IN THE SUPREME COURT OF
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No. 05-0272
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Entergy Gulf States, Inc., Petitioner,
v.
John Summers, Respondent
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On Petition for Review from the
Court of Appeals for the Ninth District of
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Argued October 16, 2008
Justice O’Neill, dissenting, joined by Chief Justice Jefferson and Justice Medina.
The Court today concludes that premises owners who pay (and recoup) their subcontractors’ workers’ compensation premiums are, and have always been, entitled to the Workers’ Compensation Act’s exclusive-remedy defense against their subcontractors’ injured employees. The Court pins its analysis on a 1917 provision that was designed to prevent “subscribers” from creating sham subcontractor relationships in order to avoid covering their own injured employees. Remarkably, neither the parties nor the dozens of amici curiae in this case have proffered such an interpretation. Although the Court concludes that the law in this regard has remained essentially the same since 1917, the Legislature first afforded a general contractor that “ha[d] contracted with another party to perform” work the right to voluntarily assume statutory employer status in 1983. Had all “subscribers” always been statutory employers of subcontractors’ employees, this statutory revision and its 1989 iteration would make no sense.
The parties and amici appear to agree, as do I and Justice Willett, that before 1989 premises owners were not “general contractors” under the Act. The appropriate inquiry, then, is not whether the 1989 “general contractor” definition excludes premises owners, as the Court posits, but whether the Legislature intended to change prior law by expanding the definition to include premises owners when it rewrote the Act in 1989 and expressly tethered the term to others commonly understood to mean a person who has contracted with an owner. Had the Legislature intended to change the law in 1989 and for the first time afford premises owners the exclusive-remedy defense against subcontractors and their employees, it would surely have been simpler to say so by using the broader term “subscriber,” or by including the term “owner contractor” in the description of analogous terms that define a general contractor.
A few points bear noting at the outset. First, whether workers’ potential recovery is greater under the common law or the Workers’ Compensation Act, and whether one scheme promotes workplace safety over the other, is a legislative call, not ours. Second, one cannot contract into the Act’s protections if the Legislature did not intend to allow it; accordingly, that Entergy reserved any right it might have to assert a statutory-employer defense against IMC’s employees, or that Summers accepted workers’ compensation benefits paid for by Entergy (and deducted from the contract price), does not inform the statutory analysis. And finally, whether premises owners should be afforded the Act’s protections by paying their general contractor’s workers’ compensation premiums, as general contractors are by paying the premiums of their subcontractors, is a policy choice we are not at liberty to make.
As the Court notes, this case has drawn much attention since our initial opinion, and numerous amici have weighed in. When this case was first presented, Summers’ emphasis was on Entergy’s proof regarding the existence of a written agreement and mistaken reliance on the Legislature’s 1993 nonsubstantive recodification of the Labor Code. On rehearing, a more focused analysis of the applicable statutory text convinces me that the Legislature, in rewriting the Act in 1989, did not intend to change the general-contractor definition to include premises owners; to the contrary, it tied the definition to terms commonly understood to mean a person who has contracted with an owner. It might well represent sound policy to allow premises owners to become statutory employers of their contractors’ employees by providing workers’ compensation coverage, potentially expanding the number of employees eligible to receive benefits under the Act.[1] Whether such an expansion would require an adjustment to premiums, benefits, or other provisions of the Act is something only policymakers can decide. Our job is to discern what the Legislature intended. And that body has restricted the option to parties analogous to “principal contractor[s],” “original contractor[s],” and “prime contractor[s],” entities that contract to perform work for third parties and who face no premises liability in the absence of control of the premises. Based on the statute’s language and appropriate statutory construction principles, I do not agree that the Legislature intended the term “general contractor” to encompass premises owners within the Act’s protections. Accordingly, I respectfully dissent.
I.
