Texas Supreme Court Confirms an Important Defense Available to Employers Utilizing the Texas Option

By Staci Cassidy, JD, Senior Vice President of PartnerSource

We have heard it countless times: “For a company that is utilizing an alternative to workers’ compensation, the employee only has to prove his employer is 1% to blame for his injury to recover damages in a negligence claim.” However, in most cases, the factfinder—an arbitrator, judge or jury -- is never asked to assign an actual percentage of fault to the nonsubscriber. Why? Because in most cases, the only parties whose acts or omissions arguably caused the employee’s injury are the employee or the nonsubscriber, and the Texas Labor Code prohibits a nonsubscriber from comparing its alleged negligence with its employee’s alleged negligence.   

But what if there is evidence a third party’s negligence caused an employee’s injury? The Texas Supreme Court recently addressed this issue in a case, In re East Texas Medical Center Athens (“In Re East Texas”). This case involved a hospital employee who claimed injury when an EMT, employed by a third party, ran into her with a stretcher. The employee filed a negligence claim against the EMT and his employer, as well as her nonsubscribing employer, East Texas Medical Center (ETMC).

The trial court dismissed the claims against the EMT and his employer because the employee failed to produce a timely expert report as required by The Texas Medical Liability Act. ETMC, still wanting to point the finger at the EMT and his employer, then designated the EMT’s employer as a “responsible third party” under the Texas proportionate-responsibility statute.

The Texas proportionate-responsibility statute allows a defendant to seek to reduce its liability for a claimant’s damages by the “percentage of responsibility” the factfinder attributes to each claimant, defendant, settling person and “responsible third party who has been designated.” Per TEX. CIV. PRAC. & REM. CODE § 33.003(a)(1)–(4): A designated responsible third party is not an actual party to the lawsuit and incurs no liability as a result of a finding that it was responsible for causing the claimant’s damages. TEX. CIV. PRAC. & REM. CODE § 33.004(i).

So, the employee in In re East Texas was faced with ETMC potentially being able to reduce its liability for her damages by the percentage of responsibility assigned to a party against whom she cannot recover. Not liking this predicament, the employee asked the trial court to strike ETMC’s designation of the EMT’s employer as a responsible third party, arguing her claim against her nonsubscribing employer was an action to recover benefits under the Texas Workers’ Compensation Act (the “Act”), and the Texas proportionate responsibility statute does not apply to an action to collect workers’ compensation benefits under the Act. § 33.002(c)(1). The trial and appellate courts agreed, and ETMC complained to the Texas Supreme Court.

The Texas Supreme Court rejected the employee’s argument by explaining the Act itself distinguishes between a statutory cause of action to collect workers’ compensation benefits available under the Act, which is a subscriber employee’s exclusive remedy, and a common-law action to recover damages based on negligence, which is a nonsubscriber employee’s available remedy. Based on this distinction, the court held a negligence action against a nonsubscriber is not an action to recover benefits under the Act, and therefore, a nonsubscriber can designate a responsible third party under the Texas proportionate responsibility statute. 

The effect of the Court’s decision in In re East Texas is that a nonsubscriber can assert the claimant’s damages were caused by the negligence of a designated responsible third party.  If there is sufficient evidence, the factfinder should not just be asked whether the nonsubscriber was negligent, but also whether the designated responsible third party was negligent. If both parties are found negligent, the factfinder must assign a percentage of responsibility to each, and the nonsubscriber will only be liable for damages in an amount equal to the percentage of responsibility assigned to it.

For questions about the availability of defending negligence actions using the Texas proportionate responsibility statute, please reach out to your PartnerSource team leader.