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Workers' Compensation Bar for Borrowed Employees
01.31.12

TEXAS SUPREME COURT REINFORCES WORKERS' COMPENSATION BAR FOR BORROWED EMPLOYEES

The Texas Supreme Court has clarified that an employer’s “exclusive remedy” defense under the state’s workers’ compensation system also applies to claims by unclassified temporary workers for whom no workers’ compensation premiums were charged. The court’s holding reiterates that workers’ compensation coverage applies to all employees, subject to certain limited exceptions, reinforcing Texas’s rule against split work forces. The opinion, delivered in Port Elevator–Brownsville, LLC v. Casados on January 27, 2012, is the latest in a line of supreme court cases addressing the application of the workers’ compensation bar to claims by temporary workers against their temporary employers.

Rafael Casados worked for Staff Force, Inc., a temporary staffing company which provided him to perform general labor for Port Elevator–Brownsville, LLC at its grain storage facility. On his third day at Port Elevator, Casados suffered a fatal, work-related injury. Both Staff Force and Port Elevator carried workers’ compensation insurance. Port Elevator’s workers’ compensation carrier, Texas Mutual Insurance Company, asserted that Casados was not a Port Elevator employee and denied coverage. Casados’ parents sued Port Elevator, rather than seeking benefits under the Texas Mutual policy or appealing its denial of coverage.

Port Elevator asserted the workers’ compensation bar arguing that Port Elevator was a workers’ compensation subscriber and that Casados was covered under its policy. Plaintiffs argued that Port Elevator did not pay premiums for temporary employees and that such workers were not covered by any classification code in the Texas Mutual policy. The trial court entered judgment on the jury’s finding of negligence and awarded damages against Port Elevator. The court of appeals affirmed, holding that Port Elevator’s failure to pay premiums for temporary workers such as Casados and the policy’s lack of a classification code for such workers rendered the Texas Mutual policy inapplicable to Casados, and the exclusive remedy defense unavailable to Port Elevator.

The Texas Supreme Court reversed the court of appeals’ judgment, concluding that Port Elevator had conclusively established its exclusive remedy defense. The court reiterated the rule in Texas that an employer may not split its work force by electing workers’ compensation coverage for some employees but not for all, subject to certain limited exceptions. The Court noted that failure to pay premiums for temporary workers does not affect an employee’s coverage, because premiums are an issue between the employer and the insurer. Moreover, even a clean and unambiguous attempt to exclude Casados from coverage would have violated the rule against splitting work forces.

The supreme court’s opinion brings full circle its jurisprudence on the applicability of the “exclusive remedy” defense to a temporary worker’s claims. Furthermore, the opinion sends a strong message to workers’ compensation underwriters that Texas will extend such coverage to all workers that are deemed “employees” under the Texas Workers’ Compensation Act, even to temporary workers, regardless of whether they are expressly classified under the policy or premiums were charged or collected for them.

To see the court's opinion click here.