Appellate Division Decisions June 10, 2021

Last week, the Third Department decided only one case on appeal from the Board, but it's worth reviewing.

Gaylord v. Buffalo Transportation, Inc., Southeast Personnel Leasing, Inc. and WCB. Decided June 10, 2021.

Claimant, a bus driver for Buffalo Transportation Inc., was injured in an accident on February 9, 2018.  He filed a claim, stating that Buffalo Transportation was his employer.  Beforehand, that employer entered into an employee leasing agreement with Southeast Personnel, a professional employer organization (PEO).  Under the agreement, this PEO assumed several human resources responsibilities, including the procurement of workers' compensation insurance for "worksite employees . . . either in its own name" or in Buffalo Transportation's name, per statutes governing PEO's.  NY Labor Law 916; 922.  The PEO obtained a policy from State National Insurance Company which covered the date of accident.

State National controverted this claim, arguing that claimant was not a "worksite employee," and that Buffalo Transportation was required to obtain its own coverage (which it did not do).  Claimant was hired and paid only by Buffalo Transportation, but State National argued that their policy only covered employees that were leased by the PEO to Buffalo Transportation, which claimant was not.  The Law Judge established the claim for several injuries, found that Buffalo Transportation was the proper employer, and also found that State National was the proper carrier.  The Board Panel affirmed, holding that the PEO was obligated to provide coverage for claimant.

Per the above-cited statute, a PEO entering into an employee leasing agreement "agrees to co-employ" all of most of the employees that provide services for the PEO's client.  Accordingly, the PEO assumes the obligation to obtain workers compensation coverage "for its worksite employees either in its own name or in its client's name."  A "worksite employee" is specifically defined as "a person having an employment relationship with with both the [PEO] and its client."  Accordingly, the PEO and its client are both considered employers for the purposes of coverage under the Workers Compensation Law.  

Workers' compensation policies extend coverage to "all employees who are employed during the policy period in question and not shown to be excluded."  Any ambiguity is to be resolved in favor of the insured.  The policy itself named Buffalo Transportation as the insured entity, as well as the PEO, listed "bus company - all other employees & drivers" under classifications, and did not state that the policy was only limited to certain employees.  Per Section 54(4) fo the WCL, such a policy is deemed to include "all employees of the employer."

State National referenced an endorsement stating that the policy covers workers "leased to the client," and that the client was obligated to obtain its own coverage for its employees that were not leased by the PEO.  Since claimant was not hired by the PEO, and was never leased to Buffalo Transportation, it was argued that the policy did not cover him.  However, the Court did not accept this argument because the only evidence submitted was an "employee alpha listing," purporting to include leased employees, that did not include claimant's name, and and also did not include any bus drivers, but only ambulance drivers.  Without additional evidence or testimony, there was no proof that this was the complete listing of the only employees that would be covered under this policy.

Moreover, the fact that claimant's was directly hired Buffalo Transportation prior to the effective date of the leasing agreement did not prevent the PEO from becoming claimant's co-employer, even if Buffalo Transportation paid him directly (a duty normally delegated to the PEO).  

Accordingly, the Court affirmed the Board in finding a co-employment relationship, particularly where Buffalo Transportation did not have its own coverage.

NOTE:  Workers compensation policies are strictly construed to resolve any and all ambiguities against the insurer.  Where, as here, there is an issue as to whether a PEO's policy covers a client's employee, if the policy language is not sufficiently explicit, an alternative argument would be the issue of general/special employment.