Wal-Mart Opts Out of Texas Workers' Compensation Scheme

Texas is the only state that allows employers to opt-out of the workers' compensation system.  Nonsubscriber status comes with benefits and disadvantagesWal-Mart Stores' recent announcement that it would opt-out of the Texas workers' compensation system is significant given that Wal-Mart is one of the largest private employers in the state.  

I invited Steve Bent, the Executive Director of the Texas Association for Responsible Nonsubscribers, to author a guest post on the ramifications of Wal-Mart's decision.  Here are Steve's thoughts.  

As one might expect Walmart's recent decision to operate as a nonsubscriber to workers’ compensation in Texas is drawing a lot of attention. Walmart represents its new program will give the company “an opportunity to provide better care for our associates while also better managing our costs.”  I think Walmart will ultimately determine its own fate in the court of public opinion. 

As we all know the key to nonsubscription is balance. It is no secret that a well designed, well governed nonsubscriber program can reduce workplace injuries and therefore significantly reduce related injury costs. But only those programs that utilize a proactive safety culture focused on injury prevention and quality benefits balance the desire for cost-savings without cost to employee welfare.

As the largest nonsubscriber in Texas and the largest employer in the nation, Walmart’s plan and plan governance will undoubtedly face intense scrutiny. I am hopeful Walmart will choose responsible leadership by building a nonsubscriber program to not only reduce workplace injuries but also offer quality benefits in a manner that its own employees agree is superior to options previously available.

I am hopeful Walmart will choose responsible governance and

  • Measure its success through injury prevention and the quality of care available to injured associates rather than mere cost savings.   

  • Provide quality benefits in a straightforward manner rather than implementing an overly complex plan that provides avenues to escape responsibility.

  • Provide impartial options to address employee disputes rather than requiring employees to enter into agreements that limit options.

  • Work with independent professionals that support the needs of Walmart and its associates rather than those willing to only side with Walmart.

The importance of Walmart’s decision to become a Texas nonsubscriber is that Walmart’s actions will not only reflect on the entire nonsubscriber community but also the nonsubscriber option and the unique nature of Texas’ workers’ compensation system, which allows most private sector employers to choose nonsubscription. 

If the nation’s largest employer can demonstrate an ability to operate as a responsible nonsubscriber; freedom, choice and innovation will hopefully prevail.  If not, Walmart could prove to be a tipping point in the battle to maintain the freedom to provide quality benefits outside of workers' compensation. 

If you are interested in learning more about nonsubscription status or keeping apprised of the most recent developments in this area, I would encourage you to contact Steve and join his organization.

Follow me on Twitter @RussellCawyer.

Texas Supreme Court Holds Worker's Compensation Exclusivity Provision Bars Claims by Deceased Employee's Parents

Today the Texas Supreme Court held that when an employee is employed by two employers (a staff leasing company and client company in this case) and both employers have workers' compensation insurance, the workers' compensation exclusivity provisions apply to bar negligence claims asserted by the deceased employee's parents.

You can review a copy of the Court's opinion here.

Follow me on Twitter @RussellCawyer.

Supreme Court of Texas Considering Important Issue of Privileged Communications Between Employer and its Insurance Company

Recently, the Supreme Court of Texas heard oral arguments in an interesting case regarding the outer limits of the attorney-client privilege with respect to a workers' compensation insurance carrier attorney's communications with its insured.  The communications at issue were made between the carriers and the insured/employer during the administrative proceeding before the Texas Workers' Compensation Commission over the compensability of a workers' compensation claim.  The case is styled In re XL Specialty Insurance Company and Cambridge Integrated Services Group Inc. (No. 10-0960).

At issue is a trial court's order that the workers' compensation insurance carriers turn over, in a civil lawsuit over the allegedly bad faith denial of workers' compensation benefits, communications they had with their insured/employer during the course of the underlying administrative litigation over the compensability of the workers' compensation claim. 

This case could have important ramifications for the Texas law of attorney-client privilege of communications between an insured and its insurance company's counsel.  Employers, and their attorneys, routinely communicate with insurance companies about the status of potential and pending claims.  Similarly, counsel for insureds routinely provide litigation updates about the potential strengths, weaknesses, potential exposure and likely outcomes on pending litigation.  These types of communications are normally treated as confidential and subject to the attorney-client privilege under the common legal interest doctrine (i.e., the privilege extends communications between parties or attorneys that share a common legal interest).  And while the case before the court is slightly different from the way EPL claims are handled because the insured/employer is not party (and is therefore a third-party) to the underlying lawsuit, the Court's pronouncements regarding the limits of the attorney-client privilege could have wide reaching effects on the manner in which employers communicate with their insurance carriers about pending claims.

