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Chaney v. Yetter Manufacturing Co.

Illinois Appellate Court

August 16, 2000


Appeal from Circuit Court of Sangamon County No. 98L42 Honorable Robert J. Eggers, Judge Presiding.

The opinion of the court was delivered by: Presiding Justice Cook

Plaintiffs, Vanessa Chaney, Ella Chaney, Elizabeth Chaney, and Terrance Chaney, through their parent, Vanessa Chaney, filed this tort action against Yetter Manufacturing Company (Yetter) seeking damages for injuries that Vanessa Chaney (Chaney) sustained in a work-related accident. On February 14, 1996, Chaney's right hand was severed at the wrist when her glove was caught in a rotating drill at the Yetter plant. Chaney was employed by Genie Temporary and Executive Services (Genie) and, on the date in question, was assigned by Genie to work at Yetter's plant. Chaney previously recovered workers' compensation benefits from Genie relating to the accident.

Genie supplied Yetter with temporary workers during peak demand periods. In exchange, Yetter paid Genie the employees' hourly wage plus a percentage fee. As is common with temporary agencies, Genie handled its employees' payroll, tax withholding and reporting, and insurance. Genie also provided workers' compensation coverage for its employees. In fact, the contract between Genie and Yetter specifically provided:

"(c) Supplier [(Genie)] is also responsible for [w]orkers' [c]ompensation and [g]eneral [l]iability insurance coverage for all temporary employees, and will furnish Client

[(Yetter)] a [c]ertificate of [i]nsurance as evidence of inforce coverage at all times during this agreement.

(e) The Supplier [(Genie)] hereby indemnifies and holds harmless Client [(Yetter)] from any judgment, finding, or assessment of liability under the Workers' Compensation Act or the laws of Illinois for injuries allegedly suffered by a temporary employee."

In response to plaintiffs' complaint, Yetter filed several affirmative defenses, one of which raised the exclusive remedy provisions of the Workers' Compensation Act (Act) (820 ILCS 305/5(a) (West 1996) (employee has no common law right to recover damages other than those provided by the Act)). Yetter contended that it was a "borrowing employer" and Chaney was a "loaned employee" at the time of the accident and, as such, Yetter was entitled to the protections of the Act's exclusive remedy provision. 820 ILCS 305/1(a)(4) (West 1996) (borrowing employers covered by Act). Yetter subsequently filed a motion for summary judgment on this same basis. The circuit court granted Yetter's motion in a docket entry order. Chaney's motion for reconsideration was denied, and the court specifically ruled that Genie (as the loaning employer) and Yetter (as the borrowing employer) were protected by the Act's exclusive remedy provisions. On appeal, Chaney argues that summary judgment was improper.

The Act is designed to provide financial protection to workers for accidental injuries arising out of and in the course of employment. Meerbrey v. Marshall Field & Co., 139 Ill. 2d 455, 462, 564 N.E.2d 1222, 1225 (1990). Accordingly, the Act imposes liability without fault upon the employer and, in return, prohibits common-law suits by employees against the employer. The exclusive remedy provision "'is part of the quid pro quo in which the sacrifices and gains of employees and employers are to some extent put in balance, for, while the employer assumes a new liability without fault, he is relieved of the prospect of large damage verdicts.'" Meerbrey, 139 Ill. 2d at 462, 564 N.E.2d at 1225, quoting 2A A. Larson, Law of Workmen's Compensation §65.11 (1988).

Section 5(a) of the Act provides that employees have no common-law or statutory right to recover damages from their employer other than the compensation provided under the Act. 820 ILCS 305/5(a) (West 1996). Section 1(a)(4) of the Act recognizes the concept of "loaning" and "borrowing" employers and outlines the implications of each status.

"Where an employer operating under and subject to the provisions of this Act loans an employee to another such employer and such loaned employee sustains a compensable accidental injury in the employment of such borrowing employer and where such borrowing employer does not provide or pay the benefits or payments due such injured employee, such loaning employer is liable to provide or pay all benefits or payments due such employee under this Act and as to such employee the liability of such loaning and borrowing employers is joint and several, provided that such loaning employer is in the absence of agreement to the contrary entitled to receive from such borrowing employer full reimbursement for all sums paid or incurred pursuant to this para- graph together with reasonable attorneys' fees and expenses ***." 820 ILCS 305/1(a)(4) (West 1996).

Thus, with respect to an injured employee, the liability of the loaning and borrowing employers is joint and several; as between employers, the borrowing employer is primarily liable and the loaning employer secondarily liable, the latter being required to pay only when the borrowing employer fails to do so, and is then entitled to reimbursement from the borrowing employer. Fort Dearborn Cartage Co. ex rel. Chubb & Son, Inc. v. Rooks Transfer Co., 136 Ill. App. 3d 371, 374, 483 N.E.2d 618, 619 (1985). The loaning employer's right to reimbursement, however, may be waived by an agreement between the respective employers. Fort Dearborn, 136 Ill. App. 3d at 374, 483 N.E.2d at 619-20.

