"Statutory Employment" is found in Section 171 of the Workers Disability Compensation Act.
"Statutory Employment" unfortunately occurs all too frequently with employers who do not carry workers compensation insurance. It is a criminal misdemeanor to operate without the insurance.
An example is illustrative: Assume contractor A is without workers compensation insurance for its employees. Assume also that Contractor A enters into a contract with Principal B to perform some service. Assume also that Employee C is hired by Contractor A and performs some work for Principal B, and is hurt on Principal B's job-site. Because Contractor A is uninsured for workers compensation purposes, Principal B becomes the "statutory employer" of Employee C, and Employee C can make a workers compensation claim against Principal B.
In Peck/Auto Club Ins. Asso, vs. Elliott's Amusements, LLC, 2005 ACO #140the Workers Compensation Appellate Commission addressed the differences between a statutory employer and a direct employer.
Peck was hired by Elliott's to build and operate an amusement park game. When the carnival season ended in Michigan, Elliott's permitted its manager to use the carnival equipment for a three week carnival in Florida. The manager asked Peck to come to Florida and erect and operate the equipment. Peck was involved in a serious accident en-route to Florida, sustaining injuries. Was Peck an employee of Elliot's at the time of the accident? Or was Peck an employee of the manager for the independent venture in the State of Florida? Elliott's had workers compensation insurance while the manager did not, so it was to Peck's benefit to assert that he was an employee of Elliott's.
Peck won. The Workers Compensation Appellate Commission determined that Peck was a direct employee of Elliott's at the time of the automobile accident. It also commented that even if Peck was not a direct employee, then Elliott's was a statutory employer because its manager had hired Peck and the manager was uninsured. The Commission determined that Elliott's and its manager were in a joint venture together. Whenever there is a joint venture, each entity involved in the joint venture has liability and therefore must be insured.