What is Borrowed Servant Rule?
Borrowed servant rule is a legal doctrine indicating that an employer may be held liable for the actions of a temporary employee.
- Borrowed servant rule is a legal doctrine in which an employer is held liable for the actions of a temporary employee. It is mostly used in worker compensation claims.
- The insurance industry uses the answers to three questions detailed in Larsons's Compensation Law in order to determine liability of compensation.
Understanding Borrowed Servant Rule
The borrowed servant rule shifts liability from the worker’s regular employer to the employer that is temporarily borrowing the worker. The temporary employer, called the special employer, is responsible for directing the work of the borrowed worker, and the borrowed worker provides services for the special employer rather than his or her regular employer. The temporary employer is thus in charge of the employee’s actions.
Borrowed Servant Liability
For example, the manager of a florist shop realizes that the company won’t be able to deliver all of its orders in time because it cannot load the truck with the number of personnel that it has. The manager asks the candy store manager next door if he could spare a couple of employees for a day. While loading the delivery truck, one of the borrowed employees slips and is injured. Even though the injured worker is not a permanent employee, the florist can be liable for the injury because there was an implied—albeit temporary—contract between the florist and the borrowed employee. The candy store where the employee normally works is not held liable.
A related doctrine is called the captain of the ship doctrine. This doctrine states that the manager in a special employer-borrowed employee relationship is responsible for the actions of the borrowed employee, even if the manager is not directly monitoring the employee. For example, the manager may be in another room or offsite when the borrowed employee becomes injured.
Borrowed Servant Rule in Action
The borrowed servant rule is most frequently seen in worker's compensation insurance claims.
It's a point of law that often comes as a surprise to business owners. How, they reckon, could they be held responsible for negligence of a worker to whom they do not pay wages, withhold taxes, provide benefits—someone who is actually employed by another party to whom they have no connection?
The courts have held that under borrowed servant this is the case, providing the business owner is given a contractual right to control both the work and the manner in which it's performed by the borrowed servant, and that control is actually exercised. In the example above, the rule is met when the florist shop owner points to the flowers and the truck and sets the borrowed servant to work on Valentine's Day deliveries.
Determining Borrowed Servant Rule
The insurance industry typically uses the answers to three questions to determine suitability of insurance liability for the special employer. These three questions are detailed in Larsons's Compensation Law, the authoritative text utilized for worker compensation in most cases. The questions are as follows:
- Has the employee made a contract of hire, express or implied, with the special employer? In essence, has the direct employer volunteered or directed the employee to work for the special employer and has the employee agreed to such assignment;
- Is the work being done essentially that of the special employer (as discussed under the right of control); and
- Does the special employer have the right to control the details of the work?