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Protect Yourself against Liability Exposure from Contractors’ Employees


Protect Yourself against Liability Exposure from Contractors’ EmployeesAs a business owner, you could be held liable for the actions of other peoples’ employees.

U.S. employment law has long recognized that workers may have an employment relationship with multiple entities at the same time. That means your company could get stung with OSHA fines, Title VII discrimination claims and other actions that arise from the actions of an employee that you thought was a subcontractor.

Here’s why:

In Secretary of Labor vs. Summit Contractors, the 8th Circuit ruled that companies that exercise overall control of a job site can be held liable for workplace infractions – even when the individual or individuals directly responsible for the infraction were employees of another firm, and no employees of the controlling employer were directly involved.

Furthermore, even if your company doesn’t exercise direct supervisory control of subcontractors, courts have held that a de facto employment situation exists if the controlling employer simply reserves the right to exercise control.

Protecting yourself
Here are some ways to safeguard yourself from joint employer liability:

• Ensure that all subcontractors have employee liability insurance and general liability insurance of their own.

• Check out the vendor or subcontractor’s track record with safety and OSHA-related claims.

• Research the subcontractor’s bonding history.

• Ensure your employer’s liability insurance covers claims that may arise from contractors and vendors working on your property, or on worksites your company controls.

• Negotiate for an indemnification clause in any vendor contracts or subcontracting arrangements.

• Don’t rely on verbal assurances: Put the subcontractor’s responsibility for complying with OSHA standards and labor laws, rules and regulations in writing, as part of the contract.

• Hold regular safety meetings with representatives from the subcontractor’s firm, and document them.

• Don’t sign a contract with a manpower or employee leasing firm unless you have looked through it for exposure to liability from their employees.

• Ensure the vendor or subcontractor is providing job site supervision. At a minimum, ensure their management is checking on the site regularly. If all supervision is left to you, federal regulators may deem these workers to be your employees.

• Don’t discipline the subcontractor’s workers directly. Work through the subcontracting entity wherever possible. If your supervisors attempt to discipline their employees, or direct their work too closely, courts may find that a de facto employment relationship exists with your firm as well as with the subcontractor. This exposes you to liabilities that these employees may cause.

• Train your middle managers and foremen that they should not attempt to take on the role of supervisor to subcontractors’ employees and onsite vendors.

• Don’t lend heavy equipment, power tools or vehicles to subcontractors on the job site, unless you also send a designated operator. Contractors are expected to have and maintain their own equipment. Also, when you send your own operator with a forklift, for example, you can help ensure that the subcontractor doesn’t expose you to liability because of an accident caused by an unqualified operator.

For more information, or to schedule an insurance and risk exposure review, call us today.