Disclaiming Employment Comes Back to Haunt Manufacturer in Negligence Action

Case File

When a manufacturer previously argued before the Industrial Commission that no employment relationship existed with an injured worker, the North Carolina Court of Appeals held it could not later rely on that alleged employment relationship to invoke workers' compensation exclusivity in a negligence action.

Case

Enrique v. Edwards Wood Products, Inc., No. COA26-281 (N.C. Ct. App. 11/04/26)

What Happened?

A North Carolina manufacturer entered into a staffing agreement with a staffing agency through which the manufacturer secured a worker's services.

While performing work for the manufacturer, the worker experienced an injury when a crane cable snapped and a steel saw blade holder fell and struck the worker. At the hospital, a blood sample drawn at 7:50 a.m. showed a 0.186 blood-alcohol level. The worker was permanently paralyzed from the waist down as a result of his injuries.

The worker filed a workers' compensation claim against the staffing agency and then sued the manufacturer in tort. The manufacturer asserted the exclusivity of North Carolina's Workers' Compensation Act as a defense.

The trial court denied the manufacturer's motion for summary judgment, prompting it to appeal.

Rule of Law

In North Carolina, an "employee" is defined as "every person engaged in an employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written." A "special employee" may be treated the same as a worker who meets the Act's definition of "employee." As such, special employees and employees are similarly subject to the jurisdictional limitations of the Act's exclusivity provision.

Under the special employment doctrine, known also as the lent employee doctrine, a general employee of one employer can also be the special employee of another employer while doing the latter's work and under his control. When the special employment doctrine applies, the general employer and special employer have joint liability under the Act, which provides the plaintiff-employee with two separate potential sources of workers' compensation benefits. However, under the special employment doctrine, the employee's receipt of workers' compensation benefits from either employer bars the employee from proceeding at common law against either of the employers.

North Carolina courts follow a three-prong test for determining whether a worker is a special employee:

(1) The employee has made a contract of hire, express or implied, with the special employer.

(2) The work being done is essentially that of the special employer.

(3) The special employer has the right to control the details of the work.

What the Court Said

The court explained that the manufacturer's efforts to argue that it wasn't the worker's employer in his workers' compensation proceeding came back to haunt it in the negligence action.

"Defendant here expressly argued before the Industrial Commission that it was not subject to the Commission's jurisdiction because 'an employer-employee relationship has never existed between [Defendant] and [P]laintiff' and that Plaintiff was injured 'while employed by [CDT] at a facility owned by [Defendant].'" 

The court held the manufacturer to that position.

"Defendant cannot disclaim an employment relationship before the Industrial Commission and then rely upon that same relationship in superior court to invoke the exclusivity provision of the Act," the court wrote. "As there was no express or implied contract of hire between Plaintiff and Defendant, the first prong of the ... test has not been met."

Case Examples: In reaching its decision, the court found guidance in two of its recent decisions on the subject of "lent employees."

Solis-Santos v. Lester, 301 N.C. App. 439 (2025).  A staffing agency entered into an agreement with the defendant demolition company, providing that the staffing agency would assign employees to defendant; pay the assigned employees' wages and provide benefits; and handle unemployment and workers' compensation claims involving assigned employees. The court affirmed the dismissal of plaintiff's negligence claims, holding that an implied contract of hire existed between plaintiff and defendant and defendant was plaintiff's special employer such that the exclusivity provision of the Act divested the superior court of jurisdiction over plaintiff's claims.

Jefferson v. Johnson Concrete Co., No. COA26-41 (N.C. Ct. App. 10/07/26). A contract between a staffing agency and defendant provided that all temporary employees assigned by the staffing agency to defendant were employees of the staffing agency; plaintiff was assigned by the staffing agency to work for defendant; and plaintiff was paid by the staffing agency. The court reversed summary judgment in defendant's favor and remanded to the trial court for further proceedings, where there was no genuine issue of material fact that no implied contract of hire existed between plaintiff and defendant such that defendant was not plaintiff's special employer and the exclusivity provision of the Act did not divest the trial court of jurisdiction over plaintiff's claims.

Unlike Solis-Santos, where the facts supported an implied contract of hire between the worker and the borrowing employer, the manufacturer's own prior assertions in this case undermined any claim that such a relationship existed.

Verdict: The court affirmed the trial court's ruling in the worker's favor.

Takeaway

If a would-be special employer argues under workers' compensation law that an injured worker wasn't its employee, it may face repercussions in a negligence action since one factor for determining special employment requires a showing that the employee has made a contract of hire, express or implied, with the special employer.

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