Inside the Unique Set of Risks for Medical Staffing Firms as Co-Employers

November 23, 2020

COVID-19 has impacted the the medical staffing market, with the landscape continuing to shift to meet ongoing health care needs, according to Staffing Industry Analysts (SIA). Requests for travel nurses are at record levels, and within allied health staffing, the virus has driven a sudden shift in demand to respiratory therapy. In addition, the demand for temporary doctors has spiked – in some areas by 20%-30%. 

The pandemic only serves to underscore the increased demand for health care professionals, particularly in the area of advanced practice nursing, licensed nurses and licensed vocation nurses. Nurses have been taking on increasingly more duties that were previously performed by physicians. In addition, an aging population and advanced technology are driving an increase in medical care employment

Telemedicine has surged during the pandemic, made more accessible because of remote work and an easing of HIPAA compliance by federal regulators. The demand for virtual nurses and doctors is expected to continue well after the pandemic.

Workers’ Comp Exposures

With medical staffing firms meeting the increased employment demand of the healthcare industry, it’s important to keep in mind the role they play as co-employers, particularly when it comes to Workers’ Compensation. For example, both the medical staffing agency and the host client have a “joint employer” relationship under several employment laws. Both the staffing agency and the host client have a responsibility to provide employee protections. When a client hires a temporary worker who is employed by a medical staffing agency, the agency is covered under the agency’s Workers’ Compensation policy. However, the host company may not be covered. The worker is not the host client’s employee, yet the client may still have liability for the individual while he or she is working at the client’s location under the client’s direction. As a result, many host clients will ask temporary staffing agencies to include language stating that the agency will take sole responsibility for Workers’ Compensation claims if a temporary worker is injured while working for a client’s business. Some may even require the staffing agency to add an alternative employer agreement rider on its Workers’ Compensation policy.

Employment Practices-Related Exposures

Employment practices liability is another critical concern for medical staffing firms as a joint employer. It’s important for staffing firms to understand the rules surrounding joint employment including the U.S. Department of Labor’s (DOL) most recent Final Rule, which became effective in March 2020. The DOL rule established a litmus test to determine whether workers can hold two or more linked businesses liable for the same Fair Labor Standards Act (FLSA) violation: Joint employment hinges on common powers to hire and fire, supervise and schedule, determine compensation, and maintain employment records. Because joint employers are jointly and severally liable for FLSA claims, the rule provided franchisers and businesses that hire workers through staffing firms a shield from liability for many minimum wage and overtime pay claims based on alleged joint employment with those staffing firms. This ruling, however, was challenged in September 2020 by the U.S. District Court in the Southern District of New York. 

Not only should medical staffing firms review the status of the DOL’s ruling with an attorney but it’s also important that they ensure that the definition of employee in an Employment Practices Liability Insurance (EPLI) policy extends to temporary/placed employees. Also critical is the ability to extend coverage to host clients as co-defendants to cover claims made by a temporary employee for a wrongful act against the client/host employer. Claims may include allegations of discrimination, sexual harassment, and other issues.

Manchester Specialty Programs specializes in providing insurance solutions for medical staffing firms, including Workers’ CompensationEPLI and Professional Liability, and can assist in securing the required coverage and in addressing these and other issues unique to the industry sector. For more information about our medical staffing firm insurance program, and how you can assist your clients in obtaining the coverages they require to adequately address their risks, please contact us at 855.972.9399.

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