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Temp agencies and tort law: an emerging issue

Workplace injuries are unfortunately quite common in the United States and in North Carolina. The Occupational Safety and Health Administration (OSHA) reported that in 2017, there were 5,147 reported on-the-job fatalities alone, more than 14 deaths every day. North Carolina contributed 183 deaths to that total. Reported non-fatal injuries in the workplace in 2017 totaled over 2.8 million. Many times, these incidents involve some type of negligence either on the part of an employer or fellow employee of the victim.

Most employers, civil practitioners and even employees are aware of the general rule that in North Carolina, as in many other states, an employee who suffers an injury on the job cannot sue his or her employer in tort for damages, even if the employer is negligent, because of the workers’ compensation provision known as the “exclusive remedy.”

Because of the evolution of worker classifications on many of the most dangerous worksites, specifically those in the construction, manufacturing, and transportation industries, which account for the majority of on-the-job injuries reported to the North Carolina Department of Labor and OSHA, the right to sue one’s employer outside of the workers’ compensation arena is making a comeback. The question of whether a worker injured or killed on the job has a negligence claim against the employer of that worksite is no longer as simple as it once was.

Willis

Willis

While neither employees nor employers should doubt that the courts still bar suits routinely under legal doctrines like the joint employer rule or the special employment rule, there may yet be a negligence case waiting at the other side of an on-the-job injury or fatality because of the rapidly expanding use of temp agencies or staffing companies. The American Staffing Association, a special interest group that lobbies and tracks data on behalf of staffing and temp agencies across the country, estimated that in 2017 North Carolina employed a staggering 546,900 so-called “temporary or contract” workers. More than one-third of those were employed in the industrial sector alone.

Because private staffing companies now routinely provide workers for jobs in the industrial and manufacturing industry, in more and more cases the employment relationship has been blurred.

For both employee and employer, the single most important item to review in determining whether an injured employee can sue in negligence are the terms of the contract between the employer and the staffing company. These contracts will often expressly hold that the workers provided by the staffing company are to be considered the employees of the staffing company. Obviously, there are benefits to a worksite employer in offloading the workers’ compensation exposure to the staffing company. But in doing so, the worksite employer may be opening themselves up to a much larger tort exposure.

These contracts typically clarify not only who will be responsible for workers’ compensation benefits should the employee be injured at work, but also the agreed-upon procedures for the employer to “convert” or fully hire the staffer away from the staffing agency. What the employer may not consider is that, absent any provision in the contract about the worker being considered the “joint employee” of both companies, it will likely allow the injured worker to sue in negligence. The exclusive remedy under the Workers’ Compensation Act would only apply to the staffing agency, an unlikely defendant given that the employee is working at another employer’s job site.

When the contract concisely states that the injured worker is an employee of the staffing agency, such language will generally defeat any other arguments trying to invoke a joint employee-employer relationship to protect the on-site employer. More than 80 years ago in Hollowell v. N. Carolina Dept. of Conservation & Dev., the North Carolina Supreme Court held that an employment relationship is essentially contractual and is ultimately determined by the rules governing the establishment of contracts. This idea is not new and is one of the reasons for the proliferation of the “independent contractor” hiring practice in many industries over the last 30 years.

But with the rapid expansion of temp agency staffing, that concept is shifting. Now, many employers who use staffing companies may think that they have insulated themselves from workers’ compensation exposure by placing that requirement on the staffing agency, but in doing so may have exposed themselves in tort by the same language.

Obviously, when the contract with the staffing agency is silent in determining expressly who is the “employer” of the temp worker, employers will argue for a joint employment relationship. Under a joint employment theory, both the staffing agency and the general employer would enjoy the benefits of being immune from suit by virtue of that shared employment. And to be sure, this joint employment concept continues to protect many employers. Only two months ago the North Carolina Court of Appeals, in Belk v. Boise Cascade Word Products, held that the injured employee could not sue because he was a special or joint employee of both his temp agency and the general employer. In that case, the contract between the temp agency and the special employer provided that both were considered employers for workers’ compensation purposes, and so the joint employee doctrine also protected both.

But there are often competing interests between the staffing or temp agency and the special employer in negotiating these contracts. Employers may have afforded themselves a financial boon when they offload the responsibility of workers’ compensation payments to the staffing company. But they may also be unwittingly exposing themselves to suit by putting the temp agency in the driver’s seat. When the staffing company assumes all workers’ compensation exposure, they are likely to place work restrictions on the temporary worker. This is especially true in the context of low skilled, low wage work. These typically include outright restrictions on working in confined spaces, working from heights, working around hazardous materials, the use of motor vehicles, and the use of machinery or machine equipment. These work restrictions make it difficult for the worksite employer to argue that it exercised a sufficient amount of control over the temporary employee to protect it from suit, when the staffing agency sets the boundaries for what type of work can and cannot be performed.

Finally, even in the absence of express language identifying who the actual employer of the temporary worker is, many staffing agency contracts also provide that a temporary worker cannot be “hired away” from the staffing agency unless the worksite employer pays the staffing agency a “conversion fee.” These fees are a major source of revenue for staffing companies. This practice, however, may also suggest that the temporary worker is not an employee of anyone other than the temp agency, because you cannot employ someone who has yet to be “converted” to your employment.

Ultimately, employees should ask their temp agencies for an understanding about who their employer is. Employers and temp agencies should review their contract language on this topic to determine to their satisfaction who bears responsibility in the event the next work place fatality also becomes a wrongful death lawsuit.

Hunt Willis is a trial attorney at Martin & Jones, PLLC in Raleigh. His practice focuses on representing plaintiffs in catastrophic injury and wrongful death cases, many of which arise out of work-related death or injury, commercial motor vehicle wrecks, and industrial accidents.

 

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