Key legislators this week sharply criticized last year’s controversial Texas Supreme Court decision in the case Entergy v. Summers, which established that an injured worker could not sue a premises owner for punitive damages when that owner also meets the definition of a general contractor and has purchased a worker’s compensation insurance plan.

Victims and family members from the British Petroleum (BP) explosion of March 23, 2005, and the Citgo explosion from last Feb. 22 came before the House Business & Industry and Insurance committees to lament the lack of accountability placed on large corporations that neglect employee safety. Employee advocates have argued that BP ignored federal occupation health and safety laws.

“The Supreme Court’s decision was an activist decision that rewrote Texas worker safety laws,” said Craig McDonald, director of the pro-plaintiff group Texans for Public Justice at a press conference, “and that decision jeopardizes community, workers’ saety, it undermines corporate accountability, and it sidesteps the intent of the Legislature.”

Many lawmakers did not seem to disagree.

The running theme in both chambers is that the decision was inconsistent with years of clear legislative intent. Lawmakers want premises owners to be civilly liable, regardless of whether they act as their own general contractor, for deaths and catastrophic injuries like those that occurred at BP and Citgo.

The court has granted a rehearing on the case, for a date uncertain. Which, as legislators know, doesn’t mean the justices will change their minds.

Supporters of the decision say the court ruled according to the plain language of the existing Texas law, and prevented plaintiffs from “double-dipping,” i.e., receiving recompense for injuries via both insurance and punitive damages supplied by the employer. Critics say the court removed too much responsibility from corporations whose negligence can destroy lives.

Several Republicans have decried the court’s decision as an example of the kind of judicial activism normally condemned in conservative circles. Employee rights advocates such as the Texas AFL-CIO have negotiated extensively in the Capitol, allowing conservatives to pass bills on the issue under very precise conditions, one of them being the continued accountability of large companies. The Texas Supreme Court, though perhaps not intentionally, changed things with Entergy.

The decision, and what it means

“Summers” is John Summers, an employee of International Maintenance Corp. (IMC), which had contracted with Entergy Gulf States, Inc. to perform construction and maintenance at its Sabine Station plant. Summers, who was injured while working there, got his worker’s compensation, then sued for negligence.

Now, employers  in Texas (unlike any those in all other states), are not required to provide workers’ compensation to employees. However, if employers choose to purchase workers’ compensation, they are immune from being sued by an employee, even if that employee is injured on the job as a result of the employer’s negligence.

 It’s called a “no-fault” system. Regardless of who is at fault – the employee or the employer – if a worker is injured, and the employer has purchased a worker’s compensation policy, the worker has a right to those workers’ compensation benefits. No more, no less.

Here’s the problem. Entergy in this case was not just a general contractor, which would normally get immunity. It was also the owner of the premises on which Summers sustained his injuries. Summers went after Entergy not as the general contractor but as the premises owner.

Under Texas law, Summers argued, the general contractor must have a contract not just with its subcontractors (IMC in this case), but also with the owner of the property on which the general contractor is procuring its work. In this case, the premises owner and the general contractor are one and the same. Thus, argued Summers, Entergy should have had a contract with itself.

Not so, said the Supreme Court.

The court pointed to a change in the Texas Labor Code from almost 20 years ago as the basis for its ruling. In Wilkerson v. Monsanto, a federal district court had held that a premises owner could not double as a general contractor because the Labor Code defined a subcontractor as “a person who has contracted to perform … the work or services which a prime contractor has contracted with another party to perform.” The operative phrase was “contracted with another party,” which the federal court interpreted as meaning that the prime contractor and the owner of the property could not be one and the same.

But that decision, the Texas Supreme Court said, was out of date. In 1989 the definition “subcontractor” was changed to mean “a person who contracts with a general contractor” to perform the work or services. The all-important phrase, “contracted with another party,” was no longer anywhere to be found in the statute. The law took effect in 1991.

 This change, the court said, meant that the general contractor could double as a premises owner without having to contract with itself. (It is worth noting that the court mis-dated this change, saying it was issued in 1993. No small amount of confusion erupted as a result.)

In practical terms, this means large companies like Entergy that own the property on which they work as general contractors cannot be sued as premises owners for negligence. They are indemnified by purchasing workers’ compensation plans, just as if they were a general contractor doing the work on somebody else’s land.

The Hidden Law

Ironically, this “plain language” of the Texas law apparently was so deeply hidden in the recesses of the Labor Code that even supporters of the court’s decision were not aware of it until after the decision was issued last year.

Rep. Burt Solomons (R-Carrollton) observed that Texans for Lawsuit Reform had been lobbying the Legislature for years to indemnify premises owners when general contractors purchase workers’ compensation plans. The Entergy decision, which TLR supports, essentially achieved the effect that TLR had been lobbying for using a law that had been on the books for almost twenty years.

Rep. Bryan Hughes (R-Mineola) put the question this way to Lee Parsley, who defended the decision on behalf of Texans for Lawsuit Reform: “Did Texans for Lawsuit Reform realize that was the law, until the Entergy case came out?”

Parsley replied: “To my knowledge no one at Texans for Lawsuit Reform had thought about it or realized it was the law, not to my knowledge, no.”

Legislators in both committees lamented that the decision ignored clear legislative intent. The lawmakers pointed to a string of consecutive sessions in which the Legislature had the opportunity to include premises owners in the indemnification awarded to general contractors who purchase workers’ compensation. But lawmakers never passed any of those bills, because they want premises owners to be liable.

Parsley’s response was two-fold.

 — Those bills would have indemnified premises owners even when the general contractor was an entirely different entity. The Entergy case was different, because it only stated that premises owners are indemnified when they serve as their own general contractor and purchase insurance. That, Parsley said, is what the law says now that those four words have been taken out of the labor code since 1989.

— The court could not be expected to divine legislative intent from bills that the Legislature never passed, as a bill can die for any number of reasons.

Parsley told the House committee that it is “within the province of the Legislature to change” the law on which the Entergy decision was based.

Should the court have done more digging to determine legislative intent? Senate State Affairs chairman Robert Duncan (R-Lubbock) posed that question to Parsley at the Senate hearing.

“I think the court has an obligation to determine the legislative intent …” Parsley said, “but the primary rule of construction is read the face of the statute.”

Where to go from here …

Whether or not the decision “created new law,” the burden of reform has unmistakably shifted from one lobby to the other.

The Legislature could tackle the question in various ways. It could simply add those crucial four words back into the Labor Code and reestablish the fact that a general contractor has to have a contract with a premises owner even if it is the premises owner. The question is whether such reforms could survive a Legislative process fraught with hurdles.

Testifying before the Senate Committee on April 28, Aquinas Corp. senior chairman Leo Linbeck told lawmakers that they may have to consider whether they still want a no-fault workers’ compensation system, whereunder insurance monies are the only remedy available to an employee.

It has also been suggested that employers be required to increase their minimum worker’s compensation benefits as a tradeoff for the inability of employees to sue.

Rep. Larry Taylor (R-Friendswood) summed up the situation: “I think some pretty sharp lawyers came up with a way to find that loophole that had been put in place back many years ago. And I think the Supreme Court … made a decision based on statutory construction rules and all that. … But whether or not it’s good policy, I think that’s where we all have a real question.

“Obviously, this is a matter that needs to be discussed and brought before the Legislature as a legislative issue.”

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