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Nonsubscriber Status under the Texas Workers’ Compensation Act
by Michelle Chelvam
Michelle Chelvam is a fourth-year associate at Phillips & Akers, P.C. Ms. Chelvam graduated magna cum laude from the University of St. Thomas in Houston and holds a law degree from the University of Notre Dame. After law school, she clerked for Justice Kem Thompson Frost at the Fourteenth Court of Appeals in Houston. Her practice areas include civil litigation and appeals.
Texas is the only state in the country that permits employers to opt out of its workers’ compensation system
1. This article provides a brief overview of nonsubscription under the Texas Workers’ Compensation Act.
What is a Nonsubscriber and Who Can Become One?
A nonsubscriber is an employer with employees that are subject to the Texas Workers’ Compensation Act but who elects to opt out of the Act. Nonsubscriber status saves the employer the cost of carrying workers’ compensation insurance. Approximately 1/3 of Texas employees work for nonsubscribers2. For the nonsubscriber, the trade off is that instead of participating in the no-fault workers’ compensation scheme, an employee alleging injury may bring a common-law negligence suit against his employer.
The Texas Labor Code prohibits public employers and general contractors involved in certain government contracts from becoming nonsubscribers. In addition, federal law provides individuals working in certain federally-regulated fields must be covered by workers’ compensation insurance.
Some Advantages and Disadvantages of Nonsubscriber Status
The requirement that an employee alleging injury proves the employer’s negligence is a significant advantage to the nonsubscribing employer. It means the employee cannot make claims for which there is not even an allegation of negligence on the part of the employer. Nonsubscription also allows an employer to manage the injured employee’s medical expenses, choice of healthcare providers, and return to the workplace. For example, approved medical providers under a nonsubscriber’s occupational injury plan can be chosen based on their expertise in a given field and approved providers are more likely to make well-reasoned decisions about necessary treatment and release of the employee to return to work. The plan can also be designed to include incentives that encourage employees to return to work promptly after recovery from an injury. One such incentive is the level of income-replacement benefits.
An obvious disadvantage of nonsubscriber status is that in an employee’s negligence lawsuit against a nonsubscribing employer, the employer cannot assert the defenses of the employee’s contributory negligence, a fellow employee’s negligence (because the fellow employee’s negligence is imputed to the employer and deemed to be the act of the employer committed through its employee), or assumption of the risk3. One theory for depriving the employer of these defenses is to increase employers’ incentive to subscribe to the Texas workers’ compensation program4.
In a nonsubscriber case, the employee may recover any tort damages ordinarily available under Texas law, including mental-anguish, pain and suffering, lost-earning capacity, and punitive damages.
Elements of a Plaintiff’s Claim against a Nonsubscriber
Employee Acting in the Course and Scope of Employment
To prevail in a case against a nonsubscriber, the employee alleging injury must prove an employee-employer relationship existed with the defendant at the time of the alleged injury.
If the nonsubscriber can prove the claimant was an independent contractor instead of an employee, then the case reverts to a general-negligence lawsuit in which the nonsubscriber may assert the claimant’s contributory negligence as a defense. While no single factor is necessarily dispositive, the factors that determine whether a person is an independent contractor or an employee include whether the person is paid by the job or by salary, whether the person uses his own tools to perform the work, and the amount of control the person is free to exercise over the details involved in performing the work.
Assuming the claimant passes the employee-independent contractor hurdle, next, the employee must show he or she was acting in the course and scope of his or her employment at the time of the alleged injury. The employer cannot be liable under a nonsubcriber theory if the employee was not acting in the course and scope of the employment. Generally, to prove the course-and-scope element, the employee must show (1) the alleged injury occurred while the employee was acting in furtherance of the employer’s business or affairs; and (2) a causal connection between the required work and the resulting injury.
The Employer’s Negligence
Finally, the employee bears the burden of proving the employer was negligent and that the employer’s negligence proximately caused the alleged damages. Negligence is the failure to act as a person of ordinary prudence would have acted under the circumstances. When deciding whether negligence has occurred, Texas courts recognize several specific duties an employer owes its employees:
To provide employees with a reasonably safe work place5;
To ensure there are enough workers available to perform a particular piece of work so the safety of all workers engaged in the work is ensured6;
To select careful and competent fellow workers7;
To provide an employee safe and suitable appliances or tools so the employee’s work can be performed with reasonable safety8; and
To establish and enforce rules and regulations for the safety of employees9.
To prove the employer’s negligence proximately caused the alleged injury, the employee must prove (1) the negligence was the cause in fact of the injury; and (2) the injury was a foreseeable consequence of the employer’s negligent conduct10.
Defenses Available to a Nonsubscriber in an Employee’s Suit against it
Even if the nonsubscribing employer was negligent, the following defenses are available if applicable under the facts of the case.
Intoxication is an absolute defense to liability. This means that even if the employer cannot prove the intoxication caused the injury, the employer is not liable if he proves the employee was intoxicated at the time of the alleged accident11. Under Texas law, intoxication is not limited to conditions caused by alcohol ingestion. Intoxication also includes not having the normal use of one’s faculties due to abuse of drugs, controlled substances, glues, paints, or similar substances.
Willful Intent is a second defense available to a nonsubscriber12. Willful intent refers to an employee’s action or inacation with the specific and wrongful intent to produce an injury or aggravate a pre-existing injury in order to collect compensation.
Sole Proximate Cause While the defense of contributory negligence is not available to a nonsubscriber, the employee cannot recover on a nonsubscriber theory if he or she was the one and only cause of his or her injury13.
1 See generally Nonsubscription under the Texas Workers’ Compensation Act, Jay M. Wallace, State Bar of Texas Litigation Section Report, Vol. 37, Winter 2006, pp. 65–71 on which this article is based. This article is for informational purposes only and does not constitute legal advice.
2 Tex. Lab. Code § 406.033.
3 Keng v. Kroger, 23 S.W.2d 347 ( Tex. 2000).
4 Cabrera v. Delta Brands, Inc., 538 S.W.2d 795 (Tex. App.— Texarkana 1976, writ ref’d. n.r.e.).
5 Holiday Lodge Nursing Home v. Huffman, 430 S.W.2d 826 ( Tex. Civ. App.—Texarkana 1968, no writ).
6 J. Weingarten v. Sandefer, 523 S.W.2d 941 (Tex. Civ. App.—Beaumont 1975, writ ref’d n.r.e.).
7 Id. at 944.
8 Cabrera, 538 S.W.2d at 795.
9 Harrison v. Harrison, 597 S.W.2d 477 (Tex. Civ. App.—Tyler 1980, writ ref’d. n.r.e.).
10 E.g., Castellow v. SwiftexMfg. Corp., 33 S.W.3d 890 ( Tex. App.—Austin 2000, no pet.).
11 Tex. Lab. Code § 406.033 (c) (1).
12 Tex. Farm Prods. v. Stock, 657 S.W.2d 494 ( Tex. App.—Tyler 1980, writ ref’d n.r.e.).
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