eyes of the insurer, and instead is considered your employee for purposes of Exclusion E. To be a "temporary worker," that individual must have a specific end date to his or her employment with you. A temporary employee who is hired for an indefinite period of time simply does not meet the criteria stated above, and is therefore considered an employee, and subject to Exclusion E if they are injured on the job.
Adding the Coverage for Injury to Leased Workers (CG 04 24) endorsement to your CGL policy will help you fill this coverage gap. This endorsement states that the term "employee" does not include a "leased worker" or "temporary worker," making the employers liability exclusion of the CGL policy inapplicable to the claims for injuries to a leased or temporary worker.
Another way to protect your company in lawsuits by injured temporary workers is to require the staffing agency that provides such workers to include the Alternate Employer Endorsement (WC 00 03 01 A) on its Workers Compensation and Employers Liability policy, and specifically schedule your company as the alternate employer. This endorsement will provide you with coverage as an alternate employer in the event the temporary worker files a tort suit.
Without the right coverage in place, on-the-job injuries to temporary workers can present a significant potential liability to your company. Let us help you examine your current CGL policy and arrangements with any staffing or leasing firms you use to make sure your company is protected.