A. The Statutory Text
Under section 406.123 of the Act, “a
general contractor and a subcontractor may enter into a written agreement under
which the general contractor provides workers’ compensation insurance coverage
to the subcontractor and the employees of the subcontractor.” Tex. Lab. Code § 406.123(a).
If such an agreement is reached and properly filed, the general contractor may
deduct premiums from the amount owed the subcontractor without incurring
penalties under section 415.006 of the Act, which prohibits employers from
collecting premiums or benefits from their employees.[2]
a person who undertakes to procure the performance of work or a service, either separately or through the use of subcontractors. The term includes a “principal contractor,” “original contractor,” “prime contractor,” or other analogous term. The term does not include a motor carrier that provides a transportation service through the use of an owner operator.
In construing a statute, our
overarching purpose is to determine and effectuate the Legislature’s intent. State
v. Shumake, 199 S.W.3d 279, 284 (
Throughout
The illustrative language the Legislature included in the Workers’ Compensation Act’s “general contractor” definition is consistent with that general understanding: “principal contractor,” “original contractor,” and “prime contractor” are all terms that envision a tripartite relationship in which one entity enters into a contract to perform work for another and then retains subcontractors or independent contractors to do all or part of the work. See, e.g., Tex. Prop. Code § 53.001(7), (13) (“‘Original contractor’ means a person contracting with an owner either directly or through the owner’s agent,” and “‘[s]ubcontractor’ means a person who has furnished labor or materials to fulfill an obligation to an original contractor or to a subcontractor to perform all or part of the work required by an original contract.”); Interstate Contracting Corp. v. City of Dallas, 135 S.W.3d 605, 611–12 (Tex. 2004) (using the term “prime contractor” interchangeably with “general contractor” in discussing pass-through claims); Page v. Structural Wood Components, Inc., 102 S.W.3d 720, 721–22 (Tex. 2003) (using the term “general contractor” interchangeably with “original contractor” in interpreting chapter 53 of the Property Code);[5] see also Op. Tex. Att’y Gen. No. DM-300 (1994) (ruling that university that hired independent contractors to provide work such as carpet installation and window repair did not act as a “hiring contractor” under section 406.141 of the Act because it did “not act even as a ‘contractor’ as that term is commonly understood,” relying in part on section 406.121(1)’s general-contractor definition). While I acknowledge that the categories listed in the second sentence of section 406.121(1)’s “general contractor” definition are not exhaustive, the Legislature did make clear that only analogous entities are to be treated as general contractors. See Tex. Lab. Code § 406.121(1). A premises owner is simply not analogous.[6]
The Court insists that the statutory
definition controls over what it tacitly acknowledges is the commonly
understood meaning of the term “general contractor.” But the Legislature itself
has mandated that “[w]ords and phrases shall be . . .
construed according to . . . common usage,” and that “[w]ords
and phrases that have acquired a technical or particular meaning, whether by
legislative definition or otherwise, shall be construed accordingly.” Tex. Gov’t Code § 311.011(a), (b). In this
instance, common usage, the common law, and a host of legislative
pronouncements are contrary to the meaning the Court attaches to the term. More
importantly, the statutory language itself comports with, and is tied to, the
general understanding of the term’s meaning. When the Legislature enacted
section 406.121, we had long defined a contractor as one who “‘undertakes to do
a specific piece of work for other persons . . . .’” Southard,
160 S.W.2d at 907 (quoting
The Court attaches a similarly
strained meaning to the term “separately” within the general-contractor
definition. (“‘General contractor’ means a person who undertakes to procure the
performance of work or a service, either separately or through the use of
subcontractors.”)
B. The Statutory Revision
Significantly, the Legislature used
almost identical “undertake to procure” language in the prior version of the
statute when conferring statutory-employer status on prime contractors who
provided workers’ compensation coverage to their subcontractors. Act of May 28,
1983, 68th Leg., R.S., ch. 950, § 1, 1983 Tex. Gen.
