Entergy Gulf States, Inc. v. Summers

The Texas Supreme Court recently upheld its previous ruling that a premises owner who contracts for the performance of work on its premises, and provides workers` compensation insurance to the contractor`s employees pursuant to the contract, is entitled to the exclusive remedy defense generally afforded only to employers by the Texas Workers` Compensation Act. Under the Act`s exclusive remedy defense, an injured employee may not sue its employer for negligence if workers` compensation benefits are provided. The Act specifically provides that ``general contractors`` who provide workers` compensation insurance for their subcontractors` employees are considered employers under the Act. What had been less clear prior to Entergy, was whether a premises owner could be considered a general contractor for purposes of availing itself of the exclusive remedy defense.

The case involved a contract worker who was injured while working at a plant owned by Entergy Gulf States, Inc.` (``Entergy``). Entergy had contracted with the plaintiff`s employer International Maintenance Corporation (``IMC``) for maintenance, repair and other technical services at various facilities. As part of that contract, Entergy agreed to provide, at its own cost, workers` compensation insurance for IMC employees in exchange for IMC`s agreement to a lower contract price. After his injury, the plaintiff applied for and received benefits under the workers` compensation policy. He then sued Entergy for negligence. Entergy moved to dismiss the lawsuit, arguing that workers` compensation benefits were the plaintiff`s exclusive remedy.

The Court agreed with Entergy, concluding that Entergy was a ``general contractor`` under the Act because it provided workers` compensation coverage to a subcontractor`s employees. In reaching this conclusion, the Court noted that ``[a] general contractor is a person who takes on the task of obtaining the performance of work`` and ``[t]hat definition does not exclude premises owners; indeed it describes precisely what Entergy did.``

While some may applaud the limitation on liability as vital to attracting business and jobs to Texas, others may argue that the Court interpreted the relevant statute more broadly than intended by the legislature, leaving workers without adequate remedy in the event of an on the job injury. Critics will likely be concerned that the Court`s ruling allows premises owners - at times, the party in the best position to ensure workplace safety - to escape all liability for dangerous working conditions. Proponents of the decision will contend that the general contractor should control site safety, and, because they are already entitled to the exclusive remedy defense under the Act, it is unfair to not extend the same protection to the owner.

Two bills impacting this issue have been filed during the current legislative session. House Bill 1657, sponsored by Helen Giddings of De Soto, proposes redefining the terms ``general contractor`` and ``subcontractor`` in the Texas Labor Code in such a way as to exclude a premises owner from entitlement to the exclusive remedy defense under the Act. That bill was voted out of the House Business and Industry Committee on April 14 by a 9-0 vote. Senate Bill 2063, sponsored by State Senator Robert Duncan of Lubbock, similarly proposes to change the Texas Labor code definition of a ``subcontractor`` in order to preclude property owners from qualifying as general contractors for the same purpose. S.B. 2063 has been referred to the Senate State Affairs Committee as of March 31.

The Entergy decision recognizes a powerful tool for premises owners and general contractors who agree to pay workers` compensation benefits. Carefully drafted contracts can limit liability to downstream employees while also reducing contract prices. Similarly, the Entergy ruling provides additional flexibility in negotiations to both general contractors and subcontractors endeavoring to submit competitive bids in this challenging economy. The possible passage of H.B. 2063 (which would still need to be signed by the governor) would greatly limit the Court`s ruling. The Gardere Construction Team will continue to monitor the bill`s progress closely.

Skillful negotiation of these contracts will require a thorough understanding of both the Texas Workers` Compensation Act and this ruling.