Temporary employees are focus of regulations
Does your company use temps? If so, be on the lookout for a new law that’s going to step up your workload and legal obligations – but also give you more peace of mind, officials say, if you’ve ever worried about one of those temps being injured in your workplace.
The state law, effective next Jan. 1, addresses a problem that wasn’t widespread, but did affect real people, officials say: Companies contracting with a temporary agency and discovering, after a temp worker was injured, that the agency had no workers’ compensation coverage.
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Under the old law, the client company was protected from liability so long as it had a certificate of insurance provided by the agency when the contract started. But for the worker, it was considered a disaster – no coverage from the temp agency, no coverage from the client company, but real bills to pay, and/or lost income.
Under the new rules, approved this summer as part of a broader workers’ comp law spruce-up, client companies will be directly responsible for ensuring the temp agency has workers’ comp coverage, and insurers will have to report lapses directly to them.
If you contract with a temp agency and don’t get a coverage certificate, or you’re told the policy has been canceled and do nothing about it, the law will deem you the temps’ employer, for workers’ comp purposes – and hold you responsible for any injuries.
In addition, said Michael Lynch, vice president of legal services for The Beacon Mutual Insurance Co., the state’s largest workers’ comp carrier, the new rules will apply at audit time: If you can’t show that the temps working for you are covered by their agency, you could be forced to pay workers’ comp premiums on their behalf, Lynch said.
“It’s just trying to close a loophole in the law,” Lynch said. “And good employers – whether they’re temp employers, or companies using temps – have absolutely nothing to worry about.”
The new law comes at a time when Rhode Island is trying to crack down on workers’ comp fraud, payroll underreporting and straight-out noncompliance. The number of lack-of-insurance investigations has more than quintupled since 2001, rising from 527 to 2,634 last year, R.I. Department of Labor and Training figures show. The penalties imposed for lack of coverage have also risen sharply, from $43,955 in 2001 to $342,884 last year.
Since the fire at The Station, which was found to lack workers’ comp coverage, the labor department Workers’ Compensation Fraud and Compliance Unit has not only stepped up overall enforcement, but also targeted specific sectors. Assistant Director Matthew P. Carey said temp agencies are among those sectors of special concern to the agency.
The new law was recommended by the state Workers’ Compensation Advisory Council, which had set up a task force including Carey, Lynch, other insurers, plaintiffs’ lawyers, insurance agents, temp agencies, chambers of commerce and the state Division of Taxation.
The problem they set out to address, Lynch said, involved not all temp agencies, but just some “rogue” ones – but those agencies were really doing workers harm.
“There are some very good temporary employment agencies in the state of Rhode Island,” Lynch said, “but there are some bad ones as well, and those bad ones would use undocumented workers, hide payroll by paying cash, discourage injured workers from reporting claims.”
Insurers and state regulators also had a hard time tracking down violators, Lynch said, because of the way the reporting system was set up. If, say, Agency A had 200 temps, and it sent 50 to work for Factory B, an audit of Factory B’s records wouldn’t show those temps at all, just its regular workers, but Agency A’s records would just show the total number of temps, not a breakdown of where each one was working.
As a result, “the system could be skirted,” Lynch said. “All this process is designed to do is provide greater documentation for the protection of all parties involved in the temporary employment situation.”
Under the new system, client companies will have to get a report directly from their temp agency’s workers’ comp carrier showing that a valid policy is in place. If the policy is canceled or non-renewed, the insurer will notify the company directly – as well as the labor department.
With just under two months to go before implementation, officials are now finalizing the language and format of the notification forms, and they’re preparing an outreach campaign to alert all the state’s employers as well as insurance agents.
Carey said he doesn’t expect the new procedures to create a significant new burden for insurers or for employers, but he does expect them to make a big difference in peace of mind.
“This will just bring (the coverage issue) more to the forefront, and give them some kind of assurance that there is insurance in place,” Carey said.