Laws 5210, 5210, amended by Act of Dec. 12, 1989, 71st Leg., 2d C.S., ch. 1, § 3.05(a)(5), 1989 Tex. Gen. Laws 1, 15. The prior
statute equated the term “prime contractor” with “general contractor,” and
defined it to mean “the person who has undertaken to procure the performance of
work or services.”
Justice Willett, and the Court to some extent, make much of the Legislature’s omission in 1989 of the third-party language, concluding that the Legislature meant to abolish the “‘upstream contract’ condition.” It is hard to fathom that such a sweeping and deliberate change in the law would be so subtly effected. But if that had been the Legislature’s intent, it would not have substituted “undertaken to perform” language that had long been recognized in the general-contractor definition as imposing a third-party obligation. The Legislature’s use of the same language in the old and new general-contractor definitions strongly indicates it intended the same meaning in each version.
Reliance on omission of the
third-party language in the subcontractor definition is misplaced for yet
another reason. It is true that the Legislature is presumed to act with
knowledge of existing laws, Acker v. Tex. Water Comm’n,
790 S.W.2d 299, 301 (Tex. 1990), and that deletions in existing laws are
presumed to be intentional. In re Ament,
890 S.W.2d 39, 42 (
Giving virtually no effect to the Legislature’s
restriction of “general contractor” to terms analogous to “principal
contractor,” “original contractor,” and “prime contractor,” the Court and
Justice Willett attach great significance to the sentence excluding motor
carriers that provide transportation services through the use of
owner-operators. But when that exclusion is viewed in the context of the entire
statutory scheme and other law applicable to motor carriers, the reason for the
exclusion becomes clear: in the 1989 rewrite of the Act, the Legislature made
some, but not all, of section 406.123 applicable to motor carriers. Like
general contractors and subcontractors, motor carriers and owner-operators
(which are deemed independent contractors under section 406.121(4)) may enter
into an agreement under which the motor carrier provides workers’ compensation
coverage to an owner-operator and its employees. Tex. Lab. Code § 406.123(c). And like a
general contractor, a motor carrier that provides workers’ compensation
coverage to its independent contractor may deduct the premium from the contract
price without incurring penalties under section 415.006 of the Act.
C. Justice Hecht’s Policy-Based Interpretation
Noting that a property owner may
act as its own general contractor, but acknowledging that the term is more
generally understood to mean one who contracts with a property owner and then
subcontracts parts of the job to others, Justice Hecht concludes that we just
can’t tell from the statutory language what the Legislature meant. Finding the
text elusive, Justice Hecht discerns “policies embedded in the Act” which he
believes tip the scales in favor of treating a premises owner as a general
contractor. There are several problems with this approach. First,
while the definition of a “general contractor” as one who “undertakes to
procure the performance of work” may in isolation appear open-ended, the
definition’s second sentence ties the term to its commonly understood meaning.
Second, if indeed the text is ambiguous as Justice Hecht claims, we have
clearly said that statutes in derogation of common law rights should not be
“‘applied to cases not clearly within [their] purview.’” See Energy Serv. Co. of Bowie, Inc. v. Superior Snubbing Servs., Inc., 236 S.W.3d 190, 194 n.17 (
The first policy that Justice Hecht
believes sweeps premises owners into the general-contractor definition is the
Act’s “decided bias” for coverage. See Wingfoot
Enters. v. Alvarado, 111 S.W.3d 134, 140 (
The second policy Justice Hecht cites is the sham-subcontractor provision. See Tex. Lab. Code § 406.124. If the Act prohibits subscribers from utilizing subcontractors to avoid coverage, he posits, it surely would not discourage coverage by denying subscribers the exclusive-remedy defense. But the sham-contractor provision was never intended to impute coverage to true third parties as Justice Hecht seems to imply; it simply prohibits a person who has workers’ compensation coverage from subcontracting the work with the intent and purpose of avoiding liability as an employer. See id. In other words, an employer cannot designate its employee a subcontractor in order to avoid paying benefits under the Act. No one claims that IMC was hired by Entergy as a sham to avoid paying its own employees workers compensation benefits; the provision is simply irrelevant to analysis of the general-contractor definition.