Section 1(a)(4) of the Act also provides that an employee, like Genie, that is in the business of furnishing employees to other employers "for the performance of the work of such other employers and who pays such employees their salary or wages notwithstanding that they are doing the work of such other employers shall be deemed a loaning employer within the meaning and provisions of this [s]section." (Emphasis added.) 820 ILCS 305/1(a)(4) (West 1996).

Clearly, Genie qualifies as a "loaning employer" under the Act. The issue in this case is whether Chaney's status as a loaned employee was properly decided as a matter of law. Although the existence of a loaned-employee status is generally a question of fact, it becomes a question of law where the facts are undisputed and capable of only one inference. Willfong v. Dean Evans Co., 287 Ill. App. 3d 1099, 1101, 679 N.E.2d 1252, 1254 (1997) (affirming summary judgment after finding the plaintiff was loaned employee). After conducting a de novo review of the record, we affirm the circuit court's grant of summary judgment.

The Supreme Court of Illinois has held that two factors determine whether a loaned-employee relationship exists: (1) whether the borrowing employer had the right to direct and control the manner in which the plaintiff performed the work; and (2) whether a contract of hire, either express or implied, existed between the employee and the borrowing employer. Of these two factors, the right to control is primary. A.J. Johnson Paving Co. v. Industrial Comm'n, 82 Ill. 2d 341, 347-48, 412 N.E.2d 477, 480-81 (1980).

Whether an employer has "control" over an employee's work depends upon the character of the supervision of the work done, the manner of direction of the employee, the right to discharge, the manner of hiring, and the mode of payment. Freeman v. Augustine's Inc., 46 Ill. App. 3d 230, 234, 360 N.E.2d 1245, 1247-48 (1977).

Yetter argues that we need not address these issues. Instead, Yetter asserts that, because Genie is a loaning employer, it must follow that Chaney was a loaned employee and Yetter was a borrowing employer under the Act. In Wasielewski v. Havi Corp., 188 Ill. App. 3d 340, 544 N.E.2d 116 (1989), the Third District affirmed summary judgment in favor of the borrowing employer on this same issue, stating:

"Ordinarily, the issue of loaned[-]employee status is determined by inquiry into whether the second employer had the exclusive right to direct and control the manner in which the employee performed his work and whether there existed a contract of hire between that employer and employee. [Citations.] Such inquiry is unnecessary, however, where it otherwise appears that a substantial part of the first employer's business involves 'hiring, procuring or furnishing employees to or for other employers operating under and subject to the provisions of [the Act] ***.' [Citation.] Under such circumstances the [Act] provides that such an employer 'shall be deemed a loaning employer within the meaning and provisions of' the Act." Wasielew- ski, 188 Ill. App. 3d at 342, 544 N.E.2d at 117-18.

Wasielewski holds that where the temporary employment agency meets the statutory definition of a loaning employer, the other employer, like Yetter, must automatically be a borrowing employer, and the need for any factual analysis is unnecessary.

The First District disagrees with Wasielewski, stating, "[w]e reject this syllogistic approach and still would require an examination of the relationship between [alleged borrowing employer] and [employee]." Crespo v. Weber Stephen Products Co., 275 Ill. App. 3d 638, 642, 656 N.E.2d 154, 157 (1995). Crespo stated that the purpose of the statutory definition of a "loaning employer" was to relieve an employee from having to establish the factual basis of employment between the employee and the loaning employer. Crespo, 275 Ill. App. 3d at 642, 656 N.E.2d at 157. By designating temporary employment agencies as "loaning employers," the Act merely establishes another party from whom the employee can seek workers' compensation recovery. 820 ILCS 305/1(a)(4) (West 1996) (establishing secondary liability for loaning employer). The definition of a "loaning employer" was not meant to establish or define who shall be a borrowing employer. Crespo, 275 Ill. App. 3d at 642, 656 N.E.2d at 157.

We agree that the statutory definition of a "loaning employer" does not establish or define who shall be considered a "borrowing employer." Crespo, 275 Ill. App. 3d at 642, 656 N.E.2d at 157. While the holding in Wasielewski (if there is a loaning employer, there must also be a corresponding borrowing employer) seems logical, we recognize that fact patterns may arise which would make such a rigid interpretation inappropriate. See Barraza v. Tootsie Roll Industries, Inc., 294 Ill. App. 3d 539, 546-47, 690 N.E.2d 612, 616-17 (1997) (employee that applied at Tootsie Roll and began work that same day was unaware that he was actually employed through a temporary employment agency).

