Are Injured Borrowed Servants Limited to Workers Compensation Remedies?

Many North Carolina employers seek to reduce labor costs and minimize legal exposure by outsourcing labor procurement or using temporary labor agencies or leased workers. What happens when a leased or temporary worker is injured or killed on the job? Can the injured worker, or the estate of a deceased worker, make a negligence claim against the employer? Or is the claimant limited to a recovery under the workers’ compensation rules?

The answer to these questions has significant implications for the exposure. A general negligence claim contemplates a full range of damages, including pain and suffering and, in death claims, loss of financial support as well as the loss of society and companionship. Workers’ compensation remedies are much more limited. These remedies are generally tied to disability as expressed through a statutory schedule employing the worker’s average weekly wage, and medical expenses. The workers compensation remedies generally make no provision for noneconomic damages, such as pain and suffering.

The Exclusivity Provision of the North Carolina Workers Compensation Act

Generally, employees injured or killed at work are limited to recovery under the North Carolina Workers Compensation Act (the “Act”). The Act provides, in pertinent part, that:

. . . the rights and remedies herein granted to the employee, his dependents, next of kin or personal representative shall exclude all other rights and remedies of the employee, his dependents, next of kin or personal representative as against the employer at common law or otherwise on account of such injury or death (1).

The Act, therefore, grants employers immunity from employees’ civil negligence actions.(2 It defines the term “employee” as “every person engaged in an employment under any appointment or contract of hire . . . express or implied, oral or written . . .” (3)

A leased or temporary employee is subject to the exclusivity provision when he or she is a “special employee” under North Carolina law.

The Special Employee Doctrine

North Carolina law recognizes the “special employee” or “borrowed servant” doctrine. The doctrine holds that a person can be simultaneously employed by more than one employer.4
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The situation arises when a person’s original employer (typically referred to as a “general employer”) lends the employee to a “special employer”. A special employer and a special employee are subject to the exclusivity provisions of the North Carolina Workers Compensation Act if: (1) the employee has made a contract for hire, express or implied, with the special employer, (2) the work being done is essentially that of the special employer, and (3) the special employer has a right to control the details of the work.5

However, North Carolina authority is split on the application of “special employee” doctrine. Two lines of Court of Appeals cases take different approaches to the application of the three prong test, and to date the North Carolina Supreme Court has not addressed the issue.
The Historical Approach to the Special Employee Doctrine

Historically, the Court of Appeals examined the implied or express contract between the worker and the employer to determine if the employee was, in fact, a special employee. Brown v. Friday Services, Inc.,6 decided in 1995, was one of the first cases to address the conjunction of the workers compensation statute’s exclusivity provisions and the special employment doctrine. In Brown, the Court of Appeals held that an employee of a temporary agency was a “special employee” of the roofing contractor for whom he was working, through the temporary agency, at the time of his injury. The Court found that the elements of the three prong test for special employment were satisfied because 1) the employee accepted the assignment from his temporary agency employer to work for the roofing contractor at the construction site on the day in question – this was deemed to constitute an implied acceptance by the employee of the contractor work at the direction and under the supervision of the contractor; 2) the work performed was that of the roofing contractor; and 3) the roofing contractor had the right to control the manner in which the work was to be performed at the site.7

Thus, with regard to the first prong of the special employment test, the Court of Appeals has historically focused on the contract between the worker and the special employer – a contract that may be implied by the worker’s acceptance of a work assignment from the special employer and the performance of work at the direction and under the supervision of the special employer – as well as an express contract between the general employer and the special employer. In 1999, the Court of Appeals followed this approach in Poe v. Atlas-Saundelier/American Trading & Production Corp.,8 finding that a temporary service worker generally employed by a temporary employment agency was a manufacturer’s special employee when he presented to the manufacturer’s facility to do work and was then under the manufacturer’s direction.

The Court of Appeals continued to follow this approach in 2004 and 2007 in the nonpublished opinions in Noyola v. Hytrol Conveyor Co., Inc9., and Lunsford v. Republic Services of North Carolina, LLC.10

In Noyola, the Court of Appeals found an implied contract of hire between the worker and special employer based on the worker’s acceptance of work assignments and performance of the assignments under the special employer’s direction and supervision. The court also noted an express contract between the general employer and the special employer.

Similarly, in Lunsford, the court found a special employment based on an implied contract between the worker and the special employer when the worker accepted an assignment from his general employer and performed at the direction of the special employer. The Lunsford court also noted the existence of an express contract between the labor service general employer and the special employer.

The More Recent Approach to the Special Employee Doctrine

In 2009, 2012 and 2013, the Court of Appeals issued decisions involving the special employment doctrine that differ in approach from Brown and its progeny, thereby creating inconsistency in the law. These decisions, Shelton v. Steelcase, Inc., 11 Gregory v. Pearson12 and Taft v. Brinley’s Grading Services, Inc..13 all implicitly reject the Brown approach. Rather than looking specifically at the relationship between the individual worker and the purported special employer, these cases look at the contractual relationship between the general employer – the leasing company or temporary agency – and the purported special employer. Rather than examining whether an implied contract between the worker and the purported special employer exists based on a course of dealing and performance, these cases focus on the language of express contracts between the general employer and purported special employer.

