In 2019 the Georgia State Board of Workers’ Compensation held that a professional employee organization (PEO) was the statutory employer of an employee of its customer in a case in which the injured employee was not listed in the agreement with the PEO as a leased employee of the PEO. The PEO client was a North Carolina company that did not have Georgia workers’ compensation coverage. It leased its management employees through the PEO, but it did not lease its construction workers and instead hired them directly. The PEO did have workers’ compensation coverage but the direct employer did not. One of the construction workers was severely injured on a job site in DeKalb County, GA.
Since the PEO only leased management employees to the direct employer, who were specifically named in its agreement with the PEO, it denied the injured employee was its employee and the insurer denied it had coverage. After a hearing, the Administrative Law Judge held that there was no employment relationship between the PEO and the injured employee. The ALJ also found that the PEO was not a statutory employer under O.C.G.A. §34-9-8 since the PEO was not a contractor engaged in construction, the business of the direct employer. The leasing arrangement created a contract governing the management employees but not the construction workers doing labor on the job site. The insurer therefore only insured the employees listed in the leasing agreement and not the injured employee.
The Appellate Division reversed the ALJ and concluded that the PEO was a statutory employer quoting the statute: “… an employee leasing company shall be deemed to be a statutory employer.” O.C.G.A. §34-9-11(c). Even though O.C.G.A. §34-9-8 did not apply, since the PEO was a statutory employer under O.C.G.A. §34-9-11(c), the insurer for the PEO was responsible for the benefits due to the injured employee even though he was not employed by the PEO. The decision of the State Board of Workers’ Compensation was appealed but the case was settled during the appeal.
Some in the PEO industry have sought a change and HB 397, introduced in the 2021 legislative session, would reverse the decision of the State Board of Workers’ Compensation. HB 397 proposes to amend the law relating to professional employer organizations, not the Workers’ Compensation Act. It would require an agreement in writing between the PEO and its co-employer client which specifically allocates the responsibility to obtain workers’ compensation coverage for the employees of the co-employer. Unless otherwise agreed in writing, the co-employer client is required to be solely responsible for any claims for injuries to its employees not covered by the written agreement between the PEO and the co-employer client.
The proposed statutory change potentially leaves an injured employee, such as the one employed by the North Carolina company in the case outlined above, with no way to obtain benefits if, as with the North Carolina company, the co-employer client does not obtain workers’ compensation insurance covering its employees and has insufficient resources to pay the benefits.
HB 397 was referred to the House Industry and Labor Committee which has indicated it will set up an ad hoc committee to study the bill. As a result, it is unlikely to pass or even see further action during the current legislative session but may be considered further next year. Despite the fact that HB 397 has the effect of changing the workers’ compensation law, the proposal was not referred to the Chairman’s Advisory Council of the State Board of Workers’ Compensation for input from the workers’ compensation stake holders.
You can access this article by Goodman McGuffey partner, Wade McGuffey, by clicking HERE.
