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The “Special Employer Doctrine” - An Employer’s Defense To A Tort Injury Claim

Friday, July 28 2017 10:45 AM

By Charles Millsap     

There Are A Number Of Circumstances In Which An Employer Can Successfully Assert The Workers Compensation Act’s Exclusive Remedy Provision In Defense of A Tort Claim Brought by an Injured Worker. One Such Situation Arises Under the Kansas “Special Employer Doctrine.”

       In Kansas, an employee generally cannot maintain a tort claim against his employer for injuries the employee sustained in the course of employment. The remedy provided by the Kansas Workers Compensation Act - recovery of workers compensation benefits regardless of fault - is “exclusive.” As a consequence, a worker is prohibited from recovering in a common law negligence action from any party from which he or she could have received workers compensation benefits under the Act.

       In any employment to which the Kansas Workers Compensation Act applies, when personal injury by accident arising out of and in the course of employment is caused to an employee, the employer shall be liable to pay compensation to the employee in accordance with the provisions of the Act. K.S.A. 44-501b(a).

In defending itself from a tort claim brought by an injured worker, an employer may assert as an affirmative defense the exclusive remedy provisions of the Kansas Workers Compensation Act. The controlling statute is currently found at K.S.A. 44-501b(d):

Except as provided in the workers compensation act, no employer, or other employee of such employer, shall be liable for any injury, whether by accident, repetitive trauma, or occupational disease, for which compensation is recoverable under the workers compensation act nor shall an employer be liable to any third party for any injury or death of an employee which was caused under circumstances creating a legal liability against a third party and for which workers compensation is payable by such employer.

(Emphasis added.)

       The Kansas legislature intends that the Workers Compensation Act shall be liberally construed for the purpose of bringing employers and employees within the provisions of the Act. K.S.A. 44-501b(a). “It is the intent of the legislature that the workers compensation act shall be liberally construed only for the purpose of bringing employers and employees within the provisions of the act. The provisions of the workers compensation act shall be applied impartially to both employers and employees in cases arising thereunder.”

       While the application of the exclusive remedy defense by an employer is straight forward when brought in response to a tort claim by a regular employee, there are other circumstances where the defense may also be available. One such situation arises when the employer has borrowed an employer from another employer - and thereby becomes the worker’s second or special employer.

B. The Special Employer Doctrine Under Kansas Law

       The exclusive remedy provision of workers compensation law prevents an injured employee, who is entitled to compensation under the Act, from maintaining a common-law negligence claim against his employer. To prevail on a defense that the exclusive remedy provisions of the Kansas Workers Compensation Act bars plaintiffs’ tort claims, the employer bears the burden to establish the existence of an employment relationship with the injured worker. Anderson v. Nat’l Carriers, Inc., 10 Kan.App.2d 203, 206, 695 P.2d 1293 (1985).

       There are number of ways in which an employer/employee relationship can be established for the purpose of application of the Kansas Workers Compensation Act and its exclusive remedy provision:


1. General employment relationship. Such a relationship can be recognized under the “right to control” test for general employment relationships. See Hill v. Kan. Dep’t of Labor, Div. of Workers Comp., 42 Kan.App.2d 215, 222-23, 210 P.3d 647 (2009), aff’d in part, rev. in part on other grounds, 292 Kan. 17, 248 P.3d 1287 (2011); Aspelin v. Mounkes, 206 Kan. 132, 135, 476 P.2d 620 (1970) (discussing “right of control” test for general employment relationship).

2. Statutory employer/employee relationship. See K.S.A. 44-503; Robinett v. Haskell Co., 270 Kan. 95, 98-99, 12 P.3d 411 (2000) [“The impact of K.S.A. 1999 Supp. 44-503 is to allow an employee of a contractor to recover workers compensation benefits from either his immediate employer or the principal contractor, so long as the work being done by the employee is either an integral part of the principal’s trade or business or is work that would ordinarily have been done by an employee of the principal.”]; Bright v. Cargill, Inc., 251 Kan. 387, 392-94, 837 P.2d 348, 356 (Kan.1992) [adopting test for “statutory employer/employee” relationship set out in Hanna v. CRA, Inc., 196 Kan. 156, 409 P.2d 786, 789 (Kan.1966)].