In Shelton, an employee of a cleaning company was injured while performing cleaning services at the defendant’s plant. The cleaning company had a direct contract with the defendant for cleaning services, rather than a contract to provide persons for special employment to provide cleaning services at the defendant’s plant. The Shelton court found that the contract expressly stated that cleaning workers at the plant were employees of the cleaning company and not of the defendant. Therefore, the injured worker was not a special employee, and thus was not limited to workers compensation remedies.14

In Gregory, a temporary employment agency placed an worker at a landfill operated by a county government. The plaintiff’s decedent was killed when a county employee ran over him with a trash compactor. The Court held that the decedent was not the county’s special employee because the contact between the temporary employment agency and the county expressly stated that temporary employees were not employees of the county. Since the decedent was not the county’s special employee, the decedent’s estate was not limited to workers compensation remedies.

Taft involved a worker employed by one company and leased to the defendant company under a formal “Employee Leasing Agreement.” The worker was killed when an employee of the defendant company started a company vehicle that pinned the decedent to a trailer. Relying in large part on the Employee Leasing Agreement’s language that all of the personnel assigned by the leasing company to the defendant were solely employees of the leasing company, the court found issues of fact as to whether the decedent was the defendant’s special employee. It reversed summary judgment for the defendant and remanded the case for trial.

Conclusion

Because the North Carolina Supreme Court has agreed to review the Gregory case, clarity in application of the special employee doctrine to injury cases may be forthcoming. In the interim, given the different approaches adopted by the Court of Appeals concerning the application of the Brown test to special employee arguments, counsel should carefully review all contracts between businesses and employment agencies and leasing companies to make sure the client’s goals in such arrangements are being met. Additionally, insurance coverage should be examined to determine if coverage exists for negligent acts of employers and workers that injure leased or temporary workers.

David O. Lewis represents individuals and businesses in civil cases in all the state, federal and tribal courts across North Carolina. If you would like more information about civil litigation or to schedule an appointment with David, please contact him at (919) 688-6341 or email him at david.lewis@bll-nclaw.com.

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ENDNOTES

1 N.C. Gen. Stat. § 97-10.1.

2 Edwards v. GE Lighting Systems, Inc., 193 N.C.App. 578, 668 S.E.2d 114 (2008). However, the immunity is not all inclusive. The North Carolina Court of appeals stated in Wake County Hosp. Sys. v. Safety Nat. Casualty Corp., 127 N.C. App. 33, 40, 487 S.E.2d 789, 793, disc. review denied, 347 N.C. 410, 494 S.E.2d 600 (1997) that the Act precludes a claim for ordinary negligence against an employer even when the employer’s conduct constitutes willful or wanton negligence. The courts of this state recognize a narrow exception to this rule under circumstances where an employer intentionally engages in conduct that is substantially certain to cause serious injury or death. Woodson v. Rowland, 329 N.C. 330, 407 S.E.2d 222 (1991). In a later opinion, the Supreme Court cautioned that this exception applies “only in the most egregious cases of employer misconduct. Such circumstances exist where there is uncontroverted evidence of the employer’s intentional misconduct and where such misconduct is substantially certain to lead to the employee’s serious injury or death.” Whitaker, 357 N.C. 552, 558, 597 S.E.2d 665, 668 (2003).

3 N.C. Gen. Stat. § 97-2(2)

4 See Brown v. Friday Services, Inc., 119 N.C. App. 753, 460 S.E. 2d 356 (1995).

5 Id. at 759, 460 S.E.2d at 360.

6 119 N.C. App. 753, 460 S.E. 2d 356 (1995).

7 Brown at 760, 460 S.E.2d at 360-61.

8 132 N.C. App. 472, 512 S.E. 2d 760 (1999).

9 166 N.C. App. 516, 603 S.E.2d 583, 2004 WL 2238968 (2004)

10 183 N.C. App. 155, 643 S.E.2d 675, 2007 WL 1247119 (2007).

11 197 N.C. App. 404, 677 S.E. 2d 360 (2009)

12 ____ N.C. App. _____, 736 S.E. 2d 577 (2012), rev. allowed, ____ N.C. ____, 748 S.E.2d 319 (2013).

13
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_____ N.C. App. _____, 738 S.E.2d 741 (2013)

14 The Shelton opinion relies heavily on Anderson v. Demolition Dynamics, Inc..,136 N.C. App. 603, 525 S.E. 2d 471 (2000), a case that does not involve leased workers, or workers placed by temporary employment agencies, or even any express contract between the two purported employers.