111 East Wacker Drive, Suite 500, Chicago, Illinois 60601

Borrowed Employee’s Injury Claim Was Barred by the Workers Compensation Act Even Though a Staffing Agency’s Insurer Paid His Compensation Benefits

By Jeanne M. Zeiger

In Holten v. Syncreon North America, Inc., 2019 IL App (2d) 180537, the Appellate Court affirmed the trial court’s dismissal of a personal injury action filed against Android Industries-Belvidere, LLC, (“Android), which was the client of the plaintiff’s employer, Staff on Site (“Staff”), a temporary staffing agency. The plaintiff was injured while operating a forklift for Android as a temporary employee provided by Staff. He filed a workers’ compensation claim against Android, which directed him to file the claim against Staff. He received workers’ compensation benefits through Staff, and then filed a personal injury lawsuit against Android. The trial court granted Android’s motion for summary judgment based upon the exclusive-remedy bar of the Workers’ Compensation Act.

The Appellate Court affirmed the dismissal, rejecting plaintiff’s arguments that judgment should not have been granted on Android’s exclusive-remedy defense where it was undisputed that Android did not pay the premiums or benefits for workers’ compensation, nor was Android obligated to reimburse Staff for the expenses. The contract between Android and Staff required Staff “to pay wages; withhold and remit payroll taxes and other government-mandated charges (including worker[s’] compensation)” and “to be responsible for and handle work-related claims and complaints.” Android presented deposition testimony that its supervisor controlled plaintiff’s work at the site and had the right to remove him from the facility.

The Court noted that Section 305/1(a)(4) of the Workers’ Compensation Act (“the Act”) “incorporates the borrowed-employee doctrine and extends the immunity of the exclusive-remedy provision to borrowing and loaning employers.” 2019 IL App (2d) 180537 at *6. The “plain language” of the provision “explicitly contemplates that the loaning employer, rather than the borrowing employer” may be the one to provide or pay the workers’ compensation premiums or benefits. Id. But the statute further provides that the liability of the borrowing and loaning employers is joint and several, and “in the absence of agreement to the contrary,” the loaning employer is entitled to reimbursement from the borrowing employer for sums paid or incurred under the Act. Hence, regardless of whether the borrowing employer or the loaning employer pays the workers’ compensation benefits, the exclusive-remedy bar of the Act protects both employers from further claims. And where Android’s contract with Staff required Staff to maintain workers’ compensation coverage for the temporary employees it provided, this was an “agreement to the contrary,” as allowed by the statute, which may have waived Staff’s right to reimbursement, but did “not eliminate the borrowing employer’s right to exclusive-remedy protection under the Act.” 2019 IL App (2d) 180537 at *7, 10.

There was no dispute that Staff was a loaning employer. The court further found no genuine issue of material fact as to whether Android was a borrowing employer regarding the direction and control of plaintiff’s work. The court noted that a borrowing employer need not have the power to dismiss the employee from his general employment as long as it has the power to dismiss the employee from the borrowed employment. Payment of plaintiff’s wages by Staff is inconsequential and did not defeat the finding of a loaned-employee situation. The court further found the existence of an implied contract of hire between plaintiff and Android, despite the details of the contract between the two employers. Hence, the court found no issue of material fact regarding the existence of a borrowed-employee relationship, and affirmed judgment in favor of Android on the exclusive-remedy defense.

This case confirms that an employee’s acceptance of workers’ compensation benefits will bar any further claims against a borrowing or a loaning employer, regardless of which employer actually paid the compensation benefits or insurance premiums. The case further indicates that a staffing agency’s written agreement to provide workers’ compensation coverage for the employees it furnishes may waive the agency’s statutory right to reimbursement under the Act. Hence, a borrowing employer’s staffing agreement, which specifies that the loaning employer/ staffing agency is required to provide workers’ compensation insurance coverage for the employees it furnishes, may serve to insulate the borrowing employer not only from work-related liability claims brought by the employees furnished under the agreement, but also from reimbursement claims brought by the loaning employer/staffing agency or its compensation insurer.

Should you have any questions regarding these issues, or require assistance with an insurance coverage issue, please contact Mollie E. Werwas at [email protected] or 312-506-4474 or Jeanne M. Zeiger at [email protected] or 312-506-4458.