For Illinois “Borrowing Employer,” Exclusive Remedy Defense Not Tied to Payment of Insurance Premiums

A temporary staffing agency worker may not maintain a cause of action against a “borrowing employer” for personal injuries sustained in a work-related accident in spite of the fact that the borrowing employer neither paid any workers’ compensation insurance premiums related to the injured worker nor was it obliged to reimburse the temporary staff agency for that expense, held an Illinois appellate court [Holten v. Syncreon N. Am., Inc., 2019 IL App (2d) 180537, 2019 Ill. App. LEXIS 386 (May 31, 2019)]. Immunity from suit arose from the existence of a borrowed-employee relationship; it did not arise from the direct provision of insurance coverage.

Background

Holten was employed by Staff on Site, Inc. (“Staff”), a firm that provided temporary employees to clients, including Android Industries-Belvidere, LLC (“Android”). Under the terms of the Staff-Android staffing agreement, Staff agreed to provide workers’ compensation insurance for all employees assigned to Android. Holten sustained injuries in a forklift accident and filed a workers’ compensation claim against Staff. Pursuant to that claim, he received various benefits.

Holten sued Android, contending Android’s negligence caused his injuries. Android offered affirmative defenses, including that, because it was a borrowing employer under the Workers’ Compensation Act (Act) (820 ILCS 1(a)(4), Holten’s claims were barred by the exclusive-remedy provision of the Act.

Following a hearing, the trial court granted Android summary judgment, finding that Android was a borrowing employer and entitled to immunity from suit.

Payment of Insurance Premiums and/or Benefits Not the Key

On appeal, Holten argued that summary judgment on the exclusive-remedy defense should have been entered in his favor, because it was undisputed that Android neither paid plaintiff’s workers’ compensation premiums or benefits nor was obliged to reimburse Staff for the expenses. The appellate court disagreed, indicating Holten’s argument ignored the framework of the borrowed-employee relationship as set forth in the statute.

That statue [§ 1(a)(4) explicitly contemplated that the loaning employer, rather than the borrowing employer, might be the entity that provides or pays the workers’ compensation premiums or benefits. Citing Illinois Insurance Guaranty Fund v. Virginia Surety Co., 2012 IL App (1st) 113758, ¶ 19, 979 N.E.2d 503, 365 Ill. Dec. 899, the appellate court stressed that regardless of which of the two employers pays the workers’ compensation benefits, the exclusivity provision of the Act immunizes both the borrowing employer and the lending employer from further claims. The court added that the legislature did not require both a lending employer and borrowing employer to procure identical coverage for the same employees.

Joint and Several Liability—Unless There was an “Agreement to the Contrary”

The court continued that the statute specifies that the liability of the borrowing and loaning employers is joint and several and that the loaning employer is entitled to receive full reimbursement for all sums paid or incurred, in addition to the specified attorney fees and expenses [see 820 ILCS 305/1(a)(4)]. The statute also provides that there may be an “agreement to the contrary.” The court noted that here, there was such an agreement to the contrary. Staff was responsible for workers’ compensation coverage. An agreement to the contrary, as contemplated by the statute, did not eliminate a borrowing employer’s right to exclusive-remedy protection under the Act.

Android Had Sufficient Control over Holten

The court added that Android qualified as a borrowing employer under the Act because, inter alia, it had the right to direct and control the manner in which Holten performed the work, Holten used Android’s equipment to perform the work, and although Android lacked power to terminate Holten from his general employment with Staff, it did have the power to dismiss Holten from his temporary employment at Android.

In sum, viewing the evidence strictly against Android and liberally in favor of Holten, the court concluded that there was no genuine issue of material fact with respect to the existence of a borrowed-employee relationship. The trial court, therefore, properly entered summary judgment in favor of Android on the exclusive-remedy defense set forth in the Act.

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