Recently, in JSE, Inc. v. Ahart, 2020 WL 1223412, (Ky.App. 2020) (to be published), the Kentucky Court of Appeals addressed the issue of employee leasing companies, specifically holding that the claimant therein was both an employee of the leasing company and the lessee.
In Ahart, Jse, Inc., d/b/a Perma Staff II, (Perma Staff) had entered into an agreement with Whaler’s Catch Restaurant (Whaler’s). Under the terms of the contract, all individuals assigned to Whaler’s to fill job positions were employees of Perma Staff, and Perma Staff was required to provide workers’ compensation coverage, which it did through KEMI, and the proof of coverage and notice to employees regarding the reporting of work-related injuries listed KEMI as the workers’ compensation carrier for Whaler’s.
Perma Staff had the sole responsibility for recruiting, training, evaluating, replacing, supervising, disciplining, and terminating all individuals assigned to fill Whaler’s job positions.
However, under Section 2(a) of the contract, Perma Staff could designate on-site supervisors from its employees to fill Whaler’s job positions under the direct supervision of the Perma Staff district manager. There was no express provision requiring that any individual hired by a Whaler’s on-site supervisor sign up with Perma Staff, although they were encouraged to do so. Doing so, was not a condition of employment with Whaler’s. Indeed, Whaler’s supervisors filled Whaler’s job positions.
Various individuals testified in the claim, but of particular importance was the testimony of Joseph Eaton, president and co-owner of Perma Staff, who testified that Perma Staff and Whaler’s were “co-employers” in that Perma Staff handled paperwork and Whaler’s handled day-to-day operations. Eaton did not, however, feel that Ahart was a Perma Staff employee because she did not complete the application paperwork at the Perma Staff office.
Ahart was hired by a Whaler’s supervisor and worked as a cook and catering server for Whaler’s, where she also occasionally bartended. She worked on an as-needed basis and was paid in cash following catering jobs. She did not receive a paycheck from Perma Staff. On September 25, 2011, Ahart suffered multiple head and brain injuries when she fell through trapdoor while working as a server at a catering event held at Whaler’s.
The ALJ determined Ahart was a Whaler’s employee and that KEMI, who did not state it covered only leased employees, specifically listed Whaler’s as an insured. Thus, as an employee of Whaler’s, he concluded she was covered under the KEMI policy. Further, the ALJ also concluded Ahart was also an employee of Perma Staff based on Eaton’s own acknowledgement that Perma Staff and Whaler’s were “co-employers”.
The Court addressed KRS 342.615(1) relative to employee leasing arrangements. In pertinent part, KRS 342.615(1) provides:
(a) “Employee leasing company” or “lessor” means an entity that grants a written lease to a lessee pursuant to an employee leasing arrangement;
(b) “Lessee” means an employer that obtains all or part of its workforce from another entity through an employee leasing arrangement;
(c) “Leased employee” means a person performing services for a lessee under an employee leasing arrangement; [and]
(d) “Employee leasing arrangement” means an arrangement under contract or otherwise whereby the lessee leases all or some of its workers from an employee leasing company. Employee leasing arrangements include, but are not limited to, full-service employee leasing arrangements, long-term temporary arrangements, and any other arrangement which involves the allocation of employment responsibilities among two (2) or more entities. For purposes of this section, “employee leasing arrangement” does not include arrangements to provide temporary workers[.]
The court in Ahart, relying on prior decisions, noted that an employee leasing arrangement under KRS 342.615 is substantially different from a loaned servant situation.
The Court noted that a leasing company provides administrative employee-related services, not workers, while in a loaned servant situation actual workers are provided. In Ahart, the actual hiring was done by Whaler’s and nothing in the Perma Staff/Whaler’s contract stated Whaler’s did not have the authority to hire employees of Perma Staff, and there was nothing in the contract to require an individual hired by Whaler’s to sign up at Perma Staff’s office to be a Perma Staff employee.
As such, the Court upheld the ALJ’s finding that Ahart was an employee of both entities and that by virtue of the policy between KEMI and Perma Staff, KEMI had coverage.
The Court also addressed a statute of limitations issue given the claimant had not moved to join Perma Staff until after the statute of limitations had expired. It determined that given the complexities of who the actual employer was in the claim, the ALJ properly acted within his discretion to join Perma Staff as a party because the claim against Whaler’s had been timely filed.