Managing Temporary Leased Employees and Independent Contractors

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Managing Temporary/Leased Employees and
Independent Contractors

• Max Lewels, ARM
• Account Executive
• American Contractors Insurance Company, Inc.

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Public Speaking is One of the Best Things I
Hate. - Yogi Berra
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Changing Business Climate

• Temporary Employees short term for peak
  seasons.
• Leased Employees permanent or indefinite time
• Independent Contractor may work for several
  employers

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Leased Employees

• Growth in the employee leasing industry propelled
  by cost savings advantages
• Reduction of administrative expenses
• Lowering the cost of insurance and benefits
• Abuses derived from employee leasing the abuse
  of the workers compensation EMR system.

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Professional Employer Organization (PEO)
Employee leasing means an arrangement whereby a
leasing company assigns its employees to a client
that allocates direction of and control over the
leased employees.
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PEOs and WC

• PEO provides WC insurance, employer of record for
  payroll and taxes.
• OSHA problem government looks to contractor for
  safety regulations and fines for non-compliance.

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Ninety Percent of the Game is Half Mental - Yogi
Berra
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Criteria for Choosing a Leasing Company

• Financial stability
• Experience in the construction industry
• Provides WC coverage with a strong insurance
  carrier
• Committed to safety

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Potential Problem with PEOs(Workers
Compensation Coverage)

• Control of an employee is paramount in most
  states
• WC secured by PEOs
• Appropriate endorsements on policy
• Keeping policy in force
• Liability assumed by Contractor under federal
  safety laws

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Employee Leasing Registration Act

• PEOs are required to register with the state
  insurance commissioner to apply for WC insurance
  coverage
• PEOs must disclose
• All addresses in the state
• Taxpayer and Employee ID number
• Every name used in past five years.
• List of all owners of the company
• If WC cancelled within past 5 years denied
  registration

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Terminating the Lease and EMRs

• Contractors experience under a leasing companys
  policy can be separated out and statistically
  filed with the NCCI
• Occurs less often than with OCIPs and CCIPs

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Guidelines for an Independent Contractor

• Control of the manner in which work is done
• Responsibility for the results
• Terms of agreement between parties
• Skill required for performance
• Which party supplies the tools
• Right of contractor to terminate employment

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Could You Just Make Up Your Mind?
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Two Case Study

• Two applications of the independent contractor
  theory
• Genie Trucking Line, Inc. vs. American
  Home Assurance Company
• Mazzoni vs. Roadway Package

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Genie Trucking vs. American Home

• Court looked at evidence produced at trial
• Genie could accept or reject drivers based on
  data on form.
• Genie tested drivers and could terminate them.
• Could not drive for any other carrier.
• Vehicles had permanently affixed decals.
• Drivers not covered by any other workers
  compensation coverage.

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Mazzoni vs. Roadway Package

• Roadway automatically deducted for insurance,
  damaged packages and uniform rental.
• Claimant had to pay all fees, taxes and repairs
  for the truck.
• Roadway logos were affixed to the truck.
• Claimant had to lease his truck from the company
  referred to him by Roadway.
• Claimant had to rent his uniform from Roadway and
  wear it at all times.
• Submit to pre-employment testing.
• Claimant could only subcontract to another
  Roadway employee.

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Automobile Liability Insurance

• Leased employees driving a contractors vehicle
  with permission is considered an insured.
• Non-owned coverage Leased employees use their
  vehicle in the performance of a task for the
  contractor (incidental).
• Hired coverage Leased employee is leased with a
  vehicle to perform driving duties.

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General Liability Insurance

• The CGL policy was revised to afford leased
  employees the same coverage as any other employee
• Leased employees are covered as insureds for
  liability arising out of their employment
• Tort liability for injury to leased employees is
  now excluded

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General Liability Insurance(Best Practices)

• Ascertain that leasing company carries CGL
  coverage with sufficient limits
• Insurance carrier should be reputable
• Contractor should be named as additional insured
  on primary basis
• Leasing company should hold contractor harmless
  to the fullest extent of the law

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Workers Compensation Insurance
Two questions are raised regarding compliance
with the WC statute 1. Who is the official
employer of the leased employee for WC
purposes? 2. What constitutes securing coverage?
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Borrowed Servant Doctrine

• An employer who is borrowing or leasing an
  employee from another firm is responsible for
  providing workers compensation benefits under the
  following circumstances
• An expressed or implied contract to hire
  exists.
• Engaged primarily in work for the special
  employer.
• Special employer controls the work.

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Co-Employment Situation

• Contractor and leasing company held jointly and
  severally liable for workers compensation
  benefits.
• Contractor would pay twice for coverage since
  insurance costs are passed back to contractor by
  the leasing company.
• In duplicate coverage situation, a dispute could
  arise between insurers.

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Workers Compensation Endorsements(Contractor
Secures Coverage)

• Contractors Policy Labor Contractor
  Endorsement (WC000320A)
• Leasing Companys Policy Employee Leasing
  Client Endorsement (WC000319) or Labor Contractor
  Exclusion Endorsement (WC000321)

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Workers Compensation Endorsement(Leasing Company
Secures Coverage)

• Contractors Policy Employee Leasing Client
  Exclusion Endorsement (WC000322)
• Leasing Companys Policy Alternate Employee
  Endorsement (WC000301)

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Surprises
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Summary(Leasing Company Provides Insurance)

• Leasing Company Workers Compensation with
  alternate Employer Endorsement
• Get copy of endorsement with certificate of
  insurance
• Reputable WC carrier
• Thirty days written notice to contractor

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Summary (cont) (Leasing Company Provides
Insurance)

• Leasing Company General Liability with
  Additional Insured Endorsement primary basis.
• Copy of Additional Insured Endorsement with
  Certificate of Insurance. Thirty days written
  notice for cancellation.
• Contractual Liability is afforded fullest
  extent possible.
• ACIG Employee Leasing Client Exclusion
  Endorsement Workers Compensation.

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Summary (cont) (Contractor Provides Insurance)

• Contractor attach Labor Contractor Endorsement
  to WC policy.
• Leasing Company Employee Leasing Client
  Endorsement or Labor Contractor Exclusion
  Endorsement.
• Strongly recommend not to add Leasing Company as
  additional insured under the Contractors CGL
  policy.
• Hired and non-owned auto coverage should always
  be part of a contractors auto policy to cover
  any leased employee situation.

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Always Go to Other Peoples Funerals, Otherwise
they Wont Go to Yours. - Yogi Berra
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Questions?