Dec. 28, 2011 – A state appeals court recently examined a “complicated” employment arrangement to affirm that a company in the business of loaning employees was not considered a “temporary help agency” for worker’s compensation purposes.

In 1995, roofer Eddie Crews (now deceased) became a quadriplegic when he fell from a roof. Crews had previously been working for M.M. Schranz Roofing Inc. (Schranz). But Schranz sent Crews to First Choice Temporary (First Choice), a temporary worker agency.

That’s because under Schranz’s contract with Milwaukee Public Schools, the company was required to use a certain percentage of minority subcontractors.

Schranz contracted with P.L. Freeman Roofing (Freeman), a one-man minority business, to satisfy the requirement. Freeman, in turn, agreed to get workers on loan from First Choice, Crews in particular. Then, without First Choice’s knowledge, Freeman loaned Crews to Schranz, which paid Freeman. Freeman paid First Choice. First Choice paid Crews.

First Choice was paying Crews when the accident occurred. First Choice paid Crews’s worker’s compensation claim, but later sued Schranz for reimbursement.

The Labor and Industry Review Commission (LIRC) ruled that Schranz was responsible for worker’s compensation because First Choice was not a “temporary help agency” with respect to the work performed by Crews for Schranz. The trial court affirmed, and Schranz appealed.

Temporary help agency

First Choice would be statutorily liable for Crews’s worker’s compensation claims if acting as a “temporary help agency” that employed Crews, the District II Wisconsin Court of Appeals explained in M.M. Schranz Rooking Inc. v. First Choice Temporary, 2011AP345 (Dec. 21, 2011).

Under section 102.01(2)(f), a temporary help agency is an employer “who places its employees with or leases its employees to another employer who controls the employee’s work activities and compensates the first employer for the employee’s services …”

But the appeals court noted that “[f]or First Choice to have met the definition of a temporary help agency so as to be responsible for worker’s compensation benefits instead of Schranz, First Choice would have had to ‘place’ Crews with Schranz.” That didn’t happen.

First Choice placed Crews with Freeman, not Schranz. “LIRC emphasized that First Choice did not even have knowledge that Crews was working for Schranz,” wrote Chief Appeals Court Judge Richard Brown. “This is a very important finding of fact and drives the result in this case.”

To be a temporary help agency, Wisconsin law requires that the agency place the employee with the employer who will supervise the work, the court explained.

Appling great weight deference to LIRC’s decision, the court ruled that at the time of the accident, Crews was Schranz’s “loaned employee” by implication under Wis. Stat section 102.07(4) and a previous decision, Crews v. Freeman Roofing Inc., WI App 2001. Thus, Schranz was responsible for worker’s compensation payments to Crews, not First Choice.

Under section 102.07(4), an employee is a person “in the service of another under any contract of hire, express or implied … whether paid by the employer or employee, if employed with the knowledge, actual or constructive, of the employer. …”