In a win for employers that use the services of staffing companies, the Massachusetts Appeals Court recently held in Molina v. State Garden, Inc., No. 14-P-676, 2014 WL 10319701 (Mass. App. Ct. Sept. 3, 2015) that an alternate employer endorsement to a staffing company’s workers’ compensation insurance policy renders all employers named in the endorsement immune from tort liability under the Workers’ Compensation Act (the “Act”). The court also held that a staffing company similarly may extend the reach of its workers’ compensation immunity by asking its employees to sign a waiver releasing the staffing company’s clients from liability covered under the Act.
Workers’ Compensation Law, Generally
As almost any employer is well aware, the cornerstone of the Act is its exclusivity provision. The Act provides an employee’s exclusive remedy against his or her employer for any injury suffered on the job. The Appeals Court previously has held that to claim the protection of the exclusivity provision, an employer must be “an insured person liable for the payment of workers’ compensation benefits to the injured employee.” See Lang v. Edward J. Lamothe Co., 20 Mass. App. Ct. 231, 232 (1985).
In cases where an employee has both a “general” and a “special” employer, as typically is true when an employee accepts a work assignment from a staffing company, the special employer (the employer directing the employee’s day-to-day operations) is covered by the exclusivity provision if the employers have agreed that the special employer will be liable for the payment of benefits to the employee. Molina raised the issue of whether naming a special employer in an alternate employer endorsement constitutes such an agreement.
The plaintiff-employee in Molina was assigned by American Resource Staffing Network, Inc. (“ARS”) to provide services to ARS’ client, the defendant State Garden, Inc. (“State Garden”). During ARS’ hiring process, the plaintiff signed a waiver releasing ARS’ clients from any liability for injuries that are covered under the Act. The plaintiff thereafter was injured while working for State Garden. He collected workers’ compensation benefits under an ARS workers’ compensation policy that named State Garden in an alternate employer endorsement, and brought suit against State Garden on the theory that the exclusivity provision applies only to those employers that actually pay the injured employee’s workers’ compensation benefits.
The Appeals Court disagreed, holding that the alternate employer endorsement in ARS’ policy constituted an agreement between ARS and State Garden that State Garden would be responsible for the payment of the plaintiff’s workers’ compensation benefits. As such, State Garden was entitled to rely on the exclusivity provision in seeking dismissal of the action. The Court also held that the waiver the plaintiff signed as part of ARS’ hiring process was enforceable because it sought a release only of ARS’ clients’ liability, and therefore was not a covenant not to sue, and because the plaintiff was covered by a workers’ compensation insurance policy.
Lessons for Employers
The Molina case provides valuable lessons both for staffing companies and for employers who use the services of staffing companies. Staffing companies may offer valuable liability protection to their clients by naming clients in alternate employer endorsements and by soliciting waivers from employees releasing clients from liability for injuries covered by the Act. Employers should consult with their staffing companies to ensure that both of these measures are being deployed on their behalf. For more information on how to use alternate employer endorsements and waivers to limit liability for workplace injuries, please contact the author or any other of Conn Kavanaugh’s experienced employment lawyers.