In the recent Texas Supreme Court case of Port Elevator v. Casados, Docket No. 10-0523 (Tex. 2012), the Court discussed the law surrounding worker’s compensation coverage of  an employee who may be working for two companies at once and  “split work forces”.  Unlike workers’ compensation laws in every other state, the Texas Worker’s Compensation Act (TWCA) allows private Texas employers to choose whether to subscribe to workers’ compensation insurance. TEX. LAB. CODE § 406.002(a); Lawrence v. CBD Servs., Inc., 44 S.W.3d 544, 552 (Tex. 2001). Employees of subscribing employers also have a choice: they may opt out of the system within the prescribed time and retain their common-law rights. TEX. LAB. CODE § 406.034.  Although the TWCA is unique among the states in allowing private employers to choose whether to subscribe, it encourages employers to subscribe by abolishing their common-law defenses of contributory negligence, assumption of the risk, and fellow servant if they do not subscribe. TEX LAB. CODE § 406.033.  The Legislature intended the TWCA to benefit both employees and employers.

For employees, the TWCA allows them to recover workers’ compensation benefits for injuries in the course and scope of employment without proving fault by the employer and without regard to their negligence or that of their coworkers. TEX. LAB. CODE § 406.031; HCBeck, Ltd. v. Rice, 284 S.W.3d 349, 350 (Tex. 2009); Tex. Workers’ Comp. Comm’n v. Garcia, 893 S.W.2d 504, 511 (Tex.1995). The Texas Courts construe the TWCA liberally in favor of coverage as a means of affording employees the protections the Legislature created. Navarette v. Temple Indep. Sch. Dist., 706 S.W.2d 308, 309–10 (Tex. 1986). For employers, their liability to employees is limited. Garcia, 893 S.W.2d at 510–11.  The TWCA states that “[r]ecovery of workers’ compensation benefits is the exclusive remedy of an employee covered by workers’ compensation insurance coverage or a legal beneficiary against the employer . . . for the death of or a work-related injury sustained by the employee.” TEX. LAB. CODE § 408.001(a). The only exception to the exclusive remedy provision is when an employee’s death “was caused by an intentional act or omission of the employer or by the employer’s gross negligence.” TEX. LAB. CODE § 408.001(b).  Although the TWCA specifies an employer may subscribe to workers’ compensation insurance by generally obtaining or declining coverage, importantly, the employer may not split its workforce by electing coverage for some employees but not coverage for all. Tex. Workers’ Comp. Ins. Fund v. DEL Indus., Inc., 35 S.W.3d 591, 596 (Tex. 2000). Other provisions of the TWCA confirm that an employer’s election is generally for its workforce as a whole.

Statutes and the common law provide certain limited exceptions that allow an employer to split its workforce. First, an employer may operate more than one distinct kind of business and elect workers’ compensation insurance for only one of its businesses. Sullivan, 334 S.W.2d at 786 (“an employee falls outside the coverage secured by an employer if the employer conducts two separate and distinct kinds of business, each of which involves different risks, payrolls and premium rates”).

Second, an employer may elect to exclude a sole proprietor, partner or corporate executive officer. TEX.LAB.CODE § 406.097.

Third, an employer may lease staff from another company under the Staff Leasing Services Act (SLSA). Id. § 91.042. However, the SLSA does not apply to work that is “temporary or seasonal
in nature.” Id. § 91.001(14). Absent one of these statutory or common-law exceptions, an employer may not split its workforce for purposes of worker’s compensation. An employee may have more than one employer within the meaning of the TWCA, and each employer who subscribes to workers’ compensation insurance may raise the exclusive-remedy provision as a bar to claims about the injury. See Garza v. Exel Logistics, Inc., 161 S.W.3d 473, 475–76 (Tex. 2005) (stating that client company could assert exclusive-remedy defense to claims  by temporary employee if it was covered by workers’ compensation insurance); Wingfoot Enters. v. Alvarado, 111 S.W.3d 134, 143 (Tex. 2003) (holding that exclusive-remedy provision applied to both temporary staffing company and client company). In Wingfoot, the Court held that an employee of a temporary staffing agency sent to a client company that directs the details of his work is an employee of both companies. 111 S.W.3d at 143. The Court explained that “an employee should not be placed in the position of trying to determine, perhaps at his or her peril, which of two entities was his or her employer on any given day or at any given moment during a day.” Id.  The employee should be able to pursue workers’ compensation benefits from either the temporary staffing company’s carrier or the client company’s carrier (see also TEX. LAB. CODE § 410.033 prescribing procedure for two or more carriers liable for compensation).

In Garza v. Exel Logistics, Inc., 161 S.W.3d 473 (Tex. 2005), the Supreme Court held that a client company can avail itself of the exclusive remedy provision against claims by a temporary employee if either: (1) the client company was a named insured on the staffing company’s policy; (2) the staffing company obtained a separate workers’ compensation policy for the client company; or (3) the client company obtained its own workers’ compensation policy. 161 S.W.3d at 480.  The Supreme Court remanded because there was no evidence the client company had any such coverage. The Supreme Court has also stated that the exclusive-remedy provision bars claims by a temporary worker against a client company if the client company establishes: (1) that it was the plaintiff’s employer within the meaning of the TWCA, and (2) it subscribed to workers’ compensation insurance. 206 S.W.3d at 123.  The Supreme Court held that the exclusive-remedy provision barred that suit because the client company was the plaintiff’s employer and was a workers’ compensation subscriber. Id. at 124.