3. Special employer/employee relationship. See Scott v. Altmar, Inc., 272 Kan. 1280, 1283-84, 38 P.3d 673 (2002) (setting forth and applying the test for “special employer/employee relationship”). This case is discussed at length below.

       The law of workers compensation recognizes circumstances under which an employee of one employer (the general employer) is loaned or assigned out to work for and under the direction, supervision or control of another employer (the special employer). This is sometimes referred to as the loaned or borrowed servant doctrine. When this occurs, both the general employer and special employer are considered to be employers of the employee for workers compensation and exclusive remedy purposes.

       This concept of dual employment is well-described in treatises. As explained in 1 Modern Workers Compensation § 103.30 (March 2016)(emphasis added):

The loaned or borrowed servant doctrine has often been applied in the context of workers’ compensation actions to hold borrowing employers liable for benefits for injuries received by their borrowed employees. If an employee is loaned by one employer to another, the loaned employee is also an employee of the borrowing employer for the purposes of determining tort immunity under a workers’ compensation statute. Except when the loaned servant doctrine has been abrogated for this purpose, the loaned employee cannot maintain a tort action against the borrowing employer, even if the borrowing employer does not provide workers’ compensation benefits to the loaned employee.

If the borrowing company pays an hourly fee to the loaning labor service with the understanding that a portion of the fee is to be used to purchase workers’ compensation insurance for the temporary employee, the labor service has for practical purposes paid workers’ compensation for the company as its agent and the borrowing company is immune from suit by the employee.

...

A person becomes a loaned servant only when one becomes subject to the control of the other employer, beyond merely telling the worker to stop work. The employee submits to the other employer’s control as to the details of the work, and thereby enters the other employer’s employment.

       Professor Larson, a preeminent author on workers compensation law, provides us with a three-pronged test to determine the existence of a special employers/employee relationship. The test is:

When an employer lends an employee to another party, that party becomes liable for workers compensation only if

(a) the employee has made a contract of hire, express or implied, with the second employer;

(b) the work being done is essentially that of the second employer; and

(c) the second employer has the right to control the details of the work.

When all three of the above conditions are satisfied in relation to both employers, both employers will be liable for workers’ compensation and both will have the benefit of the exclusivity defense to tort claims.

3 Lex K. Larson, Larson’s Workers’ Compensation § 67.01 (Matthew Bender, Rev. Ed. 2001)(emphasis added).

       The Kansas Appeals Board for the Division of Workers Compensation regularly applies the doctrine of special employer/employee to find that an employee had more than one employer at the time of an injury for the purposes of application of the provisions of the Kansas Workers Compensation Act, and many of these cases involve employment staffing services companies. See Hall v. Prostar and Star Xpress, Doc. No. 1,102,310, 2005 WL 3030747 (Kan. Work. Comp. App. Bd., Oct. 7, 2005 ) [Star Xpress was found to be a special employer of claimant and liable, along with ProStar, the general employer, for workers compensation death benefits]; Sikes v. Dunhill Temporary Services and A & C Enterprises, Doc. Nos. 256,525 and 256,526, 2003 WL 359859, * 5 (Kan. Work. Comp. App. Bd., Jan. 31, 2003 )(emphasis added) [Both a temporary employment agency (the general employer) and its client (the special employer) to which an employee was assigned to work were found to be employers of an injured worker. “Kansas has long recognized that for the purposes of the Workers Compensation Act a worker can be the employee of more than one employer at the same time. And when an employer lends a worker to another employer, the worker can look to either employer or both for workers compensation benefits.”]; Harris v. Comfort Keepers and Ace Fire Underwriters Ins. Co., Doc. No. 1,058,976, 2012 WL 1652981 (Kan. Work. Comp. App. Bd., April 30, 2012 ) [A staffing agency (the general employer) and its client (the special employer) to which a worker had been assigned were both found to be employers of an injured worker for the purposes of application of the benefits provisions of the Workers Compensation Act.]; Moran v. Arnold & Assoc. of Wichita and Zurich and Dillon Companies, Doc. No., 1,064,968, 2013 WL 5521852 (Kan. Work. Comp. App. Bd., Sept. 10, 2013) [Both a temporary work agency (the general employer) and its client, Dillons (both the special employer and statutory employer) were found to be employers of an injured worker for the purposes of the Workers Compensation Act.].