Therefore, we decline to adopt Wasielewski and will proceed to examine the traditional factors that define the loaned-employee and borrowing- employer relationship.


In Chaney's affidavit, she admits that "[w]hen [she] arrived at Yetter, [she] was instructed as to the particular task function and then was placed on that task." Chaney further stated that "[a]fter approximately one week at Yetter, Yetter asked [her] to operate a drill press, a different task to which [she] agreed" and that "[l]ater Yetter asked [her] to operate a larger drill press, a different task to which [she] initially objected but then agreed." Nothing indicates that any Genie representative was involved with or consulted regarding any task that Chaney performed at Yetter. These facts are undisputed and lead to only one conclusion. Yetter and its representatives controlled Chaney's work activities while she was at the Yetter plant. Yetter supervised her work and directed her work activities.

It is also evident that Yetter had the equivalent of a right to dismiss Chaney from employment at Yetter. Clearly, Yetter could not discharge Chaney from Genie's employment, but it is undisputed that Yetter could dismiss Chaney from service at its own plant. Chaney would then report back to Genie. This power to dismiss is sufficient for purposes of the control test. Russell v. PPG Industries, Inc., 953 F.2d 326, 331 (7th Cir. 1992), citing Evans v. Abbott Products, Inc., 150 Ill. App. 3d 845, 849, 502 N.E.2d 341, 344 (1986) (authority to dismiss loaned employee from temporary job and direct him back to loaning employer satisfied discharge element).

Finally, the record indicates that Chaney was paid by Genie, not Yetter. While this factor weighs against Yetter, it is well established that "[t]he mere fact that the employee does not receive his wages from the [borrowing] employer will not defeat the finding of a loaned- employee situation." A.J. Johnson, 82 Ill. 2d at 349, 412 N.E.2d at 481. This method of compensation is so common with temporary employment agencies that it is of little import in the analysis of whether Yetter "controlled" Chaney's work performance for purposes of the Act.

Based upon these facts, we conclude that Yetter controlled Chaney as an employee while she was at the Yetter plant. Thus, we must proceed to the second inquiry and determine whether there was a contract or agreement of employment between Chaney and Yetter.


While Illinois courts agree that the employee's express or implied acquiescence is essential to a borrowed- or loaned- employee relationship, the employee's consent may be implied in the context of a business like a temporary employment agency. Barraza, 294 Ill. App. 3d at 546, 690 N.E.2d at 616. Here, there is no dispute that Chaney knew she was working for Yetter, but through Genie. We find that Chaney impliedly agreed to the loaned-employee relationship.

As a final matter, we address plaintiffs' argument that Yetter should be subject to common-law tort liability in this suit because it was not liable under the Act. Plaintiffs cite Lachona v. Industrial Comm'n, 87 Ill. 2d 208, 429 N.E.2d 858 (1981), and assert that the agreement whereby Genie is res-ponsibile for workers' compensation claims and agreed to hold Yetter harmless from any injury-related claims relieved Yetter from liability and, in turn, the protection of the exclusive remedy provision under the Act. 820 ILCS 305/5(a) (West 1996). Contrary to the plaintiffs' assertions, Lachona does not hold that a borrowing employer can escape workers' compensation liability (vis a vis the employee) through an indemnification agreement with the loaning employer. Instead, Lachona was limited to the facts before the court and holds only that a respondent in a workers' compensation action may withdraw from the action where the remaining respondent is contractually obligated to indemnify the withdrawing party. To adopt plaintiffs' argument would require us to ignore the Act's explicit provisions making borrowing and loaning employers jointly and severally liable to the employee. 820 ILCS 305/1(a)(4) (West 1996). We decline to apply Lachona in that manner.

The Act establishes a system to help ensure that the employee will recover benefits in a loaned-employee scenario. 820 ILCS 305/1(a)(4) (West 1996). If the borrowing employer fails to pay the employee's claim, the loaning employer must pay the employee but is granted a right to seek reimbursement from the borrowing employer. 820 ILCS 305/1(a)(4) (West 1996). Despite the indemnification agreement between Yetter and Genie waiving Genie's right to indemnification, Yetter was still primarily liable for Chaney's injuries under the Act. A.J. Johnson, 82 Ill. 2d at 351, 412 N.E.2d at 482.

Under the facts presented here, we find that, for purposes of the Act, Chaney was a loaned employee and that Yetter constituted a borrowing employer. The material facts relating to our conclusion are capable of only one inference. Since Yetter qualifies as a borrowing employer, plaintiffs are precluded from bringing a civil action against Yetter pursuant to section 5(a) of the Act. The entry of summary judgment is affirmed.




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