Preventing Tort Claims Against Nonsubscribers by Temporary Employees

As the need for a temporary workforce provided by staffing agencies continues to increase, the industry is seeing an escalation of on-the-job injury claims by temporary workers. This presents a rather unique issue for nonsubscribing employers in Texas, since temporary workers under the direction and control of a nonsubscriber company can be considered "employees" of both the staffing agency and the nonsubscriber company pursuant to the Texas Workers' Compensation Act ("the TWCA"). Although the exclusive remedy provision contained within the TWCA would certainly prevent a temporary worker from bringing a lawsuit against both a staffing agency as well as a company covered by workers' compensation insurance, many nonsubscribers do not realize that attempts by temporary workers to sue nonsubscriber companies for personal injury damages can be prevented.

Last year, the Waco Court of Appeals rendered a decision in Tractor Supply Co. of Texas, L.P. v. McGowan, ____ S.W.3d ____, 2016 WL 1722873 (Tex. App. – Waco, Apr. 28, 2016), addressing this very issue. There, a temporary worker sustained an on-the-job injury while working for a nonsubscriber company, and obtained a judgment against the nonsubscribing company at trial. On appeal, the Court of Appeals reversed the trial court's $8,767,375.81 judgment, and ruled that the temporary worker take nothing by his lawsuit since the causes of action asserted were barred by the TWCA's exclusive remedy provision. The Court of Appeals found that because the nonsubscriber employer had a written agreement with the staffing agency requiring workers' compensation insurance coverage for temporary workers performing work on the nonsubscriber's premises, and coverage was available to the temporary worker, the TWCA exclusive remedy provision would apply to the nonsubscriber.

To ensure the protections to nonsubscribers utilizing temporary workers through staffing agencies afforded by the Tractor Supply Co. of Texas, L.P. decision, nonsubscriber companies should be certain to enter into a written agreement with staffing agencies to require that they procure workers' compensation coverage for the agencies' employees working on the nonsubscribers premises. More specifically, nonsubscribers need to ensure that the staffing company procures workers' compensation insurance with an Alternate Employer Endorsement, which covers the nonsubscriber company for on-the-job injuries by temporary workers. With these protections in place, nonsubscriber companies will have a very strong argument for summary judgment in the event of a personal injury lawsuit brought by a temporary worker.