Insurance Problems in Using Temporary Labor Firms

It varies by region of the country but the use of outsourced labor and/or temporary labor firms is very popular in the modern business setting today. The East Coast tends to be very familiar with using PEO’s (professional employer organizations) as compared to the West Coast, which typically does not use them very much. In this tough economic times we are facing many companies have shed many employees to the unemployment rolls. While companies have cut back on their employees, many companies have in turn rehired the same employees through a temporary labor agency.

There are obviously contract issues, employee issues, and state regulation issues that can be very murky in this type of relationship. What really becomes convoluted is when a temporary labor firm that you are using in turn uses independent subcontractors to do the work on their behalf for your small business. What a nightmare that can be trying to sort out the injured employees Worker’s Compensation claim for an employee who is working on your premises but reports directly to a temporary labor agency but is in actuality an independent subcontractor working from home.

Besides the pitfalls, that we have listed above the applying for Worker’s Compensation insurance for your commercial insurance program can be a challenge at best. If you are using these types of employer-employee relationships, be aware that those questions are asked on every Worker’s Compensation application in United States. Many of the preferred insurance carriers that insure Worker’s Compensation will not insure a company that uses temporary labor firms because of the multifaceted problems we have listed previously. Insurance carriers choose not to be involved in these kinds of transactions.

While using temporary labor firms can be beneficial, you need to go into them with your eyes wide open as to the ramifications down the road concerning your own company’s workers compensation program.

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