The Special Employer Rule May Bar Civil Lawsuits by Temporary Employees for Injuries Sustained on the Temporary Jobs

While it is well settled that the Workers’ Compensation Act bars employees from recovering in a civil suit against their employers for injuries sustained on the job, it is not as well known that a second employer, a “special employer,” may also find protection against suits from their “special employees” through the application of the Act. Based upon N.J.S.A. 34:15-8, workers’ compensation is the exclusive remedy for employees injured on the job (also known as “the exclusive remedy defense”).

Case law known as the “Manpower cases,” for the Manpower staffing agency, has established a test to determine whether the employee qualifies as a “special employee.” This five-part test looks at 1) whether there was an express or implied contract between the employee and special employer, 2) whether the work the employee did was essentially that of the special employer, 3) whether the special employer had the right to control the employee’s work, 4) who paid the employee’s wages, and 5) who had the right to hire and fire the employee. To establish a special employment relationship, a defendant need not make a comprehensive showing that all prongs are satisfied and none of the prongs alone are dispositive.

Nevertheless, the first prong, establishing an express or implied contract between the employee and special employer is critical in establishing the special employment relationship. Consent is found, however, if there is proof that the employee knew he would be hired out to the special employer and accepted that employer just as he accepted the general employer. Second, as is often the case in a temporary relationship, the work the employee performs on a daily basis is that of the special employer.

Third, and often considered the most significant factor, the right to control the employee’s work must be held by the special employer. It is not the actual exercise of control over the employee’s work itself, because often a temporary employee is skilled in the work he or she performs, it is the right to control that work. Thus, showing that, for instance, the special employer provided and supervised the employee assignments, permitted the employee to take sick leave, or supplied tools to the employee, are all indicative of the right to control the employee’s work.

Fourth, though the temporary employee will often be paid by his general employer, establishing that those wages were paid by the special employer indirectly is sufficient to satisfy this prong. Thus, for instance, if the employee is paid a flat wage by a staffing agency (the general employer), but the staffing agency invoices the special employer that flat wage plus a mark-up which includes the staffing agency’s profit margin, overhead and benefits for the employee (often including workers’ compensation insurance), that indirect payment by the special employer of the employee’s wages is sufficient to pass the fourth prong of the test.

Finally, the power to hire and fire an employee may be retained by the special employer directly, by advising the employee of his status, or indirectly, by advising the general employer the desire to retain the employee or that his or her services are no longer needed by the special employer.

Circumstances in which the special employer defense arises are often on behalf of a business seeking to be granted special employer status to protect itself against a civil lawsuit by a temporary staffing employee injured while working on its premises. New Jersey has consistently held that a special employment relationship exists between an employee working on behalf of a temporary staffing agency and the special employer for whom he is actually performing services, thereby barring any claim that employee has against the special employer. Recently, our office handled a case with such facts and was successful in obtaining a dismissal of the lawsuit, utilizing the special employer defense.

Tags: Manpower cases, Special Employer Rule