Virginia Workers Compensation: The Borrowed Employee Doctrine

Sometimes employment relationships are confusing, which can make related legal liability issues difficult to sort out. Some business entities have intertwining relationships because of common ownership, shared commercial interests, financial arrangements or even family ties. An example of this complexity is when many organizations come together on a construction project - potentially including property owners, investors, general contractors, subcontractors, utility services, government entities and more.

In Virginia and all other states, workers' compensation is the exclusive legal remedy for almost all workplace injuries or deaths. Employers carry workers' compensation insurance that pays medical and other expenses for employee injuries without regard for who was at fault for the accidents.

In a complicated commercial venture like a construction project, the interrelationships of the parties can make it difficult to say which employer is responsible for covering an injury for workers' compensation purposes. In Virginia, two particular concepts in workers' compensation law help answer this question:

  • First, the "borrowed employee doctrine" provides that when one employer (the "special master") "borrows" an employee from another employer (the "general master"), the special employer that is using the borrowed employee for a work task is the entity responsible for workers' compensation purposes should that employee be injured, even if he or she is still on the general master's payroll.
  • Second, the Virginia workers' compensation "statutory employer" statute requires that when a contractor or owner contracts with a subcontractor to perform work, if an employee of the subcontractor is injured in the course of that job, the responsible employer or "statutory employer" is the original contractor or owner, as if "the worker had been immediately employed by" the general contractor.

Borrowed-Employee Factors

Virginia courts decide on a case-by-case basis whether a borrowed employee arrangement exists. The most important factor is "control" - that it is logical for the employer most immediately or directly guiding the worker's activity at the time of an injury to be liable for workers' compensation coverage.

After control, several less important but still relevant factors may be considered:

  • Which employer's work was getting done
  • Agreements between the employers
  • Employee willingness to work for either
  • General employer termination of employment relationship
  • Who provided tools and work space, and maintained working conditions
  • Length of the relationship
  • Which employer could terminate the worker
  • Which employer paid the employee's wages

Liberty Mutual Insurance Corporation v. Herndon

In February 2012, the Court of Appeals of Virginia sitting in Salem decided a multiple-employer workers' compensation case to which the borrowed servant doctrine applied.

Gary Herndon was a laborer working on a residential construction site when he fell through a hole on the second floor of the house all the way to the basement. The resulting injuries to his head, spinal cord and ribs put him in the hospital for almost two months, after which he emerged a paraplegic.

The question of who was responsible for his workers' compensation claim was a difficult one. The court commented that the relationships between the parties were "convoluted" because they were so informal. The potential employers were:

  • CAC, the general contractor on the building site
  • SCHI, the subcontractor hired to clean the work site and frame the house
  • David Clark, the subcontractor hired by SCHI to frame the house

Herndon was a cousin of Clark's. SCHI was owned by Clark's wife, Sherry. Some of the business functions between SCHI and Clark's framing business overlapped. For example, Sherry at SCHI hired her husband Clark to do the framing work; Sherry did the "paperwork" and paid Clark's crew after SCHI was paid by CAC.

Affirming the findings of the Virginia Workers' Compensation Commission, the court agreed that there was sufficient evidence that Herndon was a borrowed employee of David Clark (the house-framer subcontractor) at the time of the injury, mainly because Clark - not SCHI - was in control of Herndon's work tasks. The court also concurred with the commission that CAC and its workers' compensation insurer were liable for the workers' compensation claim because CAC as the general contractor was the statutory employer.

If you face a complicated employment picture in your quest for workers' compensation, an experienced workers' compensation attorney can help you sort out the facts and options in your claim.