       In Scott v. Altmar, 272 Kan. 1280, 38 P.3d 673 (2002), the Kansas Supreme Court provides the well-established law needed to consider and apply the special employer doctrine. Ulysses Scott was employed by Davlin Services, a temporary employment agency. Mr. Scott was sent by Davlin to a construction site to work as a manual laborer for Altmar. Mr. Scott was injured while working on the construction site. He recovered workers compensation benefits from Davlin and later filed a personal injury tort action against Altmar. The district court granted Altmar’s motion for summary judgment, finding Altmar was Mr. Scott’s “special employer” and was therefore immune from suit under the exclusive remedy provisions of the Kansas Workers Compensation Act. The Supreme Court affirmed the district court’s entry of summary judgment, and found as a matter of law that Altmar was Mr. Scott’s special employer.

       In support of its finding, the Court noted that while at the construction site each day Mr. Scott’s work was performed under the direction, control and supervision of Altmar. The Court began its substantive analysis by reviewing the exclusive remedy provision found in the Workers Compensation Act, and noting the following requirement in applying the act:

The Workers Compensation Act is to be liberally construed in favor of bringing workers within its provisions. Robinett v. The Haskell Co., 270 Kan. 95, 101, 12 P.3d 411 (2000). We have noted that “no different rule of construction can be adopted where an injured workman for reasons which he regards as sufficient seeks a remedy outside the compensation act.” Bright v. Bragg, 175 Kan. 404, 411, 264 P.2d 494 (1953).

272 Kan. at 1283(emphasis added).2

       The Court confirmed that Kansas has adopted the three-pronged test promoted by Professor Larson to determine the existence of a special employer/employee relationship (see that test set forth above).3 The Court observed, as indicated in Bright, that where an injured employee is determined to be both a special employee and a general employee, he or she may look to either or both of his or her employers for compensation. 272 Kan. at 1283.

       The Kansas Supreme Court commented on the particular applicability of the special employer doctrine in matters involving employment service staffing agencies like Titan:

Larson appears to have analyzed the fact situation here:

“If, however, the general employer merely arranges for labor without heavy equipment, the majority of the cases hold that the worker becomes the employee of the special employer, although there is substantial contra authority. For example, employers obtaining workers from the kind of labor service typified by Manpower, Inc. have usually, but not invariably, been held to assume the status of special employer. Incidentally, most of these cases arose in the context of summary judgment motions against injured workers who were attempting to sue the borrowing employer in tort.” 3 Larson’s Workers’ Compensation Law § 67.05[3], p. 67-13.

       The district court, relying on Corley v. Hardaway Co., 905 F. Supp. 923 (D. Kan. 1995), agreed with Altmar’s assertion that an implied employment contract existed between Altmar and Scott as a special employer/employee. Other jurisdictions have upheld orders granting summary judgment in cases involving temporary personnel agencies. See Kelly v. Geriatric and Med. Serv., 287 N.J. Super. 567, 577-78, 671 A.2d 631, aff’d 147 N.J. 42, 685 A.2d 943 (1996); Meka v. Falk Corp., 102 Wis. 2d 148, 158, 306 N.W.2d 65 (1981), but see Borneman v. Corwyn Transport, Ltd., 212 Wis. 2d 25, 567 N.W.2d 887 (1997) (statutory amendment replaced loaned employee test).

