In the post-Valentine's Day wake, you may question whether you are still your contract workers' "special employer" (for purposes of the Alabama Workers' Compensation Act (the "Act")) or whether you even want to be. If you are, the Act provides the exclusive remedy for most work injuries even if you and the worker are not "exclusive" (the worker may have another employer relationship). Recently, the Alabama Supreme Court made clear the powerful impact the exclusive remedy provision of the Act has when an employee brings tort claims against his "special employer" for wrongdoing associated with a work injury.

Ex parte Tenax Corp., 228 So. 3d 387 (Ala. 2017)

Tenax Corporation ("Tenax") owns a manufacturing plant in Evergreen, Alabama, that employed Plaintiff John Dees in 2010 and 2013. In July 2014, at the direction of Tenax's plant manager, Dees began working at Tenax through Onin Staffing ("Onin"). Onin paid Dees and provided his workers' compensation insurance, and Dees' new hire paperwork with Onin specifically provided: "I understand that I am an employee of Onin Staffing. Only Onin Staffing or I can terminate my employment...." However, Dees believed that Tenax was his employer. Further, Tenax trained, supervised, and disciplined Dees, and controlled his work. Tenax also paid Onin, per the parties' agreement, premiums to cover Dees', and other contract workers', workers' compensation insurance premiums.

Unfortunately, six months after his hire, Dees suffered a substantial injury to his left arm at work. Dees subsequently sued Tenax, among others, alleging he was injured as a result of the alleged defective condition of the machine. Dees sought workers' compensation benefits from Onin, and he sought damages under the Alabama Extended Manufacturer's Liability Doctrine and for negligence and wantonness from Tenax, among others. The different claims matter because the Act limits the amount and type of damages recoverable whereas tort claims are not similarly restricted. Tenax asserted it was Dees "special employer" under the Act, and, therefore, it was immune from Dees's tort claims under the Act's exclusive-remedy provisions. The trial court rejected this argument, and Tenax filed a writ of mandamus to the Alabama Supreme Court.

The Alabama Supreme Court noted the three-part test for determining when a "special employer" relationship exists:

When a general employer lends an employee to a special employer, the special employer becomes liable for workmen's compensation [and thus immune from liability for tort actions brought by the special employee] only if

a) the employee has made a contract of hire, express or implied, with the special employer;

b) the work being done is essentially that of the special employer; and

c) the special employer has the right to control the details of the work.

When all three of the above conditions are satisfied in relation to both employers, both employers are liable for workmen's compensation.

Dees conceded part (b) and (c) and only contested whether an implied contract of hire existed. The Court found it did, noting as important (1) the plant manager directed Dees to apply for a job at Tenax through Orin ("Dees necessarily agreed to a contract of hire with Tenax"), (2) Dees conceded to control and supervision by Tenax, (3) Tenax effectively paid for Dees' workers' compensation coverage in the form of premium payments to Orin and (4) Dees' duration of work (six months) showed Dees "evaluated and acquiesced in the risks of his employment." The Court concluded that Tenax was Dees' special employer, and, therefore, was immune from Dees' tort claims under the exclusive-remedy provisions of the Act. Thus, Dees' only remedy against Tenax for his work injury was through a workers' compensation claim.

Takeaway

Ex parte Tenax Corp. provides helpful guidance to employers seeking to position themselves as a "special employer" for the contract workers assigned to their work site.

  • Control is a critical factor in the special employer test, and, naturally, the more control exercised, the more likely an employer is a special employer. Control includes setting hours, supervising, disciplining, directing work, and providing work rules and training;
  • Directly, or indirectly, providing part of the worker's workers' compensation premiums is also critical. Tenax paid its staffing agency Onin a premium to cover workers' compensation insurance for the supplied workers and that was a factor that weighed strongly in favor of a special employer relationship. If payments are made to the staffing agency to cover, among others, workers' compensation premiums, it should be made explicit in the parties' agreement. Further, it may be advisable for the special employer to have an insurance endorsement extending workers' compensation protection to the applicable workers; and
  • The longer the length of assignment the better. The Supreme Court indicated that six months of continuous assignment was sufficient duration to show the individual acquiesced to the risks of his or her employment.

But, the special employer concept is a double edged sword. While potential recovery may be limited, an employer must face the Act's no-fault provisions, which allows employee recovery regardless of his or her personal negligence of fault. More importantly, the employer that meets the criteria of a special employer (most notably by controlling the work) is more susceptible to being considered a "joint employer" of the employee. Employers deemed to be joint employers must comply with various federal, state and local labor and employment laws (e.g., NLRA, Title VII, ADA, FMLA) with respect to both their direct employees and all employees deemed to be jointly employed by both the primary and secondary employer. Thus, while Ex parte Tenax Corp. is helpful in showing the benefits 2

of the special employer doctrine, employer decisions about how to position itself involves various risks and considerations and legal counsel should be consulted.