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The Loaned Servant Doctrine: Staffing Agencies

On Behalf of | Mar 24, 2017 | Workers' Compensation

You may be eligible for Workers’ Compensation Benefits even as an employee of a temporary staffing agency.

Under Nebraska law, a worker who is injured while working on temporary assignment at a job they were sent to by a staffing agency may be eligible for workers’ compensation benefits from the staffing company.

These circumstances were tested and upheld in the Nebraska case, Morin v. Industrial Manpower. Industrial Manpower was a staffing company that provided specialized construction workers for other companies. To accomplish this, Industrial Manpower employed labor brokers who worked out of their home offices, matching up construction workers with companies that needed help. The labor brokers used phone lines provided and paid for by Industrial Manpower, as well as a database of prospective employees provided by the staffing company.

At the time of the worker’s injury at the center of this case, Industrial Manpower had labor brokers in both Nebraska and South Dakota. Two of the three partners in Industrial Manpower lived in Nebraska, and its bank account was located in Nebraska. Whenever its labor brokers sent an employee to a job site, the employee went there under Industrial Manpower’s auspices and was paid by Industrial Manpower.

In 2002, Industrial Manpower’s labor broker sent welder Pete Morin to work at Townsend Welding in Massachusetts. On December 7, 2002, Morin sustained torn ligaments in his right ankle while working as a pipe welder. Industrial Manpower’s workers’ compensation insurance carrier, Travelers Insurance, denied his claim because he was hired by telephone from Colorado. In essence, Manpower/Travelers attempted to shift the liability for Morin’s injuries to another employer, Townsend Welding.

On March 11, 2003, Morin filed suit against Industrial Manpower and Travelers in the Nebraska Workers’ Compensation Court (NWCC). The appellate court ruled the welding company, Townsend Welding, was an employer of the staffing company under the Nebraska Workers’ Compensation Act (NWCA). It also ruled that, under the loaned-servant doctrine, Morin was an employee of the staffing company and, thus, able to receive workers’ compensation benefits from the staffing company. On June 30, 2003, Travelers asked the NWCC to have the decision reviewed by a three-judge panel.

The loaned-servant doctrine provides that, if an employer loans an employee to another to perform a special service, then that employee may become the employee of the party to whom his services have been loaned. Under the NWCA, this principle allows an employee to simultaneously have two employers. In this case, Morin’s general employer was Industrial Manpower, and his special employer was Townsend Welding. In such cases, the employee may look to one, the other, or both employers for compensation.

The courts use a three-part test to determine whether the special employer in a labor-broker arrangement may be regarded as an employer within the Nebraska Workers Compensation Act. The special employer becomes liable for workers’ compensation benefits 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.

In Morin v. Industrial Manpower, there was no dispute that Morin had at least an implied contract with Townsend Welding or that the work he did was Townsend Welding’s work. There was no dispute that Townsend Welding controlled the details of Morin’s work.

The review panel ruled that, under the loaned-servant doctrine, Morin was considered an employee of the staffing company and, thus, eligible to receive workers’ compensation benefits from the staffing company, even though Townsend Welding controlled the details of his work at the time of the injury. The trial judge’s ruling was affirmed.

This case may have implications for truckers who work for an employer but pull trailers and are dispatched by another motor carrier. Both the employer and the motor carrier may be liable for workers’ compensation benefits when the driver is injured on the job.