The album Old New Borrowed and Blue was released in 1974 by the British rock band Slade. It reached No. 1 on the UK albums chart. Slade recorded the album shortly after a near-fatal car crash involving drummer Don Powell, who played drums on the album despite walking with a cane and needing to be lifted onto his drum stool.

For whatever reason, Slade doesn’t get much air play on classic rock stations in the US. I remember the songs “Run Runaway” and “My Oh My,” both released in 1984, but I don’t remember hearing much more from Slade.

Getting back to Old New Borrowed and Blue, the “Borrowed” portion of the title refers to the fact that at least one song, “Just Want a Little Bit,” was a cover. It wasn’t Slade’s song, until it was. They borrowed it and made it their own.

Can the same thing happen in employment settings? Yes, it can.

We often consider the concept of joint employment, but did you know there’s also a doctrine called the “borrowed employee” doctrine?

What is a “borrowed employee,” and why does it matter?

The concept of “borrowed employee” arises in negligence cases involving vicarious liability. The “borrowed employee” doctrine is a defense that can be asserted if an injured employee at one company alleges that an employee of another company negligently caused the injury. If your employees ever provide services for another company, pay attention.

We saw this doctrine in action earlier this month, in a case before the New Jersey Supreme Court. Pantano v. New York Shipping Association.

Philip Pantano, a mechanic employed by Container Services of New Jersey (CSNJ) had his foot crushed and amputated following a workplace accident. Pantano alleged that an employee of a different company, Marine Transport (MT), was negligent and caused the injury. Pantano claimed that MT was vicariously liable for that employee’s negligence and should have to pay for the damages. A jury agreed and awarded Pantano $861,000, on top of his workers’ compensation recovery.

The issue that went before the New Jersey Supreme Court centered around whether MT could be held vicariously liable for its employee’s negligence. The answer would depend on whether the MT employee who caused the accident was deemed a “borrowed employee” of CSNJ when the accident occurred. If MT could prove that the MT employee who caused the injury was a borrowed employee of CSNJ at the time of the accident, then MT is not vicariously liable, even though the worker was being paid by MT and was MT’s W2 employee.

The borrowed employee doctrine is a creation of state law. In New Jersey, there’s a two-part multi-factor test to determine whether someone is a “borrowed employee” for purposes of vicarious liability.

The first part of the test looks at control, which can be demonstrated through “direct evidence of on-spot control” or broad control based on method of payment, furnishing equipment, or having the right of termination. If the primary employer has control over the worker, then we go to part two of the test.

The second part of the test is the “business furtherance” prong. If the worker was furthering the primary employer’s business when committing the negligent act, then the primary employer is vicariously liable. “Business furtherance” is established under NJ law if (1) the work being done is within “the general contemplation” of the primary employer’s business, and (2) the primary employer derives economic benefit by loaning its employee.

Applying the test, a jury is supposed to determine whether the employee was acting on behalf of the primary employer, or was acting as a borrowed employee of the secondary employer, or if both are responsible.

Tip: It is in a primary employer’s interest to show that its loaned employee was acting as a “borrowed employee” of the other company at the time of the accident, if the injured employee was also employed by that other company.

Here’s why. If the employee who caused the accident was acting as a “borrowed employee” of the company that employed the injured worker, then the injured worker’s remedy is limited to workers’ compensation law. But if the accident was caused by the negligence of another company’s employee (and the worker is nit a “borrowed employee”), then the injured worker can bring a negligence claim against that other company.

If all of this is making your head hurt, remember a few things here:

1) When you lend an employee, make sure there’s worker’s compensation coverage all around.

2) When you lend an employee, make sure you have a well drafted agreement between the two companies. Allocation of risk should be addressed in advance.

Borrowing employees is commonplace. If you plan in advance, the arrangement can work well for both companies, and there’s no need to Run Runaway.

© 2023 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.