Have you used or do you use temporary help (“temps”), leased employees or borrow employees? Here are a few workers’ compensation insurance and risk management-related items to keep in mind.
Companies’ workforces may consist of people who are direct employees, temps, leased employees or borrowed help. What’s the difference? For the purposes of this article:
- Direct employees are those you hire. You withhold payroll taxes. They receive a W-2 from your company. If eligible, they participate in your company’s employee benefit plans (health insurance and 401(k)/pension plan, etc.), and their payroll is counted toward the calculation of your company’s workers’ compensation insurance premium.
- Temps are used on a short-term basis when a firm needs to temporarily fill a position due to seasonal demands or the extended absence of an otherwise permanent employee. Temps are paid by the temporary help agency.
- Leased employees are provided by Professional Employer Organizations (PEOs). PEOs supply a company with all, or the vast majority of, a company’s workforce on a permanent basis. These personnel are used/placed on a non-temporary basis.
- Borrowed employees, also referred to as “loaned employees,” are, as the name implies, borrowed for a short time period from another company, which may or may not be a temporary help agency, but is definitely not a PEO.
Who is Responsible for Providing Employee Workers’ Compensation Insurance?
Presuming the workers’ compensation statute applies, a company with direct employees is responsible for providing workers’ compensation insurance for its workforce.
A temporary help agency means an employer who places its employee with or leases its employees to another employer who controls the employee’s work activities and compensates the first employer for the employee’s services, regardless of the duration of services. The temporary help agency is responsible for obtaining workers’ compensation insurance for its employees. This insurance responds if the temp is injured while working at the company which contracted with the agency to provide the temp.
With respect to leased employees, the situation is much more complicated. Wis. Stats. §102.315 describes how workers’ compensation insurance for leased employees must be handled. Terms like “Divided Workforce” and “Master Policy” are referenced, as is paperwork that you, as the company leasing employees from a PEO, must file with the Department of Workforce Development. As a “Co-Employer,” ensuring the workers’ compensation insurance for leased employees is appropriately structured is critical.
Responsibility for workers’ compensation insurance for borrowed employees is a function of the facts and circumstances of each situation at the time of injury. You, as the “borrower,” may be considered a “Special Employer.”
Avoiding Third-Party-Over Actions
Third-party-over actions are situations in which a person is injured while working on your company’s premises as an independent contractor, temp, leased or borrowed employee. The injured person collects workers’ compensation benefits from their employer, then turns around and sues you for their injuries.
The good news is Wis. Stats. §102. 29 (6), (6m) and (7) provide immunity to you from these claims and preclude a temp, leased or loaned employee from suing you for their injuries.
Other Risk Management Tips
1. Whether using a temp or leased employee, enter into a written contract with the firm providing the personnel. If written properly, among other details, the contract should stipulate the pay rate, which entity is actually paying the personnel, and who is responsible for withholding payroll taxes and providing workers’ compensation insurance. Don’t leave things to chance – memorialize the arrangement in writing.
Using a written agreement in a borrowed/loaned employee situation may be recommended; it depends on the nature of the relationship.
2. Discuss with your insurance agent or consultant what you need to do to ensure you are properly insured when using temps, leased and loaned employees. Are you a co-employer? Do you need to add an Alternate Employer Endorsement onto your workers’ compensation policy?
Disclaimer: This article is not intended to and does not provide legal advice.
By Joy M. Gänder, CPCU, ARM
Copyright © 2015 Gänder Consulting Group, LLC
Phone: (608) 286-0286 │Fax: (608) 442-6811