In 2013, as reported here, a Massachusetts trial court upheld efforts by staffing companies and workers compensation insurers to close a loophole that allowed staffing-firm employees injured while providing services to a client company both to collect workers compensation benefits from their staffing company employer and to sue the client company. Specifically, the court held that by virtue of an alternate employer endorsement naming a staffing company’s client as an insured under the staffing company’s workers’ compensation policy, the client company is entitled to the same immunities as the staffing company under the Workers Compensation Act (the Act).
Today, the Appeals Court of Massachusetts affirmed the trial court’s decision (disclosure: I represented State Garden both before the trial court and the Appeals Court). Specifically, the Appeals Court held that an “alternate employer endorsement” to a staffing company’s workers’ compensation policy satisfies the requirements of the Massachusetts Workers’ Compensation Act, such that the staffing company’s client is entitled to the protection of the exclusivity provision of the Act. In other words, the client company cannot be sued in tort by an employee of the staffing company who is injured while performing services to the client company, provided that the staffing company had obtained an alternate employer endorsement to its workers’ compensation policy that specifically names the client company as an additional insured.
The Appeals Court also held that the injured employee’s claim is barred by the terms of a valid waiver and release he signed at the beginning of his employment, pursuant to which he agreed not to sue a client company for damages based upon injuries covered by the Workers’ Compensation Act.
This case is important for at least three reasons. First, the decision protects staffing companies from having to indemnify clients against claims arising out of workplace injuries – or fighting with clients about responsibility for such claims – the costs of which are almost never factored into the fees charged by staffing companies to their clients. Second, the case protects companies that use staffing companies against claims for damages covered by their staffing company’s workers’ compensation policy. And third, the Appeals Court’s decision is consistent with and supports the intended effects of the Workers’ Compensation Act, as well as all parties’ bargained-for rights and obligations.
- Staffing companies- obtain alternate employer endorsements that specifically name your client companies as additional insureds.
- Workers’ compensation insurance carriers- tell your staffing company clients to obtain, and your client company clients to demand, appropriate alternate employment endorsements.