Oklahoma has seen its share of changes in its workers’ compensation laws of recent. On May 6, 2013, Oklahoma Governor Mary Fallin signed S.B. 1062 into law, creating a new Title 85A of the Oklahoma Workers’ Compensation Act to operate in parallel with existing Title 85, and once again reform that state’s workers’ compensation laws – including the laws addressing subrogation. With the new law, Oklahoma joins Texas as the only states that allow employers to opt-out of the workers’ compensation system, creating what is known as the “Oklahoma Option.” For accidents which occur prior to February 1, 2014, workers’ compensation subrogation in Oklahoma is governed by § 348 (former § 44 was repealed). Okla. Stat. Ann. Tit. 85, § 348 (2011). For accidents occurring after February 1, 2014, workers’ compensation subrogation is governed by newly-enacted § 43.
As the employee leasing business continues to grow, Oklahoma law has struggled to grow with it. When and under what circumstances a leased/temporary employee can sue a third party who is also the customer of an employee leasing company has, for years, been the proverbial riddle, wrapped, in a mystery, inside of an enigma. Many hoped that the recent Supreme Court decision of Broom v. Wilson Paving & Excavating, Inc., 2015 WL 1541696 (Okla. 2015) would have cleared up much of the mystery. Unfortunately, while it did help answer some questions, this area of the law is still far from crystal clear. Until recently, neither the Oklahoma workers’ compensation statute nor Oklahoma case law dealt directly with the Exclusive Remedy Rule in connection with employee leasing situations. Fortunately, we are beginning to see the development of law in this area. The Broom case is a good start.
The legal history of employee leasing is short and sweet. In 1995, the Oklahoma Court of Appeals held that a worker assigned by a temporary agency to a client company is considered a loaned servant, and that both employers are responsible for the provision of workers’ compensation and, therefore, cannot be sued in a third-party action. Van Zant v. People Elec. Coop., 900 P.2d 1008 (Okla. App. 1995). In Van Zant, a temporary personnel service named Staff One provided temporary help to Jet Service Company. The contract provided that the temporary personnel were employees of Staff One and that Staff One would provide workers’ compensation insurance to cover them. It further provided that Jet Service Company and Staff One would be considered “co-employers” or, alternatively, “dual or joint employers” of the temporary help personnel for the purpose of “employer liability under the workers’ compensation laws.” Id. Jet Service Company argued that it was the “principal employer” of Staff One, and because the work being done by the loaned employee, Robert Van Zant, was a necessary and integral part of Jet Service Company’s business, Jet Service Company was secondarily liable for workers’ compensation and therefore immune from a civil suit due to the Exclusive Remedy Rule. The Court analyzed the case under the “Loaned Servant” Doctrine, in order to announce that Jet Service Company was liable for workers’ compensation benefits. However, the thrust of this case was not to evaluate the defense of the Exclusive Remedy Rule in employee leasing situations. Nonetheless, the Court stated:
Admittedly, these “loaned servant” cases do not directly address the tort liability of the special employer to the injured employee. It is again, however, the unavoidable conclusion that if an employer is liable for workers’ compensation, such liability is exclusive and precludes, as a matter of law, a tort claim against the employer for the same injuries. 85 O.S. § 12. The law considers Appellant to be an employee of both Staff One and Jet, with both having primary liability for workers’ compensation regardless of who provided workers’ compensation insurance. If, for some reason, Appellant was unable to recover workers’ compensation, then and only then, would Staff One and Jet lose their immunity from a tort action such as this. Such facts are jurisdictional, however, and would have to be pled by Appellant.
The Court affirmed the dismissal of the tort action by the trial court, even though it stated that it was based on the wrong reasons.
In 2015, the Oklahoma Supreme Court gave some additional direction without specifically addressing the availability of the Exclusive Remedy Rule defense in employee leasing situations. Broom, supra. In Broom, in a narrowly-divided opinion, the Court refused to extend exclusive remedy protection to Wilson Paving & Excavating because it said Broom wasn’t its “employee.” A temporary staffing company called Labor Ready provided a temporary employee named Steven Broom to work on a construction project. Broom was buried in a trench, received workers’ compensation benefits from Labor Ready for his injuries, and filed a third-party action against Wilson Paving & Excavating.
Wilson Paving & Excavating had workers’ compensation coverage through American Interstate Insurance Co. (AIIC) and obtained a declaratory judgment establishing AIIC owed no coverage to Broom. Wilson Paving & Excavating never paid any benefits to Broom and didn’t participate in the compensation proceedings. Wilson Paving & Excavating’s CGL carrier, Mid-Continent Casualty Co., also sought a declaratory judgment as to whether it had a duty to defend Wilson Paving & Excavating from Broom’s lawsuit. Because Broom was found to be a “temporary worker” at every stage of the litigation, under the plain language of the policy, the Court held that an exclusion for injuries to Wilson Paving & Excavating’s “employees” was inapplicable. The Court noted that Broom was a direct employee of Labor Ready and that he had recovered workers’ compensation benefits through Labor Ready. The Court added that exclusive remedy protection will not extend to a party standing in the position of a special master of a loaned servant if that party is not liable to the worker for workers’ compensation benefits. Wilson Paving & Excavating had a workers’ compensation insurance policy with AIIC in effect at the time of the accident, but AIIC had obtained a declaratory judgment establishing that it owed no coverage to Broom, and Broom never received any benefits from Wilson Paving & Excavating. Under its contract with Labor Ready, Wilson expressly agreed to waive any immunity provided by the workers’ compensation laws as a condition of using Labor Ready’s services. The Supreme Court concluded that the policy did provide coverage because Broom met the policy definition of a “temporary worker.”
While the Broom decision doesn’t completely clarify third-party liability in employee leasing settings, it does suggest that the exclusive remedy isn’t dead despite all the challenges. Exclusive remedy is based on a relationship between the employer and employee. Any extension of that concept is dependent on controlling law, contractual language, and intent of the parties. While it dabbled in employee leasing law, Broom was primarily a case of coverage. Undoubtedly, more clarification will be needed in this area.
If you have any questions regarding this article or subrogation in general, please contact Gary Wickert at firstname.lastname@example.org.