High Court Approves Use of Waivers Under Current Workers’ Comp Law

On its surface, a March 29 Texas Supreme Court ruling could look to some as though the court is in favor of employers opting out of the state’s workers’ compensation system. But upon closer inspection, it is clear that the court’s decision is a hat tip to the Legislature to decide whether employers can use waivers to insulate themselves from lawsuits when workers are injured.

The case is already one of heated debate at the Capitol, with a bill addressing the issue having already passed through the Senate amid mounting opposition by key business lobbying groups. But that hasn’t rankled Sen. Robert Duncan, R-Lubbock, who introduced the legislation. If passed, SB 624 would prohibit the use of waivers by non-subscribing employers, effectively sounding the death knell for the practice.

“Certainly, I was hoping the [court’s] decision would come down differently,” Duncan said. “Once you let that genie out of the bottle it’s hard to get it back in.” Nevertheless, Duncan believes the court’s decision was “an exercise of judicial restraint” in allowing Texas law to prevail.

The ruling upheld two Amarillo court decisions in early 2000 that determined that nothing in the Texas Workers’ Compensation Act, expressed or implied, could keep employers from requiring their employees to sign a liability waiver in order to receive medical and disability insurance.

In the first case, Gary Lawrence, a 55-year-old bulldozer operator whose legs were crushed when his machine toppled and pinned him underneath, was required to sign such a waiver. The company provided him with $210,000 in benefits after the accident, but Lawrence sued, claiming company negligence contributed to his injury and was responsible for paying more than just medical bills and lost wages. The case was thrown out in 1998 by Judge Abe Lopez because of the waiver Lawrence had signed.

In the second case, Danny Lee Lambert sued Affiliated Foods Inc. after his foot was injured in a 1993 forklift accident. Like Lawrence, Lambert had also signed a waiver. He received $57,000 in benefits from Affiliated, but sued in 1997, claiming company negligence. Randall County State District Judge Patrick Pirtle dismissed the case based upon the waiver.

The Amarillo Seventh Court of Appeals upheld both decisions in January 2000. In affirming that decision by a vote of 6-2, the Supreme Court determined that the Texas Workers’ Comp Act “neither clearly prohibits nor clearly allows voluntary pre-injury employee elections to participate in non-subscribing employers’ benefit plans in lieu of exercising common-law remedies. And whether or not such elections should be held void on the theory that they contravene the general statutory scheme and thus violate public policy is a decision that we believe, absent clear legislative guidance and in light of numerous competing public policy concerns, is better left to the Legislature. Accordingly, we decline to invalidate the petitioners’ elections on public policy grounds and affirm the court of appeals’ judgments.”

Business community members applauded the ruling, but the Texas AFL-CIO declared it a “death warrant” for the workers’ compensation system. “The court issued an engraved invitation to unscrupulous companies to drop workers’ compensation coverage and at the same time demand that employees who are injured in the workplace give up their valuable right to sue employers for negligence,” Joe Gunn, Texas AFL-CIO president was quoted in a report by the Austin American-Statesman.

Sen. Duncan believes his bill will address the matter sufficiently. Should it not pass, however, Duncan said the state’s workers’ comp system will likely collapse from the mass exodus of employers currently in the system.

“If this bill doesn’t pass, employers will get out of the system in numbers like we’ve never seen before,” Duncan said. The result will be an inferior system for worker protection, a drastic reduction in premium volume and skyrocketing costs for those employers who remain in the system, he said. And the matter couldn’t be addressed until the next Legislative session in 2003, Duncan said, leaving ample time for the system to reach a critical state.

“The only remedy at that point to restore the comp system would be to require employers to carry workers’ comp and I don’t want to tell employers they have to carry workers’ comp,” Duncan said. “I think we’re looking at a crisis situation here if this bill doesn’t pass.”

Duncan has spoken with numerous legislators as well as Texas Gov. Rick Perry and is confident the bill has the support it needs to be passed into law.

Bo Gilbert, the legislative liaison for the Independent Insurance Agents of Texas, agrees. “I’m extremely optimistic that it will pass and I believe it will benefit the Texas workers’ comp system greatly,” Gilbert said.

The bill was scheduled for hearing in the Business and Industry Committee April 10.

Topics Texas Workers' Compensation