A temporary worker who becomes injured can have a long-lasting impact on your business if you’re not properly insured.

Hiring temporary workers is often a great way to handle busy work periods throughout the year. But what happens when a temporary employee is injured on the job? Who is responsible for covering their injury and recovery time until they are ready to work again? It’s important to know the facts so you can protect your business if, and when, accidents and injuries occur.

Below are the 3 Most Important Questions we receive about temporary employees and how injuries can affect your Workers’ Compensation insurance policy.

1. Can I be sued by a temporary employee who is hurt at our workplace?

Yes, the short answer is that you can be sued by anyone at any time! That’s why you should take the appropriate measures to reduce risk and maintain a Comprehensive General Liability (CGL) policy and endorsements needed to protect your organization should a temporary employee be injured at your workplace. Most importantly, the language contained in a General Liability policy needs to be reviewed by an insurance agent/consultant to identify the presence of potential exclusions related to varying definitions of “who is an employee?” In addition, when contracting with a temporary employment agency, you must be in possession of a copy of their Workers’ Compensation policy. Their policy should be reviewed by your legal counsel to ensure that it includes language stating that the temporary agency takes responsibility for any Workers’ Compensation claim presented by workers placed with your company. This should cover Workers’ Compensation claims that may arise now and in the future.

 2. If a company is sued by a temporary worker, is this covered under Workers’ Compensation?

Workers’ Compensation, in the presence of a temporary employment relationship, becomes an area in which you and the temporary agency have “joint employer” status under several Workers’ Compensation employment laws. This reasoning has to do with the potential for employment abuses in this triangular relationship situation. In essence, you both have a responsibility to provide employees with mandated protections. Theoretically, since the temporary agency is the employer, Workers’ Compensation benefits should be covered by their policy. However, since you can be sued by the injured party, you need to ensure that there is a clear contractual delineation of responsibilities between you and the temporary agency, and adequate General Liability protection in your own policy to cover any injured temporary employees.

 3. How can I protect my business with insurance?

There are two insurance endorsements that a client can add or purchase to extend coverage for temporary employees:

Alternate Employer Endorsement (WC 00 03 01 A)

The most effective way to close the coverage gap described above is the Alternate Employer Endorsement. A client company can request that the leasing company include the Alternate Employer Endorsement on a Workers’ Compensation and Employer’s Liability policy. Such an endorsement should specifically schedule you as the alternate employer. While not a CGL solution, the Alternate Employer Endorsement can close the gap by providing coverage to you, the client company, as an alternate employer. The endorsement states:

Part One (Workers’ Compensation Insurance) and Part Two (Employers’ Liability Insurance) will apply as though the alternate employer is the insured. [i]

Coverage for Injury to Leased Workers (CG 04 24)

The client company should also consider adding, to its own CGL policy, an endorsement entitled, Coverage for Injury to Leased Workers (CG 04 24). This endorsement simply states that the term “employee” does include a “leased worker” or “temporary worker.” The effect of this endorsement is to invalidate the Employers’ Liability exclusion on the CGL making it no longer applicable to claims for injuries to a leased or temporary worker—because both are now considered to be employees of the client company for the purposes of applying this exclusion.

Be Sure to Read your staffing companies’ fine print

When an organization uses a workforce that is furnished on a short-term basis (such as the one provided by a temporary staffing agency), or on a longer-term basis (such as from an employee leasing company), a careful review of the details of the arrangement is necessary. There should also be a review of the policies and contractual agreements that exist between the parties to this triangular relationship. The client company should obtain proper documentation from the agency providing the personnel, including a request to be named as an alternate employer, via an endorsement, with their name specifically stated on that endorsement. The client company should also consider the possibility of adding coverage for “injury to leased worker endorsement” to their own CGL policy. [ii]

Let Schaefer Enterprises show you how to protect your business and mitigate risks before temporary employees become injured on the job. Call us at 877.237.2481 and learn more about workers’ compensation.

Opinions expressed in Expert Commentary articles are those of the authors and are not necessarily held by the author’s employer SEI New York or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
[i] IRMI, www.IRMI.com
[ii] IRMI, www.IRMI.com