Justice Hecht next charges that my reading of the statute would have “perverse” results because the contractual indemnity allowed under section 417.004 and provided for in Entergy’s contract with IMC would permit Summers to recover common law damages from Entergy, which Entergy could in turn recoup from IMC. Justice Hecht suggests that in such a scenario, “the workers’ compensation system provides nothing to any employer.” Of course the pre-1989 Act, at least according to my reading (and that of the litigants, amici and Justice Willett), had the same effect, which is a policy choice the Legislature made. The question is whether in 1989 the Legislature intended to change that policy. In addition, several factors undermine Justice Hecht’s point. One, while Entergy paid IMC’s premiums for Summers’ benefits under its owner-provided insurance plan (OPIP), that cost was deducted from the contract price paid to IMC, so Entergy effectively paid nothing for the additional protection Justice Hecht’s reading would afford Entergy. Two, owners receive significant economic benefits from OPIPs like Entergy’s apart from tort immunity. OPIPs allow owners to secure coverage for all their contractors at a lower overall price than the cost of workers’ compensation insurance that subcontractors would normally incorporate into their contract prices, thereby lowering owners’ overall costs. Howrey LLP, Owner Controlled Insurance Programs (OCIPs): Why Owners Like Them and Why Contractors May Not, Construction Web Links, July 14, 2003, http://www.constructionweblinks.com/Resources/Industry_Reports__Newsletters/July_14_2003/ocip.htm. In turn, the cost of the premium deducted from IMC’s contract price was likely lower than the premium IMC would have otherwise paid. Consequently, both Entergy and IMC benefitted from the insurance arrangement in this instance irrespective of tort immunity. Three, that indemnity agreements like that between Entergy and IMC are widespread in the industry is some indication that premises owners do not perceive the Act’s statutory-employer provision to protect them from common law claims, else there would be no need for such agreements. And four, any tort damages that Summers might recover would likely be paid from the commercial general liability policy that Entergy required IMC to obtain as a condition under the parties’ contract, and the workers’ compensation carrier would be subrogated to Summers’ recovery under section 417.001 of the Act. The “perverse result” that Justice Hecht envisions simply does not exist.
The fourth policy reason Justice Hecht cites is that the Act was intended to be comprehensive. But again, it can only be comprehensive to the extent that the Legislature intended, and there is nothing in the 1989 revision that would indicate the Legislature’s intent suddenly changed. Underlying Justice Hecht’s analysis is an apparent assumption that Summers might recover a windfall against Entergy on his common law claims. But if Entergy is not Summers’ employer under the Act, it retains the full panoply of defenses available to it under the common law, and Summers shoulders the burden of establishing the company’s negligence with the consequent uncertainties of litigation. Should Summers prevail on his common law claims, which is far from certain, he would forfeit any benefits that he has received under the Act. Irrespective of the workers’ compensation system’s relative merits, which is not ours to decide, it has operated this way at least until the statutory revision in 1989; there is nothing to indicate the Legislature’s revision was intended to effect a change.
D. Statutory Construction Principles
As I read the statutory language, it
seems clear that the Legislature did not intend to transform premises owners
who contract for third-party services into general contractors entitled to
assert the Act’s exclusive-remedy defense. But even if the language were less
than clear, well-established statutory construction principles lead to the same
conclusion. In a decision issued a week before the Court’s original opinion in
this case, we considered whether an indemnification agreement between a subscribing
employer and another party could be enforced by that party’s contractor even
though the contractor had not executed the agreement.
class=Section2>
allows the intended beneficiary of a contract to enforce it,
and that statutes in derogation of common law rights “‘will not be extended
beyond [their] plain meaning or applied to cases not clearly within [their]
purview.’”
