Employer Using Temporary Help Agency - Who Is Protected by Workers Compensation Bar?

If you are an employer operating in Texas and you have workers in your work force that you obtain through a temporary employment agency, you need to make sure that you check out today's decision from the Texas Supreme Court. Garza v. Exel Logic, Inc. (TX 4/8/05). The question is whether under the following contract, the primary employer was entitled to the workers compensation bar in a suit brought by an injured employee. The contract between Exel and Interim Services provided as follows:

In consideration for [Interim’s] performance of the Services, [Interim] shall receive as sole payment, the hourly rates negotiated with Exel Logistics Operations in the respective market plus the markups reflected for the appropriate classification of temporary labor for the respective market as set forth in Exhibit A1 (Rate Schedule). The markups in Exhibit A1 include all costs, overhead and burden associated with providing temporary labor to Exel Logistics, including but not limited to costs associated with testing, background investigations, training, workers compensation, insurance, etc. No fees may be billed other than the markup on the hourly rate. [emphasis added]

Garza was a worker provided by Interim to Exel who was injured on the job following the instruction of an Exel supervisor. In his lawsuit both Exel and Interim raise the workers compensation bar. Garza did in fact collect workers compensation benefits.

Both Exel and Interim were successful at the trial and intermediate appellate level. Today, the Supreme Court agrees that the temporary employment agency is protected by the bar and affirms their dismissal. However, after a detailed anaylsis of the provisions of the Texas Labor Code, the Court sends Exel, the primary employer, back to the trial court for further proceedings to show that it has coverage itself. As the Court noted:

Nothing in the contract between Interim and Exel indicates that Interim was required to obtain a workers’ compensation policy that named both parties as insureds, or that Interim was required to obtain a separate policy for Exel. The contract indicates the opposite.

If the workers compensation policy actually issued had named both as insureds, or if there were a separate policy for Exel, then it appears both would have been protected, but nothing in this record shows that is what happened.

Often the "details" of insurance, including workers compensation, are not scrutinized until after an injury occurs. Today's decision is an important reminder that every employer in this situation should check now to be sure that it has the protection it believes it does.

Today's decision is also worth noting for a couple of other points. First, it goes against the standard view that the Court is an "anti-employee" court, since it actually reversed a pro-employer ruling. Secondly the author of the opinion is the much beleagured Judge Priscilla Owen, one of the infamous "Filibustered 10" whose nomination to the federal appellate bench has been caught in the malestrom of political posturing.