The California Workers' Compensation Experience Rating Plan—1995 (ERP) at Section V, Rule 4, Application of Experience Modification to Policies Covering Employee Leasing Arrangements, provides requirements for workers' compensation policies written where an entity utilizes the services of a third party (Labor Contractor) to provide its workers for a fee or other compensation.
A separate workers' compensation policy must be written for workers provided to a client who enters into an employee leasing agreement. The experience modification of the client applies to the separate client policy, and the experience reported in connection with the separate policy will be used in the future experience ratings of the client, not in the future experience rating calculations of the Labor Contractor.
A policy providing coverage for only the employees of the Labor Contractor must exclude coverage for all workers provided to its clients pursuant to employee leasing arrangements, and the experience developed under this policy will be used only in the future experience rating calculations of the Labor Contractor.
Rule 4, however, does not apply when workers are provided by the Labor Contractor solely to assist the client in meeting temporary staffing needs, such as employee absences, skill shortages or seasonal workloads.