In a case of first impression, a 6-3 majority of the Texas Supreme Court has held that a drug testing entity hired by an employer to test existing and prospective employees does not owe a duty of reasonable care to an employee in collecting and processing test samples.
Houston Area Safety Council, Inc. and Psychemedics Corporation v. Guillermo M. Mendez (No. 21-0496; delivered June 23, 2023) arose from an allegedly false positive in a drug test, which resulted in a longtime employee of a welding company to lose his job at a Valero refinery. Plaintiff sued his employer, the company that collected the sample, and the testing laboratory, alleging negligence in the collection, transportation, testing, and reporting his test results. Plaintiff settled with the employer. The remaining defendants moved for summary judgment, asserting that they owed no legal duty to plaintiff. The trial court granted summary judgment. The Houston [1st] Court of appeals reversed. Defendants sought review.
In an opinion by Chief Justice Hecht, joined by Justices Blacklock, Busby, Bland, Huddle, and Young, the Court declined to recognize a new duty. The Court’s analysis referred to the so-called Phillips factors, enunciated by the Court in Greater Houston Transportation Co. v. Phillips, 801 S.W.2d 523, 525 (Tex. 1990). Under Phillips, when considering the creation of a new legal duty, the Court must “weigh ‘the risk, foreseeability, and likelihood of injury…against the social utility of the actor’s conduct, the magnitude of the burden of guarding against the injury, and the consequences of placing the burden on the defendant.’ We also consider ‘whether one party would generally have superior knowledge of the risk or a right to control the actor who caused the harm.’” In two prior cases involving drug testing, the Court applied the Phillips factors to determine that (1) a drug testing entity hired by an employer did not owe a duty to tell the employer or person tested that certain substances would cause a positive result, and (2) an employer that collected a sample did not owe a duty of care because DOT regulations governing drug testing “substantially reduced the risk and likelihood of harm to tested employee” and recognizing such a duty would weaken Texas’ at-will employment doctrine.
Similarly, the majority reasoned that the testing entity in this case followed a rigorous testing process to guard against errors and, if a positive test does occur, had a procedure for contacting the test subject for an explanation of the result and retesting. The entity is also subject to licensing and regulation by state and federal agencies. And although the entity could no doubt foresee the serious consequences to the employee of a false positive, no matter how unlikely such a result might be, the “great social utility in drug testing employees, particularly those engaged in occupations that present substantial dangers” outweighs the risk of harm to an individual. Moreover, a drug testing entity has no control over what an employer will do with a test result, neither does it have a direct relationship with test subjects, at-will employees of the employer. If subjected to a potential lawsuit every time a test returned a positive result, a drug testing entity would likely have to increase the cost of its services or manage risk through indemnity agreements with employers, which could encourage employers to take over testing themselves and erode the at-will employment doctrine. Finally, the majority concluded, the economic-loss rule militates against recognizing a negligence duty that would allow a “contractual stranger” from recovering economic damages in actions for negligent performance of services in the absence of professional malpractice. The majority declined to recognize a new duty here.
Justice Young concurred. He would dispense with the Phillips analysis altogether as too subjective and policy-oriented, a test better left to the Legislature than the courts. Justice Boyd, joined by Justices Lehrmann and Devine, dissented on the basis that, in their view, applying the Phillips factors “necessarily leads to a recognition of the common-law duty proposed in this case.” The dissent was unpersuaded that recognizing the duty would actually result in a “flood of frivolous and burdensome claims,” pointing to the absence of frequent litigation in other jurisdictions that have done so. It also worried that the absence of a duty would let drug testing entities avoid the consequences of inaccurate tests and that holding accountable testing entities with “superior knowledge and control over those whose conduct may create such risks … substantially outweighs the impact that recognition of the proposed duty would have on the social utility of drug testing and the burdens and consequences the duty would place on such entities.”
Justice Young’s concurring opinion hits the nail on the head. The creation of new legal duties ultimately involves competing policy considerations that are generally best determined through the legislative process.
