Premises Owners May Obtain Exclusive-Remedy Defense Under Texas Labor Code

Entergy Gulf States, Inc. v. Summers, No. 05-0272 (Tex. August 31, 2007)

This recent case clarifies the distinction under Texas law between a premises-owner and a "General Contractor" and holds that an owner acting as its own general contractor may obtain the protection under the Texas Labor of restricting an injured employee's remedies to workers' compensation benefits.  John Summers worked as the employee of International Maintenance Corp. (IMC) which contracted to perform construction and maintenance at Entergy Gulf States's plant.  The parties' contract provided that Entergy was a statutory employer that would procure workers' compensation coverage for IMC's employees.

Section 406 of the Texas Labor Code provides that a "general contractor" may enter a written contract to provide worker's compensation coverage for a subcontractor's employees, which makes the general contractor the employer of the subcontractor's employees for purposes of the workers' compensation laws.  A "general contractor" is defined as "a person who undertakes to procure the performance of work or a service, either separately or through the use of subcontractors." (Tex. Labor Code Sec. 406.123 (e)).

The lower appeals court had followed earlier cases and held that a general contractor had to enter a prime contract with another [an owner] and then agree to subcontract all or part of that work to a subcontractor.  This interpretation was based on language in the Labor Code that was changed in 1993 revisions when the Code was recodified, ostensibly "without substantive change."  Nevertheless, the Texas Supreme Court held that a court must give effect effect to a statute's clear and specific wording despite a generic statement disclaiming substantive changes.  The current statute contains no limitation on the definition and permits an owner to qualify as a general contractor on its own behalf.

Accordingly, it is now clear that premises owners may contract with contractors and obtain the benefits of the exclusive remedy of the the workers' compensation laws.