Why contract clarity matters

Labor shortages aren’t going away anytime soon, and contractors are filling the gap with subcontractors, temp workers and staffing agency crews. While these arrangements keep projects on track, they also create complicated questions around liability when someone gets hurt on the job.

A borrowed employee is anyone who works for one employer but is lent (formally or informally) to another. The risk shows up when that worker is injured and it becomes unclear who is responsible: the supplying employer, the subcontractor or the general contractor.

“For SC&RA members, the best practice is to treat this as a front-end issue, not a back-end surprise.” - Joel Dandrea, CEO, SC&RA

The answer usually comes down to control. If the contractor directs the work – sets tasks, supervises execution, enforces safety rules – then the contractor is likely seen as the employer for liability purposes regardless of what the contract says. Courts regularly look past contract language to assess who was truly in charge. That means a general contractor can find itself facing exposure not just under workers’ compensation but also under negligence claims, which can result in much larger payouts.

That said, even the cleanest language about which party is the “employer” for workers’ comp purposes won’t hold up if the facts on the ground say otherwise. That’s why site supervision, safety protocols and documentation must match what the agreement outlines. If a contractor is truly directing the work, the risk transfers with it.

Job progress

For SC&RA members, the best practice is to treat this as a front-end issue, not a back-end surprise. Contracts should clearly spell out who is responsible for payroll, wage determination, insurance coverage and safety oversight. Provisions for indemnity, caps on liability and proof of coverage are critical. Contractors should also require subcontractors to disclose whether they are using borrowed employees and, if so, ensure there’s adequate coverage for them downstream.

Insurance is the other key lever. Workers’ compensation coverage should be confirmed for every worker who steps on site, regardless of who technically employs them. In states where courts presume general employment, contractors should be prepared to demonstrate that the borrowed employee relationship exists if they intend to claim workers’ comp immunity.

Beyond contracts and coverage, there’s a cultural component here. Transparency between contractors, subs and staffing providers reduces the chance of surprise liability after an accident. Jobsite safety meetings, supervision protocols and even something as simple as making sure rosters accurately reflect who is working for whom can go a long way toward clarifying responsibility before an incident occurs. Proactive communication also improves morale and trust, especially among temporary workers who might feel disconnected from jobsite expectations.

And this is not just about risk avoidance – it’s about productivity. When roles and responsibilities are clearly defined, injuries are investigated faster, disputes are minimized and job progress stays steady. In an era where every lost day carries a significant cost, clarity around borrowed employees helps keep schedules, budgets and relationships intact.

Competitive edge

Borrowed employees are an essential part of today’s workforce model, but they shouldn’t represent a hidden liability. A combination of strong agreements, consistent oversight and proactive legal review can help contractors protect themselves while keeping projects on schedule.

Ultimately, this isn’t just a legal issue, it’s a risk-management issue. When responsibility is clearly defined, properly insured and well-communicated, projects run smoother, injuries are handled faster and costly disputes are avoided. For contractors navigating a tight labor market, that clarity isn’t just protection – it’s a competitive edge that can strengthen client relationships and set the stage for repeat work. Review your contracts, insurance and site protocols now, before the next project kicks off, so that borrowed employees become a solution, not a liability surprise.