E-Newsletter: Workers' Comp

The Borrowed-Servant Doctrine in Workers' Compensation

Workers' compensation is a scheme set up by each state government to control how workers with occupational injuries or industrial diseases are compensated. In most situations, an employee who sustains a work-related injury or illness will receive monetary and other benefits according to the workers' comp laws of his or her state and without regard to fault. As a trade-off, the employer carries workers' compensation insurance to cover these claims and is immune from related employee lawsuits because workers' compensation, with a few narrow exceptions, is the worker's exclusive remedy.

It is not unusual for employers to share employees. For example, a retail business could contract for building construction services and have construction company employees on store premises carrying out the terms of the service agreement. If a construction employee contracted food poisoning in the retailer's employee lunchroom, how would he or she be compensated? What types of responsibilities would each employer have for that injury?

The borrowed-servant doctrine is the longstanding legal principle that an employee who consents to be lent by his or her general employer to a special employer is also considered to be the servant of the special employer so that the worker is essentially employed by both employers at the same time. In most states, this means that if a borrowed employee is injured while working for a special employer, the employee's exclusive remedy is still workers' compensation rather than a lawsuit against the borrowing employer. Usually both employers are jointly and each fully liable for the workers' compensation claim.

The states use a variety of tests to determine whether an employee is a loaned employee or borrowed servant for workers' compensation purposes. Sometimes a state's statutes enunciate a specific test to be applied. Other times the statutes might enunciate a test that is further defined and refined by the courts. Another possibility is that the workers' comp statutes in a state are silent on this issue and the law is completely developed by the courts.

The traditional and most common test to determine whether someone is a borrowed employee is some variation of the control test described by a Texas court as "whether the . . . special employer has the right to direct and control the employee with respect to the details of the particular work at issue, and . . . whether the borrowing employer has the right to control the progress, details, and methods of operations of the work." Flores v. North American Technologies Group, Inc., 176 S.W.3d 442, 448-49 (Tex. App. 2004).

Some states have adopted a three-part test or some variation thereof, enunciated by a Nebraska court as follows: "[T]he special employer becomes liable for workers' compensation only if (1) the employee has made a contract of hire, express or implied, with the special employer; (2) the work being done is essentially that of the special employer; and (3) the special employer has the right to control the details of the work." Morin v. Industrial Manpower, 687 N.W.2d 704, 712 (Neb. Ct. App. 2004).

Finally, the remaining states apply the multifactor test in determining whether a special-employment relationship exists. These states usually still consider control to be the most important factor, but analyze several others, such as:

1. Length of employment position
2. Contractual terms, express or implied, between the general and special employers
3. Power to select and/or terminate the employee
4. Employee acquiescence to arrangement
5. Place of work
6. Delivery of employee instruction
7. Source of remuneration
8. Which employer receives benefit from the work
9. Termination of the employment relationship by the original employer
10. Source of equipment and tools
11. Dress code requirement

If you have been injured while in a borrowed-employee arrangement, an attorney with experience in workers' compensation can advise you about the particular law followed in your state and in your situation.

Illustrative Workers' Comp Borrowed-Servant Cases

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Illustrative Workers' Comp Borrowed-Servant Cases

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