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June 3, 2016

This week the Texas Supreme Court issued one opinion addressing the apparent conflict between Sections 406.122(b) and 406.123 of the Texas Labor Code in the context of workers’ compensation insurance and the exclusive-remedy defense.

TIC Energy and Chemical Inc. v. Kevin Bradford Martin – No. 15-0143

In this case, the Texas Supreme Court determined whether a subcontractor, who is not considered an employee of the general contractor under Section 406.122(b), could be entitled to the exclusive-remedy defense as an employee of the general contractor under Section 406.123 by virtue of a written agreement whereby the general contractor agrees to provide workers’ compensation insurance to the subcontractor.

Under Section 406.122(b), a subcontractor who operates as an independent contractor – who agrees in writing to assume the responsibilities of an employer for performance of the work – is not an employee of the general contractor. In contrast, under Section 406.123, a general contractor becomes the statutory employer of a subcontractor if the general contractor agrees in writing to provide workers’ compensation insurance to the subcontractor.

In this case, under the terms of the written agreement, the subcontractor was an employee under Section 406.123 but was not an employee under Section 406.122(b). Holding that the subcontractor failed to establish that Section 406.122(b) does not apply to the agreement at issue, the trial and appellate courts denied the subcontractor’s motion for summary judgment based on the exclusive-remedy defense.

The Texas Supreme Court reversed and rendered judgment for the subcontractor finding that “section 406.122(b) is a general rule and 406.123 is a permissive exception.” Therefore, in this case, the general contractor is the statutory employer of the subcontractor for purposes of the exclusive-remedy defense because the evidence established that the general contractor’s written agreement met the requirements of the exception under Section 406.123.

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