What is a 'General Employer'

A general employer is an employer who loans an employee to another business, and who is the employee’s original employer. Such arrangements are usually conducted on a temporary basis. 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'

General employer is the term that describes a business that lets another business borrow one or more of its employees for a specified period time. This arrangement is regulated under the borrowed servant rule. The borrowed servant rule shifts liability from the workers’ regular employer to the employer that is temporarily borrowing the workers. The temporary employer is called the special employer, since the arrangement is typically temporary.

The special employer is responsible for directing the work of the borrowed workers, and the borrowed workers provide services for the special employer rather than their own regular employer. The temporary employer is thus in charge of the employees’ actions. The employees, despite not having a regular, permanent employer-employee relationship with the special employer, are considered to have an implied employment contract.

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.

General Employer and Liability Considerations

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 sometimes be difficult to determine whether it or the special employer was in control at the time of an 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.

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