Del Industrial, Inc. v. Texas Workers' Compensation Insurance Fund

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-97-00349-CV

Del Industrial, Inc., Appellant

v.

Texas Workers' Compensation Insurance Fund, Appellee

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT

NO. 95-11777, HONORABLE HUME COFER, JUDGE PRESIDING

This is an action for collection of insurance premiums. The primary issue is whether a

company that leases employees from a staff leasing agency is responsible for paying workers' compensation

insurance premiums for the leased employees. The lower court imposed liability on appellant, Del

Industrial, Inc. ("Del"), for payment of the premiums based on section 91.042(c) of the Staff Leasing

Services Act ("the Act"). See Tex. Lab. Code Ann. § 91.042 (c) (West 1996). (1) Because we find the

statute does not require the company to pay the premiums, we will reverse and render judgment in favor

of Del.

STATEMENT OF FACTS

Appellee, the Texas Workers' Compensation Insurance Fund ("Fund"), is a governmental

corporation that operates as a workers' compensation insurance carrier. See Tex. Ins. Code Ann. art.

5.76-3 (West Supp. 1998). Pursuant to a contract, the Fund agreed to provide Del with workers'

compensation insurance coverage for Del's employees from March 30, 1994 to March 22, 1995. During

this time, Del also leased staff from a licensed staff leasing company, Administrative Resources, Ltd. (2) At

the end of the policy period, the Fund charged Del an additional $82,047, the cost of premiums for

workers' compensation coverage for the leased workers. (3)

After unsuccessful attempts to collect these additional premiums, the Fund brought suit

against Del to collect the amount. The Fund moved for summary judgment on the issues of Del's liability

for the workers' compensation premiums and the amount due. The Fund claimed Del was liable for the

premiums under section 91.042(c) of the Act or, alternatively, because Del exercised supervision, direction,

and control of the leased employees. Del filed a competing motion for summary judgment, arguing that the

Fund had no legal basis for charging Del with the premiums. After a hearing, the trial court granted partial

summary judgment in favor of the Fund on the specific ground that Del was liable for the premiums under

the Act and denied Del's cross-motion for summary judgment in its entirety. The trial court's order was

silent as to the Fund's alternative theory of recovery. Further, the trial court did not render summary

judgment on the amount of premiums owed. Following a trial to determine the amount of premiums due,

the trial court rendered a final judgment which incorporated the language of the partial summary judgment

on Del's liability and awarded the Fund a total of $30,215.64 in premiums and interest. Del filed this

appeal, raising one issue. In its appeal, Del contends that the Act does not authorize the Fund to charge

Del workers' compensation insurance premiums for employees Del leased from a staff leasing company.

STANDARD OF REVIEW

A summary judgment is proper only when a movant establishes that there is no genuine

issue of material fact and that it is entitled to judgment as a matter of law. See Tex. R. Civ. P. 166a. In

deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable

to the nonmovant will be taken as true. See Nixon v. Mr. Property Management Co. , 690 S.W.2d 546,

548-49 (Tex. 1985). Every reasonable inference must be indulged in the nonmovant's favor, with any

doubts resolved in its favor. Id. A summary judgment for the defendant disposing of the entire case is

proper if, as a matter of law, the plaintiff could not succeed upon any theories pleaded. See Delgado v.

Burns , 656 S.W.2d 428, 429 (Tex. 1983).

When both parties move for summary judgment, the non-prevailing party may appeal both

the prevailing party's motion as well as the denial of its own. See Holmes v. Morales , 924 S.W.2d 920,

922 (Tex. 1996); Tobin v. Garcia , 316 S.W.2d 396, 400 (Tex. 1958). An appellate court should

liberally construe appeals involving cross-motions for summary judgment, and, if the point of error

sufficiently alerts the court that appellant is contesting both the granting of appellee's motion and the denial

of its own, the court should consider both issues. See Runyan v. Mullins , 864 S.W.2d 785, 787-88 (Tex.

App.--Fort Worth 1993, writ denied). (4) In addition, when reviewing cross-motions for summary

judgement, the appellate court should consider all the summary judgment proof and determine all questions

presented. Commissioners Court v. Agan , 940 S.W.2d 77, 81 (Tex. 1997). The appellate court may

affirm the trial court's summary judgment or reverse and render judgment on the non-prevailing party's

motion. See Holmes , 924 S.W.2d at 922 ; Jones v. Strauss , 745 S.W.2d 898, 900 (Tex. 1988).