The application of those same
principles in this case demonstrates that the Legislature did not intend to
expand the class of contractors entitled to claim statutory-employer status to
include premises owners when it rewrote the Act in 1989. Nothing in the Act’s
legislative history suggests that the Legislature perceived an “evil” in the then-existing
requirement that a person must have contracted to perform services for another
to be a general or prime contractor. See Joint Select Committee on
Workers’ Compensation Insurance, A Report to the 71st Legislature
(1988); Tex. Workers’ Comp. Comm’n v. Garcia,
893 S.W.2d 504, 512– 13 (Tex. 1995) (discussing report). And to the extent the
statute’s language does not plainly entitle premises owners to assume
statutory-employer status under these circumstances, Superior Snubbing
counsels against that construction, as it would be in derogation of Summers’ common law rights. 236 S.W.3d at 194 n.17; see
also Kroger Co. v. Keng, 23 S.W.3d 347, 349 (Tex.
2000) (“[I]t would be injudicious to construe the statute in a manner that
supplies by implication restrictions on an employee’s rights that are not found
in section 406.033’s plain language.”) (citing Miears v. Indus. Accident Bd., 232 S.W.2d
671, 675 (
The Court may perceive that it has managed to blur the inconsistency between its decision today and Superior Snubbing by proclaiming that the law has remained unchanged since 1917. ___ S.W.3d at ___. But its own analysis shows how hollow that statement is. The Court acknowledges that an entirely new provision was introduced in 1983, and then amended in 1989. And the Court attaches some significance to the omission of the phrase “with another party” from the subcontractor definition in 1989. ___ S.W.3d at ___. In Superior Snubbing, the Court concluded that the Legislature’s insertion of a phrase failed to demonstrate legislative intent to change the law absent a showing of any specific motivation. Here, the record is similarly devoid of any showing of an “evil” in need of remedy, yet the Court concludes that the omission of the “with another party” language effected a sweeping change in the law.
Justice Hecht recognizes the tension
between today’s decision and Superior Snubbing, but brushes it aside
because “it has never been clear when a person is considered the statutory employer
of a subcontractor or his employees . . . .”[7] He reaches that conclusion by focusing on
a series of failed bills — all of which ultimately made clear that a general or
prime contractor is someone who has agreed to perform work for a third party —
and the fact that the 1983 legislative forerunner to the sections at issue
today originated in a bill that would have eliminated the sham-subcontractor
provision of the Act. Following this circuitous route, Justice Hecht concludes
that “the definition of ‘prime contractor’ finally enacted could reasonably be
read to include a premises owner acting as his own general contractor.” ___ S.W.3d at ___. That view (voiced by none of the
litigants or amici) is simply contrary to the
statute’s terms; before 1989, the subcontractor definition made it unmistakably
clear that a general contractor was someone who had “contracted with another
party to perform work.” Act of May 28, 1983, 68th Leg., R.S., ch. 950, § 1, 1983 Tex. Gen. Laws 5210, 5210, amended by
Act of Dec. 12, 1989, 71st Leg., 2d C.S., ch. 1, §
3.05(a)(5), 1989 Tex. Gen. Laws 1, 15. Moreover, to the extent Justice Hecht’s
interpretation of the Act is informed bills that were never adopted by both
houses of the Legislature, it is worth noting that the House committee
substitute for Senate Bill 1, the source of sections 406.121 and 406.123, would
have specifically allowed premises owners to secure statutory-employer status,
but that version of the bill was rejected in its entirety by the Senate. See
H.J. of
The Court’s conclusion that premises
owners are subsumed within the general-contractor definition is also
inconsistent with another statutory construction principle we have frequently
employed. Just four months ago, we analyzed section 101.022(b) of the Texas
Civil Practice and Remedies Code to determine whether loose gravel on a road
amounted to a special defect.
