In an important decision for Texas employers and general contractors who use consolidated insurance programs (“CIPs”) for construction projects, the Texas Supreme Court today ruled that subcontractors covered by CIPs are “deemed employees” for purposes of the exclusive-remedy defense under the Texas Workers’ Compensation Act. TCJL filed an amicus brief in TIC Energy and Chemical, Inc. v. Martin (No. 15-0143) in support of the subcontractor.
In general, the Texas Workers’ Compensation Act provides that a subcontractor and the subcontractor’s employees are not employees of a general contractor for purposes of workers’ compensation insurance coverage, if the subcontractor is operating as an independent contractor and has entered into a written agreement with the general contractor evidencing that the subcontractor assumes the responsibilities of an employer for the performance of work. However, the statute expressly allows a general contractor and a subcontractor to enter into a written agreement under which the general contractor may provide workers’ compensation insurance coverage to the subcontractor and the subcontractor’s employees. For purposes of workers’ compensation coverage, therefore, a subcontractor or subcontractor’s employee is a “deemed” employee of the general contractor. These consolidated insurance programs (CIPs) are a common feature of construction projects in Texas and help ensure that every contractor and contractor’s employee on a construction site have workers’ compensation insurance coverage for workplace injuries. Despite well-established legal authority to the contrary, the Corpus Christi Court of Appeals opined that these two provisions of the Texas Workers’ Compensation Act irreconcilably conflict. The court of appeals opinion created uncertainty regarding the status of contractors and their employees under consolidated insurance programs, some of which have been in place for many years.
Writing for a unanimous court, Justice Eva Guzman found that the Corpus Christi Court of Appeals’ opinion created a conflict with the appellate decision in Garza v. Zachry Construction Co., 373 S.W.3d 715 (Tex. App.–San Antonio, 2012, pet. denied). In that case, the San Antonio Court of Appeals determined that a subcontractor was entitled to rely on the exclusive-remedy defense by virtue of the general contractor’s CIP. The Court thus found that the conflict in the appellate courts created “sufficient uncertainty in the law to confer jurisdiction over” the appeal. Turning to an analysis of the statutory language at issue, Justice Guzman then determined that the Legislature specifically authorized CIPs to extend”deemed employee” status to subcontractors and their employees under §406.123, Labor Code, for the purpose of assuring that every worker on the site has coverage. Finally, the Court found, as TCJL argued in its amicus, that §406.123 creates a permissive exception to the general “independent contractor” rule (§406.122, Labor Code). This result, the Court ruled, is dictated both the plain language of the statute and the Legislature’s policy objectives. As Justice Guzman put it, “[M]utual protection from personal-injury claims by those engaged in a common endeavor is valuable and a significant component of the statutory scheme.” The Court reversed and rendered judgment in TIC’s favor.
During the 2015 legislative session, Rep. Paul Workman (R-Austin) and Senator Kevin Eltife (R-Tyler) filed legislation that would have reversed the Corpus Christi Court of Appeals opinion. When it became evident that SCOTX would address the issue and the legislation might be unnecessary, TCJL and other supporters of the bill agreed to stand down pending the Court’s decision. We are extremely pleased with the favorable outcome of the case and the Court’s affirmation of the fundamental purposes of the workers’ compensation system.