This case is one of statutory construction, and such matters are questions of law for the

reviewing court to decide. See Johnson v. City of Fort Worth , 774 S.W.2d 653, 656 (Tex. 1989). The

primary rule of statutory interpretation is that a court must look to the intent of the legislature and must

construe the statute so as to give effect to that intent. Union Bankers Ins. Co. v. Shelton , 889 S.W.2d

278, 280 (Tex. 1994). The court is bound to construe a statute as written and, if possible, ascertain the

legislature's intention from the language used in the statute. See Morrison v. Chan , 699 S.W.2d 205, 208

(Tex. 1985).

DISCUSSION

The section of the Act in question reads as follows:

§ 91.042 Workers' Compensation Insurance

(a) A license holder may elect to obtain workers' compensation insurance coverage for

the license holder's assigned employees through an insurance company as defined under

Section 401.011(28) or through self-insurance as provided under Chapter 407.

(b) If a license holder maintains workers' compensation insurance, the license holder shall

pay workers' compensation insurance premiums based on the experience rating of the

client company for the first two years the client company has a contract with the license

holder and as further provided by rule by the Texas Department of Insurance.

(c) For workers' compensation insurance purposes, a license holder and the license

holder's client company shall be coemployers. If a license holder elects to obtain workers'

compensation insurance, the client company and the license holder are subject to Sections

406.034 and 408.001. (5)

(d) If a license holder does not elect to obtain workers' compensation insurance, both the

license holder and the client company are subject to Section 406.004 and 406.033. (6)

(e) After the expiration of the two-year period under Subsection (b), if the client company

obtains a new workers' compensation insurance policy in the company's own name or

adds the company's former assigned workers to an existing policy, the premium for the

workers' compensation insurance policy of the company shall be based on the lower of:

(1) the experience modifier of the company before entering into the staff leasing

arrangement; or

(2) the experience modifier of the license holder at the time the staff leasing

arrangement terminated.

(f) On request, the Texas Department of Insurance shall provide the necessary

computations to the prospective workers' compensation insurer of the client company to

comply with Subsection (e).

The trial court based its decision regarding Del's liability for the premiums on its reading

of one sentence of this section. Quoting the partial summary judgment order, the final judgment states:

The Court finds that, because of the language of Texas Labor Code §91.042(c) providing

that "For workers' compensation insurance purposes, a license holder [staff leasing

company] and the license holder's client company shall be coemployers," employees

leased by [Del] from a staff leasing company are covered under [Del's] workers'

compensation insurance policy issued by the Texas Workers' Compensation Insurance

Fund. Therefore, the Court finds as a matter of law the Texas Workers' Compensation

Insurance Fund is entitled to premium under its policy issued to [Del] for workers'[sic]

provided by a leasing company without statutory workers' compensation insurance

coverage.

Likewise, the Fund contends on appeal that the "coemployer" language obligates the client company to

extend coverage to leased employees when the staff leasing company does not elect to provide coverage.

For numerous reasons, we disagree with the Fund's position.

First, the Fund seeks to interpret the term "coemployers" without considering the entire

statutory scheme. S tatutory provisions, however, must not be isolated from the surrounding language nor

construed apart from their context. See Morrison , 699 S.W.2d 208 ; Jessen Assocs., Inc. v. Bullock , 531

S.W.2d 593, 601 (Tex. 1975). Further, we must presume that in enacting the statute the legislature

intended the entire statute to be effective. See Tex. Gov't Code Ann. § 311.021 (2) (West 1988). Reading

the entirety of the section on workers' compensation insurance together with other provisions of the Act

leads us to the conclusion that the staff leasing company and the client company are coemployers only to

the extent of the consequences of the staff leasing company's election.

