Medical Staffing Firms Face Unique Risks in their Role as Co-Employers

According to the GW Health Workforce Institute at George Washington University, by 2022 nearly one in eight U.S. jobs is projected to be in the healthcare sector, particularly in the areas of advanced practice nursing, licensed practice nurses and licensed vocational nurses.  Part of the reason for this medical staffing trend is due to the number of current nurses retiring and because registered nurses (RNs) are increasingly being asked to take on duties that have previously been the physician’s responsibility.

Additionally, an aging population and advanced technology are driving an increase in medical care employment. Technologies such as patient portals or video conferencing tools are now making their way into healthcare. As healthcare leaders find the best uses for these tools, experienced technologists will be in demand. Telemedicine is also gaining momentum, including in home healthcare. As states adapt their laws around telehealth and patients become more comfortable with getting medical care using a tablet or mobile phone, demand for “virtual physicians” will increase.

As medical staffing firms continue to gear up to meet the increased employment demand of the healthcare industry, what’s important to keep in mind is the unique role they play as co-employers, particularly when it comes to Workers’ Compensation and liability issues. For example, both a temporary staffing agency and the client company have a “joint employer” relationship under several employment laws. This means both the agency and the client company have a responsibility to provide employee protections. When an organization hires a temporary worker who is employed by a temporary staffing agency that agency is typically covered by the Workers’ Compensation coverage it has on its employees – but a client company may not be covered. The worker is not the client company’s employee, yet the client’s company 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 contracting firms 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 business. Some may even require the temporary agency to add an alternative employer agreement rider on its Workers’ Compensation policy.

The area of employment practices is another critical concern for medical staffing firms, particularly now that the National Labor Relations Board (NLRB) has changed the standard regarding the joint employer issue. The new NLRB standard considers employers using professional employment organizations (PEOs), staffing agencies, and others to have employment practices risks, such as wage-and-hour issues, that they didn’t have before. Now employees could be considered a joint employer not only if the employer exercises direct control of employees’ activities, but also if it has “indirect” or even “potential” control. Under the new standard, there is a strong possibility that these employees are economically dependent on the contracting employer and would be jointly employed by both their “actual” employer (staffing firm) and the contracting employer. What does this mean for a staffing agency? Employers using staffing firms to augment their regular workforce will be looking at their agreements with vendors more carefully to determine where all relationships fall. They will be asking many due-diligence questions of staffing vendors, such as whether the firm has conducted a wage-and-hour audit, what indemnification would be provided by the staffing firm in the event of a joint employer lawsuit, if the staffing firm carries Employment Practices Liability (EPLI) insurance, and what would happen if both companies were sued – are they both on their own or is there joint and several liability?

Manchester Specialty Programs specializes in providing insurance solutions for medical staffing firms, including Workers’ Compensation, EPLI and Professional Liability, and can assist in securing the required coverage and in addressing these and other issues unique to this industry sector. For more information about our insurance solutions, you or your local agent/broker can contact us at 855.972.9399.