Thus, “[u]nder the ejusdem generis rule, we are to construe ‘special defect’ to include those defects of the same kind or class as [excavations or obstructions].” . . . While these specific examples “are not exclusive and do not exhaust the class,” the central inquiry is whether the condition is of the same kind or falls within the same class as an excavation or obstruction.
In support of its construction, the Court posits two workers injured in the same industrial accident receiving different compensation. The Court apparently considers it anomalous that a worker employed by the premises owner working side-by-side with a subcontractor’s employee might be limited to workers’ compensation benefits, while another employed by an independent contractor would be able to seek the full range of damages under the common law. First, to the extent such an anomaly exists under my reading of the statute, it is the result of policy choices made by the Legislature that long pre-existed the 1989 revision. Moreover, in implying that the result is somehow unfair to the premises owner’s injured employee, the Court overlooks the option the Act provides employees of subscribing employers to elect not to be covered by workers’ compensation. Tex. Lab. Code § 406.034. It also overlooks the quid pro quo, being the relinquishment of uncertain common law recovery in exchange for the prompt receipt of defined benefits, that has insulated the Act from constitutional challenge under the Open Courts provision of the Texas Constitution. Garcia, 893 S.W.2d at 521.
II.
Because I do not believe that the Legislature in the 1989 Act intended to change prior law and confer statutory-employers status on premises owners, I respectfully dissent.
___________________________________
Harriet O’Neill
Justice
OPINION DELIVERED: April 3, 2009
[1] Interestingly, Entergy’s agreement to provide coverage for IMC’s employees swept no additional employees into the workers’ compensation system in this case. Before it was amended, the contract between Entergy and IMC required IMC to provide workers’ compensation coverage for IMC employees. The availability of this type of contractual arrangement, coupled with contractual indemnity provisions, may explain the dearth of case law arising under section 406.123(a).
[2] The Court insists that Entergy “paid for” workers’ compensation insurance covering IMC’s employees. ___ S.W.3d at ___. It may be technically true that Entergy directly paid the insurance premiums, but it is undisputed that Entergy procured the insurance in exchange for a reduction in the cost of its contract. Thus, under the Court’s construct, Entergy bought immunity from suit at no additional cost to itself.
[3] The Act does not use that term, but I use it for ease of reference. Under the Act, “[a]n agreement under [section 406.123] makes the general contractor the employer of the subcontractor and the subcontractor’s employees only for purposes of the workers’ compensation laws of this state.” Tex. Lab. Code § 406.123(e).
[4] Both the Court and Justice Willett recite the principle that we do not apply the ordinary meaning of a term if the Legislature has adopted a specialized definition, then promptly cast it aside by looking to the ordinary meaning of the words the Legislature used within the “general contractor” definition. This is necessary, of course, because we cannot determine whether a premises owner is “analogous” to the types of contractors listed in section 406.121(1) or what “undertakes to procure” means without examining how those terms are commonly understood.
[5] While attaching some significance to a string of inapposite out-of-state cases, Justice Willett gives these examples no weight because some of them discuss a party’s status as a “contractor” or an “independent contractor,” rather than a “general contractor.” But the person or entity at issue must first be a contractor before being further classified as an independent contractor, a subcontractor, or a general contractor. Moreover, several of these examples define terms that the Legislature has expressly deemed analogous to “general contractor” in section 406.121(1), including “original contractor” and “prime contractor.”
[6] The commonly understood difference between general contractors and premises owners may explain why Entergy failed to raise the statutory-employer defense until nearly two years after the suit was initially filed. Even then, the defense was the last of the ten defenses Entergy raised, after contributory negligence, failure to mitigate damages, and several others.
[7]
The sham contractor provision, now codified as section 406.124 of the Labor
Code, the only source of statutory -employer status prior to 1983, appears to
have been the subject of only eight cases since its enactment in 1917. See
Hatfield v.