All staffing, logistics and employee leasing companies in Illinois should carefully review this important ruling—we are sure these facts will repeat themselves in the months and years to come. This year, Illinois amended and clarified parts of our Workers’ Compensation Act but arguably it is still not the clearest piece of legislation. Attorneys continually attempt to dispute the plain language of the act, specifically, Section 5(a) providing an exclusive remedy to the injured employee for work-related injuries that do not involve third-party tortfeasors.

In Mason v. John Boos & Company, Plaintiff worked as a temporary worker and sustained amputation of the thumb and most of the four fingers on the right hand in a machine allegedly lacking safety features. Such an undisputed injury has a high workers’ comp cost but an explosive third-party exposure. Petitioner entered into a global WC settlement agreement and signed a release of all claims against Defendants. Plaintiff later filed a negligence action against both the loaning and borrowing employers alleging potentially millions in damages unavailable in the workers’ compensation setting.

The Circuit Court and now the Fifth District barred the claim based on the fact Plaintiff received a workers’ compensation settlement which was the exclusive remedy under Section 5(a) providing in pertinent part no common law or statutory right to recover damages from the employer other than the compensation under the Act.

The primary rule of statutory construction is to ascertain and give effect to the legislature's intent. Here, the purpose of the Workers' Compensation Act is to provide a speedy recovery without proof of fault for accidental injuries. Approximately 90% of all Illinois workers’ compensation claims are settled at or during arbitration. Again, if the case is likely to settle anyway, a speedy settlement resolution often is best for both sides, the injured worker gets a fast settlement, in this case more than $90,000, and the employer prevents a common law action.

Second, and more important the Circuit Court and the Fifth District on appeal barred the claim because the terms of settlement contract released all claims. We stress the importance of attaching similar terms or riders into all settlement contracts as follows:

In full, final and complete settlement of any and all claims of any nature whatsoever, including but not limited to past, present, and future time losses, medical, surgical and hospital expenses and for any and all permanent disability of whatever nature, allegedly arising out of an accident on or about the “specific date of loss” and all known and unknown injuries and sequelae which allegedly resulted or will result from said accident Petitioner agrees that this settlement shall include all other claims of accident or injury, either by a specific accident or repetitive trauma, for all dates of work by Petitioner for Respondent not limited to the above date of loss.

Plaintiff alleged Defendants allowed him to operate a machine without adequate training, allowed him to operate a machine without a "kill" switch, and allowed him to operate a machine without safety guards and if all true would likely result in an award for pain and suffering, lifelong medical bills, and permanent disability. Again, the fact the employer settled all potential claims quickly and with specific protective language in the contract probably prevented a multi-million dollar jury claim or verdict. Please note the aforementioned “lifesaving” settlement terminology is used in all KC&A settlement contracts to protect the best interests of our clients. We do caution some Arbitrators are reluctant to approve contracts for “all other claims of accident.”

Third, Plaintiff attempted to dispute the exclusive remedy due to the temporary staffing agency which hired him failing to register as an employee leasing company. Our analysis of the applicable Illinois Leasing Act rule confirms the employee leasing company must:

· Register with the Illinois Department of Insurance;

· Secure coverage with the borrowing employee under a master policy;

· Indicate the policy provides coverage for leased employees;

· Limit the named insured's employees leased to the clients;

· Indicate the experience of employees leased to client(s) will be separately maintained by the Employee Leasing Company;

· Maintain accounting and employment records relating to all employee leasing arrangements for minimum of four calendar years;

· Maintain addresses of each office it maintains at the principal place of business;

· Separately maintain the experience of employees leased to clients;

· Maintain sufficient data by client to permit calculation of experience rating modification for each client;

· Provide modification or payroll and loss information to a client upon request;

· Notify its insurer any terminated employee leasing arrangement within 30 days before termination or upon termination.

Under the Illinois Leasing Act the insurer is required to:

· Provide proof of coverage to the employee leasing company and its clients within 30 days of coverage being effected or changed;

· Audit policies within 90 days of effective date;

· Conduct additional audits thereafter;

· Compare a client's experience rating modification to the employee leasing company's experience rating modification at the inception of the employee leasing arrangement;

· Report separate client data to NCCI after termination of Employee Leasing arrangement;

· Report subsequent or corrected client data to NCCI for the continuance of experience rating.

The Fifth District still barred the common law claim because failure to register as an employee leasing company did not negate exclusivity of remedy. The purpose of the Leasing Act is to ensure an employer properly obtains insurance coverage and the only remedy for a violation to register is to deny or revoke registration. Therefore, in the event a company fails to register, that company is not eligible to receive workers' compensation and employers' liability insurance policies and has no bearing on the exclusivity of the Act.

We are happy to see the Fifth District follow the both the letter and spirit of the law. However, the fact this case is one of first impression increases the likelihood of further appeal. We will keep a close watch on further appeals or developments. Please contact our firm with any questions or concerns regarding settlement language and with strategy for speedy resolution. Full disclosure, we want our readers to know we represent John Boos & Company for some of their claims but not the one in question—it is not our intention to affect the outcome of this litigation in any way; we are simply reporting the facts as we understand them.

This article was researched and written by Nathan S. Bernard, J.D. who can be reached at nbernard@keefe-law.com. Please send your thoughts and comments or post them on our award-winning blog.

KCBA Blog

11-7-11; We are happy to see the most liberal of Illinois Appellate Districts issue a ruling that closely follows the law and provides Illinois businesses needed protection...