Special Employer

What is a Special Employer?

A special employer is an employer who borrows an employee from the original employer and to whom the new employee owes a duty. When one employer loans another employer to provide specific services and expertise on loan, a special employment relationship changes the two employers’ roles and responsibilities.

The borrowing employer under whose direction work is performed becomes the special employer. Under the arrangement, the special employer owes a duty of reasonable care towards the special employee. On the other hand, the original employer surrenders control and direction of the employee to the special employer, and hence, is not liable for the special employee’s actions.

Understanding a Special Employer

An employer may find himself short of workers for a particular task and resort to borrowing labor to fill the workforce requirement void. The borrowed workers often possess the special expertise needed by the special employer to execute the task(s) in question.

Such a working arrangement is similar to leasing or borrowing special equipment from one business to another. The business that sends one or some of its employees to do some work for a separate business is referred to as the general employer. In contrast, the borrowing business is called a special employer. In this scenario, a special employee is required to follow the special employer’s instructions.

As in other employment arrangements, the consent of the involved parties is a prerequisite. The working relationship is according to the borrowed servant doctrine or loaned servant rule. According to the borrowed servant rule, the special employee must consent to the new working formula, and the right to control and direct the borrowed worker is a preserve of the special employer.

In such cases, the general employer does not wish to end its employment relationship with the borrowed employee. Rather, the special employee is loaned to another business for a determined period.

Possible Legal Issues in the Borrowed Servant Rule

Legal issues can arise as to who should bear the legal burden for the negligence of the special employee. The borrowed employee may cause harm to others while performing work as per the special employer’s request. The injured party is sometimes an on-site employee employed by the special employer or can be the borrowed employee him/herself.

Control is used as the basis upon which to test whether the special employee is under the general employer or special employer. The law presumes that the mere right of control is enough to create a master-servant relationship. If the special employer has the right to control the details of the work and the control is exercised, they are considered to have control of the relationship.

Additionally, the question of which business the borrowed employee is working on is used to determine legal liability.

The most frequent legal issues arise from workers’ compensation insurance claims. The decision of whether general employment or special employment exists is dependent on the facts of the case.

Special Employer Doctrine

Generally, two principles are applicable when a special employer borrows an employee from the original employer.

1. The first principle is the special employer’s right to exercise control over the borrowed employee.
2. The second principle is whether the said employee consents to the special employer’s right to exercise control. However, it is immaterial whether the special employer reserves the right to exercise that control since the original employer possesses residuary control and can recall or discharge the special employee.

In most cases, the borrowed employee’s compensation and payment of insurance premiums by the special employer are not enough to prove special employment status.

Liabilities for a Special Employer

Three rules must be met for a special employer to be responsible for any injuries or damages sustained by the borrowed employee. They include:

1. An expressed contract to loan the special employee must be made, and the employee must consent to it.
2. The work being done is part of the special employer’s typical business.
3. The special employer controls the details of the work that the borrowed employee is expected to execute.

An employment contract indicating that the general employer would pay insurance premiums for the borrowed employee would ensure that the employee is not held liable for any resulting damages in the new workplace. For example, the control test argues that the general employer must extend the special employee’s workers compensation benefit.

The general employer’s insurer would hold the special employer liable for the borrowed employee’s actions unless there is an exclusion endorsement that extended coverage to the special employer.

Contracting businesses are usually linked with borrowed labor arrangements because they act as middlemen between companies looking for employees equipped with specific skills and qualifications.

Related Readings

CFI offers the Commercial Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant resources below:

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