Opinion ID: 1398857
Heading Depth: 1
Heading Rank: 2

Heading: loaned employee doctrine

Text: KRS 342.640(1) bases a worker's status as an employee on the existence of an express or implied contract of hire between the worker and putative employer. The loaned employee doctrine permits the direct employee of one business (general employer) to be considered an employee of another business (special employer) and, thus, a co-employee of its employees if three basic tests of an employment relationship are present: 1.) an express or implied contract of hire exists between the employee and the special employer; 2.) the employee performs work for the special employer; and 3.) the special employer has the right to control the work that the employee performs. [15] The doctrine was instituted to protect injured workers and does not permit a special employer to be thrust upon them against their will or without their knowledge, thereby depriving them of the right to sue for damages. [16] Allied Machinery, Inc. v. Wilson [17] noted, however, that the more recent cases [18] had broadened the scope of a putative employer's immunity by focusing on its right to control the details of the work being performed at the time of the injury rather than on the existence of a contractual relationship with injured worker. In the present case, a temporary worker and his direct employer (a subcontractor) rely on the doctrine to defend against a tort claim by the contractor's permanent employee. Hudson and Labor Ready assert that he was loaned to Mid-America and was immune from Johnston's tort claim because he was Mid-America's employee and her co-employee. We disagree. Professor Larson's treatise notes that temporary employees comprise between one and two percent of the American labor force and that the closest loaned employee cases involve a general employer whose very business is to furnish equipment and employees to others. [19] Although most cases consider the worker to be the employee of the special employer when the general employer arranges for labor only, some jurisdictions address the question by statute. [20] Kentucky is among those jurisdictions. Enacted in 1996, shortly after the court rendered the decision in Technical Minerals, [21] KRS 342.615(1) creates two classes of workers (leased employees and temporary workers) and two classes of employers (employee leasing companies and temporary help services). Employee leasing arrangements are arrangements in which two or more entities allocate employment responsibilities. [22] KRS 342.615(4) requires the lessee to secure workers' compensation coverage for all leased employees or contract with the employee leasing company to do so, and it requires the premium to be based on the lessee's exposure and experience. A temporary help service hires its own employees and assigns them to clients for finite periods to supplement the client's workforce during special situations such as employee absences, temporary skill shortages, and seasonal workloads. [23] KRS 342.615(5) states explicitly that the temporary help service shall be deemed a temporary worker's employer and shall be subject to Chapter 342. Although KRS 342.615(4) may permit a leased employee to be viewed as being the lessee's employee rather than the employee leasing company's employee, KRS 342.615(5) does not permit a temporary employee to be viewed as being the client's employee. Hudson clearly was a temporary worker rather than a leased employee and KRS 342.316(5) clearly required him to be considered Labor Ready's employee rather than Mid-America's employee. Thus, he was not Johnston's co-employee.