Should co-employers pay workers’ compensation for an injury claim?

Truck driver and loader suffers slip-and-fall injury to lumbar spine

Should co-employers pay workers’ compensation for an injury claim?

A professional employer organization should not be allowed to silently benefit from co-employment then later deny the co-employment to escape its obligation to provide workers’ compensation benefits, a panel of the Workers’ Compensation Appeals Board of California recently said.

In the case of Ortega Gonzalez vs. Major Transportation Services, Inc., a California corporation, Baljinder S. Gill, individually, and dba Major Express Logistics, Peoplease LLC; National Interstate Richfield, Major Transportation Services, Inc. and Peoplease LLC jointly employed the applicant as a long-haul truck driver and occasional loader.

A contract between the two companies obligated Peoplease to provide workers compensation coverage, to issue checks, and to furnish other services. It required Major Transportation to run payroll through Peoplease.

In September 2018, the applicant suffered a slip-and-fall injury to his lumbar spine in Illinois while driving a truck for Major Transportation.

Read more: Customer sues Costco, independent contractor for slip-and-fall accident

The workers’ compensation administrative law judge found that Peoplease and Major Transportation both employed the applicant on the date of injury. The judge ordered the parties to proceed to arbitration on the issue of coverage, if necessary.

Peoplease asked for a reconsideration. It argued that it and Major Transportation were not co-employing the applicant on the date of injury. The applicant became Major Transportation’s employee as of that date because Major Transportation issued the paycheck covering that date, Peoplease claimed.

Board looks at dual employment

The panel of the Workers’ Compensation Appeals Board denied reconsideration. First, it explained the nature of dual employment, which included the following characteristics:

  • The general employer sent the employee to perform labor for the special employer
  • The work rendered benefited each employer
  • Each employer had some direction and control over the work’s details

If the special employer leased all its employees to a professional employer organization (PEO), which leased back all those employees, then the special employer’s liability would be insured through a single client policy issued to the PEO. Under section 3602(d) of the Labor Code, the client policy would insure both employers for workers’ compensation claims for their joint employees.

In this case, Peoplease was a PEO, a general employer that leased back employees to the special employer and that provided payroll services. Peoplease agreed to obtain workers’ compensation coverage for Major Transportation’s employees under a section 3602(d) agreement.

Peoplease and Major Transportation both employed the applicant before and after his date of injury, the panel ruled. Major Transportation’s issuance of a paycheck did not temporarily suspend the employment relationship between the applicant and his general employer, the panel added.

The panel agreed with the workers’ compensation judge’s findings in a report that Peoplease benefited from the applicant’s co-employment status and from his work on the date of injury.

Substantial evidence supported that Peoplease co-employed the applicant even if its paycheck did not cover the date of injury, the judge found. Peoplease and Major Transportation both knew that their contract was not being strictly followed, the judge noted.

Major Transportation submitted payroll to Peoplease covering the date of injury as part of its submission for the following pay period, and Peoplease benefited from this by charging fees. The judge considered it improper to excuse Peoplease’s late checks but not excuse Major Transportation’s late payroll submission.

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