Temporary Employers Subject to Tort Claims for Temporary Employee’s Injuries

The Wisconsin Appellate Court in In Re the Estate of Carolos Esterley Cerrato Rivera v. West Bend Mutual Insurance Company, No. 2017AP142, recently ruled an employee of a temporary staffing agency can bring a tort claim against his or her temporary employer in certain situations.

While the decision is limited to situations in which the temporary employee has not opted to make a claim under the Wisconsin Workers’ Compensation Act (“Act”), it is a cause of concern for both temporary staffing agencies, temporary employers and their insurers.

History and Purpose of the Act

In 1911, Wisconsin adopted the oldest continuing state worker’s compensation program. It constituted a legislative decision to effect a compromise between an employer’s and employee’s competing interests in which the employee accepts a smaller recoveries than those potentially available at common law in return for coverage of all work-related injuries regardless of fault.

Prior to the Act, an employee’s only option to be compensated for a work-related injury was to sue his or her employer in circuit court under a common law tort-related theory, e.g. alleging the injury was the result of the employer’s negligence. If successful, the employee could be awarded:

• Lost wages
• Cost of medical treatment
• Pain and suffering
• Any other foreseeable damage caused by the employer’s negligence

While there was the potential for a larger award of damages under a common law tort action, there was less certainty as to what damages would be awarded and how long it would take for the employee to receive such damages.

When attempting to balance the competing interests of the employer and employee, the legislature created a statutory system which removed the uncertainty on the part of the employee, by limiting the type of damages for which the employer would be liable.

Following the implementation of the Act, an employee’s exclusive remedy for a work–related injury was the Act. The “exclusive remedy provision” of the Act, which bars tort claims by an employee against his or employer, was a key component of the legislature’s compromising of both side’s interests.

Temporary Employees and the Act

As early as 1920, the Wisconsin courts were required to determine the proper “employer” of loaned or temporary employees. The issue was twofold:

1. Which employer was liable for worker’ compensation benefits?
2. Which employer was protected from a tort claim as a result of the exclusivity provision of the Act?

Through both court decisions and amendments to the Act, the borrowing or temporary employer of the employee was deemed to be shielded by the Act from tort claims.

The Appellate Court’s recent decision, however, has identified a flaw in this shield. According to the plain language of the Wisconsin Statutes, section 102.29(6)(b)(1) of the Act, “no employee of a temporary help agency who makes a claim for compensation” may make a claim in tort against any employer who compensates the temporary help agency for the employer’s services.

Rivera Case

In the Rivera case, Mr. Rivera was directly employed by Alex Drywall. He performed work on behalf Alpine Insulation (“Alpine”), who then paid Alex Drywall for this work. As a result, the court found Mr. Rivera to be a temporary employee of Alpine.

On August 21, 2014, Mr. Rivera was killed in a single accident while being transported from one Alpine job site to another. Although eligible to do so, rather than file a claim for benefits under the Act, Mr. Rivera’s estate filed a wrongful death claim against Alpine and its insurer.

The case against Alpine and its insurer was dismissed by the circuit court as it determined the suit was barred by the exclusivity provision of the Act. Mr. Rivera’s estate appealed this decision and the Appellate Court held that because Mr. Rivera or his estate did not make a “claim for compensation” under the Act, the exclusivity provision did not apply.

Therefore, rather it than being limited to the statutory benefits under the Act, Mr. Rivera’s estate could seek any and all damages available under common law.

Future Impact

Based on the Appellate Court’s decision in Rivera, a temporary employee now has a choice whether to request benefits pursuant to the Act or whether to demand damages in tort from his or her temporary employer. The Appellate Court also held that similar language in section 102.29(7) provides “loaned employees” this same choice.

When making such a decision, the temporary employee will have to determine whether the potential for larger damages outweigh the certainty and speed in which benefits under the Act are paid. If the temporary employee decides to make a claim under the Act, he or she will be barred from making a tort claim against the temporary employer.

As a result of the Rivera decision, a bill has already been drafted in the Wisconsin State Assembly to revise the language of Wisconsin Statutes, section 102.29 to change “makes a claim for compensation” to “has the right to make a claim for compensation.” If passed, this should reinstate the shield against tort claims to both temporary and loaned employers.

Until then, however, whether you are a temporary/loaned employer or a temporary staffing agency contractually required to indemnify your customers, we recommend you review your insurance policies to make sure a tort claim by a temporary employee is covered.

As always, McCarty Law’s Employment and Labor Law attorneys stand ready to assist you with this review.

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Brian T. Flood

Business and Corporate Law Attorney at McCarty Law LLP
Brian advises and assists individuals and businesses in a wide array of corporate, business, banking, employment, and real estate matters. In addition, Brian works with businesses in a variety of employment-related matters.

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