In most cases, Texas employers are not required to participate in workers’ compensation insurance. Employers who opt out of workers’ comp are not immune from personal injury suits filed by their employees … but what about temporary workers from temp agencies and staffing companies?

Recently a worker at a Tractor Supply distribution center in Waco was injured in an onsite accident. The company did not carry workers’ compensation insurance, and the individual filed a personal injury suit for more than $8 million – and won. But when the company appealed, the award was tossed out. The reason: Since the worker was a temporary employee provided by a staffing agency, the injury was covered under the agency’s workers’ compensation insurance.

The contract between the staffing agency and Tractor Supply contained a clause stating that Tractor Supply would pay the agency to cover payroll taxes and other overhead items, including workers’ comp insurance. In the policy between the staffing agency and its insurance company, an alternate employer endorsement allowed the staffing agency to permit its clients to be covered by the policy. And in an addendum submitted to the insurance company, the staffing agency listed the clients to be covered, including the client named in this lawsuit. (See Tractor Supply Co. of Texas v. McGowan.)

The company, in this case, was fortunate that its coverage under the staffing agency’s policy was easily proven, but not all cases are as clear-cut.

When working with staffing agencies for temporary help, keep the following in mind:

  • Make sure that the agency has workers’ compensation insurance with an alternate employer endorsement.
  • Check your contract with the agency for language regarding workers’ compensation.
  • Always verify that insurance endorsements are completed correctly.