Collapsing House Leads to 'Co-employer' Questions for N.Y. PEO

New York, NY (WorkersCompensation.com) –  One lesson that often emerges from workers’ compensation cases, particularly those involving relationships under insurance contracts, is that specificity of language can make all the difference.

In Matter of Cardona v. DRG Construction LLC, No. 532601 (N.Y. App. Div. 07/22/21), while it was unclear whether a worker was an employee or a subcontractor, policy language did not exclude the worker from coverage under an arrangement flowing from a state law provision.

PEO as Co-employer

While working as part of a construction crew lifting a home off its foundation, the worker was injured when the house fell and collapsed. The worker filed a workers’ compensation claim, leading to a dispute as to whether he was an employee of the construction company or a subcontractor handling the house-lifting work.

A further question arose regarding whether the worker was also an employee of a professional employer organization – or PEO -- to which the company had outsourced its payroll and human resources responsibilities, including those related to workers’ compensation.

A workers’ compensation law judge established the claim and determined that: 1) the organization was a proper employer; and 2) the issuer of the workers’ compensation insurance policy obtained by the organization was the responsible carrier. Upon administrative review, the Workers’ Compensation Board affirmed, prompting the organization and its insurer to appeal.

In New York, when a PEO enters into a professional employment agreement with a client, it assumes the responsibility to secure and provide required workers' compensation coverage for worksite employees, making the PEO a co-employer.

Subcontractor Status?

The court held that under contractual language between the PEO and the company, the PEO was a co-employer of the injured worker.

The dispute in the case involved whether the PEO owed workers’ compensation responsibilities to the company even though the worker might have been a subcontractor.

An agreement between the PEO and the company specified that the PEO was co-employing “all or a majority” of the company’s employees, However, a list of employees did not include the worker’s name.

Nonetheless, the agreement referred to "BUILDING RAISING OR MOVING — ALL EMPLOYEES — ALL OPERATIONS TO COMPLETION & DRIVERS" under the classification of operations and provided no detail as to who was co-employed by the PEO and the company.

As a result, the PEO could not make an argument that the worker was not covered by the policy, and the court explained that the PEO did not establish that exclusions or exemptions applied to avoid coverage of the worker’s injuries.

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