We'll have more from this case when the Court renders its opinion in the case. 

Follow me on Twitter @RussellCawyer.

Should I Buy (or do I need) Workers' Compensation Insurance?

Texas employers have the option of purchasing workers’ compensation insurance or going as a nonsubscriber.  Deciding whether to be a nonsubscriber or purchase workers’ compensation insurance requires an idea of what your anticipated workers’ compensation premium will be (usually obtained through your insurance broker) as well as understanding what legal protection a Texas employer gets by becoming a workers’ compensation insurance subscriber. Here is a quick summary of the differences between being a subscriber versus a nonsubscriber.  

Workers' compensation is a form of insurance purchased by employer to provide coverage for medical expenses, partial income and disability benefits for an employee suffering an injury or illness arising in the course and scope of his or her employment. In Texas, employers are permitted to opt-out of the state worker’s compensation. These employers are called nonsubscribers. There are advantages and disadvantages

The primary advantage of worker’s compensation coverage is that workers compensation subscribers (i.e., employers having workers compensation insurance coverage) cannot be held liable in court for employee injuries or illnesses that occurred in the course and scope of the employee’s employment. This protection does not apply to individuals who are independent contractors of an employer. The primary disadvantage to worker’s compensation coverage is its cost. Another disadvantage is that worker’s compensation subscribers cannot discriminate or retaliate against employees who report or have workplace injuries, and employees can sue employers if they experience an adverse employment action shortly after reporting or having a worker’s compensation claim.

Nonsubscribers, on the other hand, cannot be sued for discrimination or retaliation for taking adverse action against an employee that has been injured on the job.  They can, however, be sued by the employees for negligence and gross negligence when they are injured at work. The law is written to encourage employers to purchase workers compensation insurance. Consequently, nonsubscribers have few defenses to these claims such as claims for contributory or comparative negligence (aka “proportionate liability”) where liability is apportioned between the employer and employee based on percentages of relative fault. The only legal defenses a nonsubscriber has to a claim that an employee was injured in the course and scope of employment are that the employee was the sole cause of the injury or was intoxicated at the time the injury occurred. 

Understand that your general liability, homeowners or umbrella insurance policies alone do not provide coverage employee injuries or illnesses. Most such policies have exclusions that do not cover claims made by employees or those otherwise providing services for the employer (i.e., independent contractors). Whether to purchase worker’s compensation insurance is an important business decisions and the pros and cons of that decision should be weighed carefully.

Follow me on Twitter @RussellCawyer.

EEOC Changes Tactics in Enforcing "Pregnancy" Discrimination Laws

The EEOC recently brought suit against the country's largest home builder on behalf of a pregnant employee who was denied a period of unpaid leave in addition to the maximum permitted under the employer's policies.  What is unique about this suit is that the EEOC brought the suit under the Americans with Disabilities Act rather than the Pregnancy Discrimination Act.

According to the Commission's press release, D.R. Horton

denied [the plaintiff] additional unpaid leave time after her doctor placed her on bed rest for over seven months as a result of pregnancy-related complications. Although the company initially provided some leave time, it finally stated it was against company policy to provide the employee any more leave time, even if it was unpaid, and then fired her.

Prior to the passage of the ADA Amendments Act, it is unlikely that the EEOC would have brought this case under the ADA because most courts were reluctant to conclude that pregnancy was a disability.  Instead, the Commission would have had to show under the Pregnancy Discrimination Act that the pregnant employee was treated differently than other nonpregnant employees who were similar in their ability and inability to work (i.e., similar work restrictions).  However, the EEOC is targeting employer leave policies that are perceived by the Commission as rigid.  An example of such policy is one that provides a maximum leave duration of six or twelve months.

One aspect of this tactic that should be troubling to Texas employers is the fact that Texas law uses the enforcement of a neutral absence control policy as a defense to a workers' compensation claim.  Where an employer uniformly and consistently applies a leave of absence policy with a maximum duration, an employee who is separated from employment for exhausting the available leave of absence, even if the absence is caused by an on-the-job injury, will have no workers' compensation retaliation claim.  Suits like the EEOC's suit against D.R. Horton may have the effect of requiring employers to make more frequent exceptions to these neutral absence control policies that might weaken their effectiveness as a defense in Texas workers' compensation retaliation cases.