Steven L. Brenneman, Teri F. Thompson, Elizabeth A. Ward, Editors
Ford & Harrison LLP

Vol. 18, No. 9
April 2008

WORKERS' COMPENSATION

Injured temporary worker can't sue borrowing employer

As we've reported before, employers that use temporary workers can shift responsibility for workers' compensation claims to the temporary employment agency via a contractual waiver of the temporary agency's right to reimbursement from the borrowing employer. But what about the flip side of the coin? Can the injured worker file a claim outside the Illinois Workers' Compensation Act to hold the borrowing employer liable? An Illinois appellate court recently clarified the rules.

Working on borrowed time

Roberto Chavez was employed by Tandem Staffing Solutions, a temporary employment agency. Tandem sent Chavez to work as a temporary laborer at Transload Services in Harvey. There, after receiving an employee handbook and individualized training from Transload, he performed the same type of work as Transload's other employees ― unloading rail cars. Doug Stone, Transload's supervisor, controlled Chavez's work schedule and assignments and had the authority to discharge him.

While working at Transload, Chavez was injured when he was struck by an overhead crane. He filed for and collected workers' comp benefits through Tandem, the temporary agency. He also sued Transload, alleging premises liability and negligence.

Wait a minute, said Transload. The whole point of our workers' comp system is that employers may avoid claims for torts (wrongful acts) such as negligence, while providing injured employees benefits without requiring them to prove the employer acted negligently or was otherwise at fault. The Illinois Workers' Compensation Act is thus the "exclusive" remedy for workplace injuries. But does the exclusivity provision of the Act protect an employer that "borrows" a temporary worker and by contract shifts the responsibility for workers' comp benefits to the temporary agency, the "loaning" employer? The answer depends on whether a valid "borrowed employment relationship" exists.

First, a little background. Section 1(a)(4) of the Act addresses the rights and responsibilities of "loaning employers" and "borrowing employers." As we've explained before (see "Temp agency to pay for tortilla worker's trouble," September 2007), the Act provides that if an employer loans an employee to another employer and the loaned employee is injured, the borrowing employer is primarily responsible for workers' comp benefits and the loaning employer is secondarily liable.

If the loaning employer must pay, it's entitled to reimbursement from the borrowing employer in the "absence of [an] agreement to the contrary." If the loaning employer and borrowing employer have an agreement by which the loaning employer agrees to provide workers' comp benefits for its loaned employees, then the borrowing employer is off the hook for the purpose of workers' comp.

Neither a borrower nor lender be?

That's all fine and good, said Chavez, but he was suing Transload, not under the Workers' Compensation Act, but for common-law claims such as negligence. That takes us back to the question posed earlier: Can Transload take advantage of the Act's exclusivity provision (which bars common-law claims) even though it had no exposure under the Act by virtue of its contract with Tandem? Yes, said the court, because the Act's exclusivity gives immunity to both loaning and borrowing employers, and Transload was a "borrowing employer."

To determine whether a "borrowed employment relationship" exists, courts look to several factors, including the terms of any written contract between the two employers. The two most important factors are (1) whether the borrowing employer had the right to control the employee's work and (2) whether the worker gave express or implied consent to be in a borrowed employment relationship.

Chavez was trained by Transload and accepted its employee handbook. He took direction from Transload's supervisor, worked the same hours, took the same breaks, and received the same instructions as other Transload employees. Clearly, Transload had the right to control his work, even though it wasn't allowed to entrust Tandem employees (such as Chavez) with unattended premises or valuables or assign them to operate dangerous equipment.

Chavez argued that he never consented to being a Transload employee. After all, he received his paychecks from Tandem. Never mind, said the court. Because Chavez accepted the employment assignment and the control and direction of his work by Stone, he "impliedly consented to the borrowed employment relationship," said the court. Because those two key factors were satisfied, a borrowed employment relationship existed. Transload is therefore protected by the Act's exclusivity provision. Case dismissed. Chavez v. Transload Services, L.L.C., No. 1-07-0125 (Ill. App. 1st Dist., Mar. 4, 2008).

Take a load off

What does this mean for employers that use temporary workers? It confirms that "borrowing" employers can have their cake and eat it, too. That is, they can use temps while avoiding responsibility for workers' comp benefits and may still be shielded from negligence and other common-law claims by the Act's exclusivity provisions. But to do so, remember to include in your agreement with the temp agency a waiver of the temp agency's right to reimbursement, and make sure you meet the criteria for a borrowed employment relationship.

Copyright 2008 M. Lee Smith Publishers LLC

ILLINOIS EMPLOYMENT LAW LETTER does not attempt to offer solutions to individual problems but rather to provide information about current developments in Illinois employment law. Questions about individual problems should be addressed to the employment law attorney of your choice.