272 Kan. at 1286-87 (emphasis added).

       The Court concluded its decision affirming the grant of summary judgment by finding that an implied employment contract existed between Mr. Scott and Altmar as a special employer/employee and that each of the three prongs of the test had been shown to exist by uncontroverted evidence:

It is significant here that Altmar controlled and supervised all aspects of work performed at the job site and that Davlin had no control over what work was to be done at the site by Scott, the temporary worker. There was no evidence to controvert the fact that Scott accepted Altmar’s control and direction. By Scott’s conduct, he made an implied contract of hire with Altmar. As a special employer, Altmar was immune from Scott’s common-law negligence claim under the exclusive remedy provision of K.S.A. 44-501(b).

272 Kan. at 1287.

       Kansas has a long history of recognizing the doctrine of borrowed servant or special employer. The Kansas Supreme Court noted this in Kleppe v. Prawl, 181 Kan. 590, 592, 313 P.2d 227, 229 (1957):

Defendant contends that an employee may have a general employer and also a special employer at the same time. We have no quarrel with him on that point because we have so held in Smith v. Brown, 152 Kan. 758, 761, 107 P.2d 718; Beitz v. Hereford, 169 Kan. 556, 220 P.2d 135; Bright v. Bragg, 175 Kan. 404, 264 P.2d 494. These cases could be supplemented by many more but they are sufficient.

See Smith v. Brown, 152 Kan. 758, 761-62, 107 P.2d 718 (1940) [“It is well settled that the servant of A may for a particular purpose, or on a particular occasion, be the servant of B, though he continues to be the general servant of A and is paid by him for his work.”]; Bendure v. Great Lakes Pipe Line Co., 199 Kan. 696, 701, 433 P.2d 558 (1967) [“A special employee is a creature of the common law. The term refers to a lent employee. Once the relationship of lent employee or special employee and employer is established, the special employee becomes the servant of the special employer and assumes the position under the Workmen’s Compensation Act as a regular employee and no special inclusion statute is necessary to give a special employee coverage. (99 C.J.S. Workmen’s Compensation s 47a, p. 241.)”]; Bright v. Bragg, 175 Kan. 404, 412, 264 P.2d 494 (1953) [“The real test whether a person becomes a special employer, of course, is whether he has the right to control and direct the particular activity as a consequence of which the injury occurred and not merely whether he exercised the power of direction. . . . ‘Our Workmen’s Compensation Act does not differentiate between special and general employers. G.S.1935, 44-508(h). We think it may properly include both.’”].

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       1 Of the three factors used for determining the existence of a “special employer” status, “the most important . . . is the degree of control retained by the person for whom the work is done.” Scott v. Altmar, 272 Kan. at 1285. And it is important to note that the test is of one “right to control” rather than actual exercise of that right. In Bright, 251 Kan. 387, 405, the Court described the question as follows:

Who had the right to exercise supervision and control over the workman and to determine the manner in which the work was to be done rather than who actually exercised such control.

Bright, 251 Kan. at 405 (emphasis added) (quoting from Beitz v. Hereford, 169 Kan. 556, Sly. ¶ 2, 220 P.2d 135 (1950).

If the borrowing employer has the right to exercise control over the loaned employee, the loaning employer is described as the general employer and the borrowing employer as the special employer.

American States Ins. Co. v. Hanover Ins. Co., 14 Kan.App.2d 492, 497, 794 P.2d 662 (Kan.App.,1990)(emphasis added).

       2  “The provisions of the Workmen’s Compensation Act are to be liberally construed to bring workers under the act whether or not it is desirable for the specific individual’s circumstances.” Mays v. Ciba-Geigy Corp., 233 Kan. 38, 65, 661 P.2d 348 (1983) (emphasis added).

        The Court made this further reference to Professor Larson’s treatise:

If the conditions are satisfied, “the presence of a general employer somewhere in the background cannot change the conclusion that the special employer has qualified as an employer of this employee for compensation purposes.” 3 Larson’s Workers’ Compensation Law § 67.01[2], p. 67-3.

 

 

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