• Anti-Entergy Legislation Loses Energy
  • October 22, 2009 | Author: D. Bradley Kizzia
  • Law Firm: Strasburger & Price, LLP - Dallas Office
  • On April 3, 2009, the Texas Supreme Court rendered its opinion in Entergy Gulf States, Inc. v. Summers. In a split decision on rehearing,2 the Court essentially upheld its 2007 opinion3 so as not to change the ultimate holding, that is, that a premises owner that contracted to provide workers compensation for its contractors and employees is protected by the exclusive remedy and workers compensation bar from a work-related personal injury claim of such contractors and employees.4  Soon after this controversial decision, bills were introduced in the Texas House5 and Texas Senate6 intended to reverse the Court's decision.  House Bill 1657 narrowly passed the House, but the Senate legislation stalled.  Thus, the Entergy decision stands for the time-being. 

    The Entergy Factual Scenario.

    Entergy Gulf States, Inc. (“Entergy”) contracted with International Maintenance Corporation (“IMC”) to perform services at its various facilities, including maintenance and repair services.  The written contract between the parties specified that Entergy would provide, at its own cost, workers compensation insurance for IMC's employees in exchange for IMC's lower contract price.  Entergy complied with its contractual obligation by purchasing workers compensation insurance covering IMC's employees.  John Summers (“Summers”), an IMC employee, was injured while working at one of Entergy's plants.  He then applied for, and received, benefits under the workers compensation policy purchased by Entergy.  Nevertheless, he thereafter sued Entergy for negligence.  Entergy then moved for summary judgment on the ground that it was a statutory employer7 and therefore immune from common law tort suits.8  The trial court agreed and granted summary judgment for Entergy.  The Court of Appeals reversed.  The Texas Supreme Court granted Entergy's Petition for Review to determine whether a premises owner is precluded from serving as its general contractor for purposes of qualifying for immunity as a statutory employer of its contractors and employees.

    Supreme Court Analysis in Entergy.

    The Texas Labor Code establishes a means by which a general contractor can qualify for immunity from common law tort claims brought by an employee of its subcontractor if the general contractor and subcontractor enter into a written agreement under which the general contractor provides workers compensation insurance coverage to the subcontractor and the employees of the subcontractor.10  This agreement makes the general contractor a statutory employer of the subcontractor's employees for purposes of workers compensation claims, and the statutory employer is therefore entitled to immunity from common law tort actions brought by the subcontractor's employees in that the covered employees “exclusive remedy” for work-related injuries is a claim for workers compensation benefits.11 

    The issue before the Texas Supreme Court in Entergy was “whether a premises owner that contracts for the performance of work on premises, and provides workers compensation insurance to the contractor's employees pursuant to that contract is entitled to the benefit of the exclusive remedy defense generally afforded only to employers by the Texas Workers Compensation Act”?12 

    More specifically in the Entergy case, the Court determined that the principle dispute was “whether Entergy falls within the Act's definition of 'general contractor.'”13  The Court then looked at the Labor Code's definition of “general contractor”14 and declared that “a general contractor is a person who takes on the task of obtaining the performance of work,” which “definition does not exclude from premises owners;”15 rather, according to the Court, the definition described “precisely what Entergy did.”16  Thus, the Court concluded that “a premises owner can be a general contractor under the definition provided in the Act.”17

    The Holding in Entergy.

    Because the Supreme Court concluded that Entergy met the definition of “general contractor” under the Texas Labor Code, it held that “the exclusive remedy defense for qualifying general contractors is, likewise, available to premises owners who meet the Act's definition of 'general contractor,' and who also provide workers compensation insurance to lower-tier subcontractors' employees.”18  The Court therefore reversed the Court of Appeals' judgment and rendered judgment for Entergy. 

    Failed Legislative Remedies.

    In reaction to the Texas Supreme Court's decision, bills were introduced in the 2009 Texas Legislature seeking to revise the Texas Labor Code so as to eliminate the statutory basis for the Texas Supreme Court's decision.  In House Bill 1657, the definition of “general contractor” would have been revised to mean “a person who undertakes to procure the performance of work or a service for the benefit of another ....”19  The definition of a subcontractor would have been revised to mean “a person who contracts with a general contractor to perform all or any part of the work or services that a general contractor has contracted with another party to perform.”20  Senate Bill 2063 would merely have changed the definition of a “subcontractor” as proposed in the House Bill.  The legislation passed the House, but died in the Senate. 

    Conclusion.

    As previously reported,21 Texas law does not always treat employers equally when it comes to a job injury claim by one employer's worker against another.22  Based on the current state of Texas law, employers, including landowners, general contractors, and occupiers of premises, can seek to minimize their potential tort liability arising from injuries to employees of contractors whom they engage to perform work or services for them, if they contractually obligate themselves to provide and in fact do provide workers compensation coverage for such contractor employees.  However, such arrangements will likely be the focus of future court and legislative challenges, so employers who consider such options should do so with due consideration to the cost and risk thereof and should make sure that all of the “i's” are properly dotted and “t's” properly crossed so as to withstand close scrutiny on technical grounds.