Special Employment and Union Workers

A blog post by Sure Log, June 2022

When an employer lends an employee to another employer and both have the right to exercise certain powers of control over the worker, a “special employment” relationship arises. The employee can be held to have two employers — the original “general employer” and the second “special employer.” If a special employment relationship is found to exist, both employers are jointly and severally liable for any injuries to the employee.A special employment relationship commonly is formed when a temporary employment agency or labor contractor sends a worker to another company to perform work. But it’s not limited to those situations. Generally, in determining the existence of a special employment relationship, the right of control is the paramount factor. But it’s not the exclusive factor and it’s not determinative of the issue. The courts will look at multiple factors to determine whether special employment exists.

Recently, in Robles v. Southern California Gas Co., 2022 Cal. Wrk. Comp. P.D. LEXIS 92, the Workers’ Compensation Appeals Board (WCAB) held that special employment could apply to a union representative. In that case, the applicant worked for Southern California Gas Co. (SCGC), but was also a regional officer for a union. The applicant was injured while traveling to the union office to participate in a study day in the midst of ongoing contract negotiations. Both SCGC and the union maintained workers’ compensation insurance for the date of injury. At trial, one issue was whether the applicant was an employee of SCGC or the union on the date of injury. The workers’ compensation judge (WCJ) concluded that the applicant was an employee of SCGC, but the WCAB remanded for the WCJ to determine whether he might have had two employers. When the WCJ issued a subsequent decision that the applicant was not an employee of the union, the WCAB rescinded the decision.

The WCAB first upheld the WCJ’s decision that SCGC was the applicant’s employer and that it was responsible for his workers’ compensation benefits, because those issues were not originally appealed and were no longer subject to review by the courts. The WCAB found that the applicant also was employed by the union at the time of injury. It found substantial evidence that he was providing services to the union on the date of injury — he was a regional officer for the union and driving to the union office to work on behalf of the union in the midst of contract negotiations. It found that by performing those services, the applicant was presumed to be a union employee under Labor Code 3357, and the union did not prove otherwise.

The WCAB held that there was a special employment relationship. It found that the SCGC was the general employer because it loaned the applicant to the union, but also retained control during the loan-out period. It found, among other things, that it had to release the applicant to participate in union activities, that the applicant was required to report his union work hours, and that he was required to return to work if a union meeting lasted fewer than eight hours. It found a letter agreement was not controlling even though it expressly stated that SCGC employees “who are absent from work at the Union’s request” are “employees of the Union for all employment purposes set forth in the Workers’ Compensation and Insurance Chapters of the California Labor Code.” The appeals board also found that the union was the special employer because, among other things: (1) it had the power to select union representatives to participate in study days, and selected the applicant; (2) the applicant was subject to the union’s confidentiality policies; and (3) the union had the authority to discharge the applicant from his position as union regional officer. So, the WCAB concluded that both SCGC and the union were jointly and severally liable for his workers’ compensation benefits.

Accordingly, employers and unions must be careful in dealing with injuries involving union workers. If an employer loans an employee out to do union work, a special employment relationship exists and both may be liable for an employee’s workers’ compensation benefits.

Note that Robles did not address SCGC’s liability for the applicant’s injury, because the company did not appeal an earlier decision, so its liability became final. Although general and special employers generally are jointly and severally liable for an applicant’s injuries, specific statutes may be used to identify one or the other as liable for workers’ compensation benefits.

Insurance Code 11663 states, “As between insurers of general and special employers, one which insures the liability of the general employer is liable for the entire cost of compensation payable on account of injury occurring in the course of and arising out of general and special employments unless the special employer had the employee on his or her payroll at the time of injury, in which case the insurer of the special employer is solely liable.” So, although a general employer normally is liable for workers’ compensation benefits, if an employee was on the special employer’s payroll at the time of injury, the special employer’s insurer would be liable.

Furthermore, LC 3602(d) states that “an employer may secure the payment of compensation on employees provided to it by agreement by another employer by entering into a valid and enforceable agreement with that other employer under which the other employer agrees to obtain, and has, in fact, obtained workers’ compensation coverage for those employees.” The Court of Appeal has explained that LC 3602(d) was “intended to save general and special employers duplicate workers’ compensation coverage and premiums,” and that LC 3602(d) “authorized a means by which employers could contract and satisfy workers’ compensation insurance requirements with a single policy.” (Fireman’s Fund Insurance Co. v. WCAB (Colamaria) (2010) 75 CCC 1123, 1133.) So, employers and unions could enter into an agreement as to who would provide coverage for injuries sustained by union workers.

About the Author

Sure Log, of Counsel, is a specialist in workers’ compensation defense and related labor law issues. He analyzes files for litigation and settlement, conducts research, reviews records to facilitate completion of discovery and drafts a variety of documents, including trial and appellate briefs. He was instrumental in a 2009 case that ended vocational rehabilitation in California.

About IEA

IEA traces its history to our predecessor organization, “The Fire Underwriters Association of the Pacific” (FUAP) created in 1876 in San Francisco, CA after the post Gold Rush building boom.  Its stated purpose was the promotion of harmony and good practice among the claims adjusting profession. Over time, we became an all industry, all-lines organization with national outreach across the United States.

Today, we are committed to providing professional development to a changing workforce with changing needs. IEA offers myriad courses, seminars, and on-demand training to meet our students where they are and help them reach their goals. We are proud of our contribution to better risk analysis and high operating standards in the industry.