General Employer

DEFINITION of 'General Employer'

An employer who loans an employee to another business, and who is the employee’s original employer. A general employer is not held responsible for the actions of the employee; instead, the business that borrows the employee is responsible despite not being the permanent employer.

BREAKING DOWN 'General Employer'

Businesses may let other businesses borrow their employees for a period time. This arrangement is regulated under the borrowed servant rule. The business that borrows the employee is referred to as the special employer, since the arrangement is typically temporary. The employee, despite not having a regular, permanent employer-employee relationship with the special employer, is considered to have an implied employment contract.

If an employee of the general employer is injured while working for the special employer, the general employer will not be held liable for damages. The special employer is considered liable if it made an express or implied contract to hire the borrowed employee, if the work being done is the work that the special employer typically does, and if the special employer controls the details of the work that the borrowed employee does. Because the general employer may not be present on the worksite, it can be difficult to determine who was in control at the time of injury.

In order for the general employer to be held liable, an agreement between a general employer and a special employer would have to indicate that the general employer would provide insurance coverage to the employee being borrowed. For example, the general employer would have to extend workers’ compensation coverage. The insurer of the general employer will hold the special employer liable for the actions of the employee on loan unless there was an exclusion endorsement that extended coverage to the special employer.

Contracting firms are commonly associated with borrowed employee arrangements, since they function as a middleman between workers and companies that are looking to have work done.