One Thing Contractors Need to Be Wary About When Leasing Employees

The construction industry has long utilized employee leasing companies to staff their projects.  While leasing employees solves a lot of problems for contractors, there remain issues that contractors need to be concerned about. One such issue is the potential of being liable for the labor burden, including workers compensation, because leased employees are considered to be an employee of the contractor.

Leased Employees are considered an employee of contractor 

Generally speaking, the law considers leased employees to be employees of the contractor they are performing work for.  According to the Restatement of Employment Law, the following test governs whether an individual qualifies as an employee:

(a) Except as provided in §§ 1.02 and 1.03, an individual renders services as an employee of an employer if:

(1) the individual acts, at least in part, to serve the interests of the employer;

(2) the employer consents to receive the individual’s services; and

(3) the employer controls the manner and means by which the individual renders services, or the employer otherwise effectively prevents the individual from rendering those services as an independent businessperson.

1. Empl. § 1.01 (2015).  Under this test, the leased employee is considered to be an employee of contractor because the leased employee is acting to serve the interests of contractor, and the contractor is directing the work performed by leased employee.

Workers Compensation

Construction contractors who have 1 or more employees (not including exempt business owners) are required to obtain and pay for workers compensation coverage.  Frequently Asked Questions (myfloridacfo.com).  Consequently, contractors that lease even one employee are required to obtain workers compensation coverage.  “An employer who secures coverage through an employee leasing company must secure coverage for each and every employee; promptly advise the employee leasing company of any change in job duties; and promptly advise the employee leasing company of any personnel not included in the employee leasing arrangement.” Key-coverage-and-eligibility.pdf (myfloridacfo.com).  

When you lease an employee, you have the option of obtaining the workers compensation coverage for the leased employees under your own policy, or to have the leasing company obtain the coverage.  See Fla. Stat. 627.192 (“The purpose of this section is to ensure that an employer who leases some or all of its workers properly obtains workers’ compensation insurance coverage for all of its employees, including those leased from or co-employed with another entity, and that premium paid by an employee leasing company is commensurate with exposure and anticipated claim experience for all employees.”); id. at (3) (“A lessor that obtains coverage in the voluntary workers’ compensation market may elect, with the voluntary market insurer’s knowledge and consent, to secure the coverage on leased employees through a workers’ compensation policy issued to the lessor.”)

Further, contractors are responsible for ensuring that their subcontractors have provided workers compensation for their workers too, including leased employees used by the subcontractor.  “If a worker is injured, without being protected by insurance, then the contractor becomes responsible for the payment of benefits.” Frequently Asked Questions (myfloridacfo.com).  Moreover, if your subcontractor(s) leasing employees, “you must obtain a Certificate of Liability Insurance and a list of the employees leased to the subcontractor obtained from the employee leasing company as of the date the subcontractor commenced work for the contractor on each project.”  Id.    

Conclusion

When leasing employees, contractors need to be aware of the requirements, including workers comp coverage, and be sure to prevent the severe liability that comes with not having proper workers comp coverage for all employees, including leased employees.