"Quarterly Updates Providing Practical Help For Corporate Legal Counsel."
Q: "Can an employer which is a non-subscriber to Texas workers compensation insurance insulate itself against injury claims from employees before they occur?" --OR-- "Can an employee of a non-subscribing employer waive his right to sue an employer for work-related injuries, before such injuries occur?"
A: "NO" to both questions. (The answer to this issue has changed since Lawrence v. CDB Services, Inc. was effectively overruled by the revision to Texas Labor Code Sec. 406.033, which added subsection (e) on June 17, 2001.)
DISCUSSION:
Suppose an employer, ABC Company, has experienced a rash of injury claims by employees over the last five years. It has carried workers compensation insurance until the last year, when premiums got so expensive that it could no longer afford them. ABC cancels its workers compensation insurance, replacing it with an accidental injury insurance policy which will become the cornerstone of a company-administered employee benefit plan. Aware of the fact that it can still be the target of a lawsuit from an injured employee, ABC Co. has its lawyer draft a waiver/release of liability for each new employee who elects to participate in the benefit plan. Essentially, the waiver/release provides that, in exchange for the benefits received under the Plan, the employee waives the right to sue ABC for any injuries, illness or death sustained during employment, even if caused by ABC's own negligence.
Employee Williams signs onto the benefits plan as soon as he is hired. Two months later, he puts a drill bit through his finger while installing a satellite dish for a customer. He wants to sue his employer for permanent nerve damage and loss of use of the finger, above and beyond medical expenses. Can he do so?
In the State of Texas, however, as of June 17, 2001, such a waiver and release are void and unenforceable on public policy grounds. Prior to that time, Lawrence v. CDB Services, Inc., 44 S.W. 3d 544 (Tex. 2001) held that an employee's pre-injury release of claims against his employer for the employer's own negligence could be enforced, provided it met certain "fair notice" requirements. Critics and advocates of employee rights forcefully argued that such a waiver of rights is counter to public policy favoring free access to the courts. They also maintained that the average employee doesn't really have a grasp on what he is giving up when he enters into such an agreement, and often cannot afford legal counsel to advise him. Apparently heeding such arguments, the 77th Texas Legislature passed subsection (e) to Section 406.033 of the Texas Labor Code, which now provides:
"A cause of action described in Subsection (a) may not be waived by an employee before the employee's injury or death. Any agreement by an employee to waive a cause of action or any right described in Subsection (a) before the employee's injury or death is void and unenforceable."
In passing the amendment, the Legislature took quite literally the Lawrence court's seeming invitation to find that certain benefit plans and the pre-injury releases contained in them violate the workers compensation statutory scheme and its underlying public policy. Apparently, an employer can't "have its cake" (being a non-subscriber) "and eat it too" (obtain the immunity from suit afforded to subscribers).
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Clearly, any employer who has found that worker's compensation premiums are becoming unaffordable (and who is not required to carry same by his customers, e.g., building contractors) may wish to consider an ERISA or other similar benefit plan. When it does so, serious consideration should be given to providing for mandatory mediation and arbitration concerning disputes arising under the benefit plan. These disputes would include those concerning benefits paid for on-the-job injury, and would significantly decrease exposure to unpredictable jury verdicts and the costs associated with trial.
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