Employer Failed to Prove Plaintiff was a Co-Employee of New PEO
A Texas Court of Appeals has reversed a summary judgment for an employer that contended that it’s agreement with a Professional Employer’s Organization gave it the benefit of the exclusive remedy doctrine. Rodriguez v. Lockhart Contracting Services, Inc., No. 04-15-00654-CV, (June 29, 2016), focuses on what steps a PEO must take to protect its client company from suit when it has assumed the employment contracts of a prior PEO.
Rodriguez was hired by Lockhart Contracting on February 18, 2011. At the time Rodriguez began working at Lockhart Contracting, it had a professional employer services agreement with a PEO known as TXWorks. Lockhart Contracting’s employer services agreement with TXWorks was administratively terminated on March 14, 2011, and Lockhart Contracting entered into a new agreement with Prime Source Too — another licensed PEO — effective March 15, 2011. A director for both TXWorks and Prime Source testified that when TXWorks terminated its contract with Lockhart, “all TXWorks employees were transferred to” Prime Source and were then subject to the new services agreement between Lockhart Contracting and Prime Source. On March 15 or 16, 2011, Rodriguez was injured while working at a Lockhart Contracting jobsite. According to Rodriguez, he was carrying a sixteen-foot-long concrete form when he fell into an uncovered hole.
Both programs were insured by the same carrier, but each program had its own, independent, workers’ compensation policy. The claimant received workers’ compensation benefits under the TXWorks workers’ comp policy. Eventually, the payments on the claim were transferred to the workers’ compensation insurance policy held by Prime Source when a manager at carrier learned Lockhart Contracting had changed PEOs before the accident. The record shows the transfer took place months after the carrier had completed workers’ compensation payments to Rodriguez and his medical providers.
After Rodriguez received his final temporary income benefits check, he filed suit against Lockhart Contracting and TXWorks. In his original petition, Rodriguez asserted negligence claims against both entities. However, upon discovering the employer services agreement between TXWorks and Lockhart Contracting had expired prior to the accident, Rodriguez amended his petition, maintaining his negligence claim against Lockhart Contracting — contending Lockhart Contracting was his employer and a nonsubscriber — but amending his claim against TXWorks to assert only a claim for fraud.
Lockhart Contracting filed a traditional motion for summary judgment, in which it alleged Rodriguez’s suit is barred by the exclusive remedy doctrine. Lockhart Contracting argued that by virtue of its agreement with Prime Source — a professional employer organization — it was covered by workers’ compensation insurance on the day of Rodriguez’s injury, and therefore Rodriguez was limited to recovery under the Act. Alternatively Lockhart Contracting argued that Rodriguez was barred from bringing suit against Lockhart Contracting because he accepted benefits under the workers’ compensation insurance policy — an equitable, quasi-estoppel theory.
Rodriguez filed a response to Lockhart Contracting’s motion for summary judgment. Rodriguez claimed: (1) he was not a Prime Source employee at the time of the accident, and therefore, even if Lockhart Contracting had coverage through its agreement with Prime Source, such coverage was not applicable to his accident; and (2) even if he was a Prime Source employee, the agreement between Lockhart Contracting and Prime Source did not comply with the requirements of the provisions of the Labor Code applicable to such agreements, thereby negating coverage. Rodriguez also asserted that his acceptance of benefits is irrelevant to his right to bring suit against Lockhart Contracting.
The trial court rendered summary judgment for Lockhart Contracting on the exclusive remedies ground. The claimant appealed. The court of appeals reverses the judgment of the trial court and remands the case to the trial court for further proceedings. In so doing, the court agreed with Rodriguez’s assertion that Lockhart Contracting was not entitled to summary judgment because there is more than a scintilla of evidence showing he was not a Prime Source employee at the time of the accident.
As part of its summary judgment evidence, Lockhart Contracting submitted the professional services agreement between itself and Prime Source. The agreement states, in pertinent part:
All employees assigned to [Lockhart Contracting’s] worksite(s) by [Prime Source] shall be covered by [Prime Source’s] workers’ compensation insurance in compliance with applicable laws and regulations. [Prime Source’s] workers’ compensation insurance will not cover any person(s) performing services for [Lockhart Contracting] who are not covered by this Agreement and not on [Prime Source’s] payroll. [Lockhart Contracting] understands, agrees, and acknowledges that no person shall become employed by [Prime Source], be covered by [Prime Source’s] workers’ compensation insurance or another benefit or term or condition of employment, or be issued a payroll check unless that person has, prior to commencing such employment, completed [Prime Source’s] applications, W-4 withholding form and form I-9, all of which must be delivered to [Prime Source] before the person commences employment. Prime Source shall not be considered an employer for any person until that individual completes these forms and [Lockhart Contracting] is notified that the person has been hired by [Prime Source].
(emphasis added) When this provision of the professional services agreement is viewed in the light most favorable to Rodriguez and all inferences therefrom are indulged in his favor, we hold it creates a fact issue as to whether Rodriguez was a Prime Source employee.
Per the agreement, Rodriguez could not be an employee until he — prior to employment — completed a Prime Source employment application and other attendant paperwork. Mr. Yarter admitted during his deposition that no Prime Source paperwork was completed by Rodriguez when he testified Prime Source “would have gotten paperwork — new paperwork filled out on him.”
The claimant’s suit for fraud against the TXWorks was severed and remains pending at the trial court.
FOLIO
