Staffing Agency Workers' Comp: Alternate Employer Endorsements and Client Certificates

A staffing agency's workers' comp policy is the proof its clients rely on, and client contracts usually ask for three things: a certificate of insurance, an alternate employer endorsement and a waiver of subrogation. The certificate shows coverage exists. The endorsements change what the policy does for the client. Agencies that sign the contract first and ask the insurer second often find the policy cannot do what the contract promises, or that the endorsement carries a charge nobody put in the bill rate. In California, Labor Code section 2810.3 adds a statutory reason for clients to insist on proof.

Who is the employer when a temp is hurt

The staffing agency is the employer of record, pays the wages and carries the workers' comp policy. The injury usually happens at the client's site, under the client's direction, on the client's equipment. In many states the client can claim the same exclusive-remedy protection as a special or borrowing employer, but the rules differ by state and by the facts of the arrangement. That uncertainty is why clients ask for contractual protection on top of the certificate.

What a certificate does and does not do

A certificate of insurance is evidence that a policy existed with stated terms on the date it was issued. It does not amend the policy, extend coverage to the client, or guarantee that the policy stays in force. If the policy is cancelled or non-renewed after the certificate is issued, the certificate does not keep it alive. Clients that understand this ask for notice of cancellation and current certificates through the contract term, and agencies should build a calendar for renewals so no client holds a stale certificate.

Alternate employer endorsements

An alternate employer endorsement extends the agency's policy so that a named client is treated as an alternate employer for the temporary workers the agency supplies. NCCI publishes a standard version, form WC 00 03 01, and many carriers use their own wording. California and other independent-bureau states use their own forms, so the number and text differ by state. Read the endorsement itself rather than relying on its title, and check which states and which clients it covers.

Waivers of subrogation

A waiver of subrogation prevents the insurer from pursuing the client to recover what it paid on a claim. NCCI's standard version is form WC 00 03 13. Many insurers charge for it, and the charge can vary with the number of clients and the payroll involved. Ask for the price before agreeing to the clause, then reflect it in the bill rate.

California Labor Code 2810.3

Section 2810.3 makes a "client employer" share with a labor contractor all civil legal responsibility and civil liability for the workers the contractor supplies, for two things: the payment of wages, and failure to secure valid workers' compensation coverage as required by Labor Code section 3700. The section also says a client employer cannot shift to the labor contractor any legal duties or liabilities under Division 5, which is the Cal/OSHA safety law.

The definition of client employer excludes a business with a workforce of fewer than 25 workers, including both its own hires and workers obtained from labor contractors, and a business with five or fewer workers supplied by labor contractors at any given time. It also excludes the state and its political subdivisions. For agencies, the practical effect is that larger California clients have their own exposure if the agency's coverage lapses, so they ask to see proof and to be told promptly if anything changes.

Clauses to expect in a staffing contract

• Proof of workers' comp coverage in every state where workers are placed.

• Employers liability limits stated in the contract. Many clients ask for $1,000,000 limits.

• Notice of cancellation, non-renewal or material change.

• An alternate employer endorsement naming the client.

• A waiver of subrogation in favor of the client.

• Safety and orientation obligations, including who trains the temp on the client's equipment.

• Indemnity language that may reach beyond what insurance covers.

Ask before you sign

Before an agency signs a client contract, ask the insurer or the broker three questions: can the policy carry the endorsements the contract requires, in which states, and at what charge. Then price the answer into the bill rate. Workers' comp is a direct cost of every billed hour in staffing, so a charge nobody planned for comes straight out of margin. Policy and contract that match at bind are far cheaper than a gap discovered after a claim.

For the wider picture on classification, mods and placement, see our staffing agency workers' comp guide and our walkthrough of staffing workers' comp audits.

Frequently Asked Questions

What is an alternate employer endorsement in workers' comp?

An endorsement that extends a staffing agency's policy so a named client is treated as an alternate employer for the temporary workers the agency supplies. NCCI's standard form is WC 00 03 01, and carriers and independent-bureau states may use their own wording.

Does a certificate of insurance protect my staffing client?

A certificate is evidence that a policy existed with stated terms when it was issued. It does not amend the policy or extend coverage to the client. Protection for the client comes from the policy and any endorsements.

What is a waiver of subrogation for a staffing agency?

A clause, added by endorsement, that stops the insurer from pursuing the client to recover what it paid on a workers' comp claim. NCCI's standard form is WC 00 03 13. Insurers often charge for it, so price it before you agree to it.

Is the client liable if a staffing agency has no workers' comp in California?

Under Labor Code section 2810.3, a client employer shares liability with the labor contractor for failure to secure valid workers' compensation coverage. The section excludes businesses with fewer than 25 workers, businesses with five or fewer supplied workers at a time, and public entities.

Can a high-mod staffing agency still get these endorsements?

Availability and price depend on the market and the state. We ask about endorsement terms when we take an account to market, so the contract and the policy line up before binding.

Need a staffing placement where the policy matches the client contracts? Tell us the states, the placement mix and the mod through Will We Write It. Send it to proposals@cprbrokers.com or call 714-928-3858 (office 704-256-5945).