Based on the plain language of the statute, we conclude that the legislature granted the staff

leasing company the absolute right to elect whether to obtain coverage for the leased employees. Section

91.042(a) flatly states that "[a] license holder may elect to obtain workers' compensation insurance

coverage for the license holder's assigned employees." See Labor Code § 91.042(a) (West 1996). The

remainder of the workers' compensation insurance section then sets forth the consequences of the staff

leasing company's decision for both the staff leasing company and its client company, thus defining the

extent of their relationship as "coemployers." For example, if the staff leasing company elects to obtain

coverage, it pays the premiums, and the staff leasing company and the client company are subject to the

employee election, exclusive remedy, and exemplary damages provisions of the Texas Labor Code. See

Labor Code § 406.034 (West 1996) & § 408.001 (West 1996). If the staff leasing company does not

elect coverage, however, the staff leasing company and the client company must notify the Texas Workers'

Compensation Commission. See Labor Code § 406.004 (West 1996). In this event, the staff leasing

company and the client company, both having the status of coemployer, are subject to common law suits

without the benefit of certain defenses. See Labor Code § 406.033 (West 1996). The legislature's use

of the term "coemployers" followed only by an explicit explanation of the consequences of the staff leasing

company's election persuades us that the staff leasing company and client company are coemployers only

to the extent of the consequences of that election.

Further, the legislature has imposed extensive responsibility for the leased employees on

the staff leasing company rather than the client company. For instance, the staff leasing company retains

the right of direction and control over the employees assigned to a client company. See Labor Code §

91.032(1) (West 1996). The staff leasing company also retains the right to hire, fire, discipline, and

reassign the assigned employees. See Labor Code § 91.032(4) (West 1996). Additionally, the staff leasing

company must assume responsibility for the payment of wages to the assigned employees, without regard

to payments made by the client company to the staff leasing company, and collect and pay payroll taxes

of the assigned employees. See Labor Code § 91.032(2), (3) (West 1996). It is the staff leasing

company's responsibility to inform its assigned employees of the contractual agreement with the client

company. See Labor Code § 91.031(b) (West 1996). Most important to our discussion, the staff leasing

company is statutorily required to retain the right of direction and control over the management of

workers' compensation claims, claim filings, and related procedures . See Labor Code § 91.032(5)

(emphasis added). This assignment of extensive responsibility to the staff leasing company additionally

persuades us that the coemployer status is limited solely to the consequences of the election.

Second, holding as the Fund urges us to do, that the client company must provide coverage

for the leased employees, could lead to an unreasonable result. Under the Fund's interpretation, an injured

leased worker could recover twice for the same injury: once from benefits obtained through the client

company's policy, and again under the Act in a common law cause of action brought against the staff

leasing company that elected not to provide coverage. (7) A court, however, will not construe a statute in a

manner that will lead to a foolish or absurd result when another alternative is available. See Tex. Gov't

Code Ann. § 311.021 (3) (West 1988); Meno v. Kitchens , 873 S.W.2d 789, 792 (Tex. App.--Austin

1994, writ denied) .

Finally, accepting the Fund's interpretation would violate the legislative intent as expressed

in the plain meaning of the statute and require us to read an additional obligation into the statute that is

counter to this expressed intent. See Meno , 873 S.W.2d at 792 (courts are obligated to follow plain

meaning of statute); Laidlaw Waste Sys. (Dallas), Inc. v. City of Wilmer , 904 S.W.2d 656, 659 (Tex.

1995) (courts should not insert additional requirements into statute except to give effect to clear legislative

intent). The Fund asks this Court to hold that the client company is obligated to provide coverage if the

staff leasing company elects against it. Clearly, though, section 91.042(d) demonstrates that the legislature

contemplated a situation in which neither the staff leasing company nor the client company would provide

coverage for the leased employees. Instead of requiring the client company under those facts to provide

coverage for the leased employees, the legislature chose to strip the client company of traditional common

law defenses and expose it to common law causes of action. We reject, therefore, the Fund's position as

contrary to the expressed legislative scheme and decline to impose the additional, unwritten obligation on

the client company.

We hold that the Act does not require a client company to extend workers' compensation

insurance coverage to leased employees if the staff leasing company elects not to provide coverage.

Accordingly, we further hold that Del is not liable to the Fund for workers' compensation premiums for the

employees it leased from Administrative Resources. Del's sole point of error is sustained. (8)

Del requests that this Court reverse and render judgment in its favor. In a footnote to its

brief, the Fund argues that we are precluded from rendering judgment for Del because the trial court did

not consider the Fund's alternative ground for liability asserted in the summary judgment motion when it

granted the partial summary judgment on liability. However, we are obligated to dispose of as many claims

as possible while a case is on appeal in order to promote judicial economy. See Cincinnati Life Ins. Co.

v. Cates , 927 S.W.2d 623, 626 (Tex. 1996); Delta Air Lines, Inc. v. Norris , 949 S.W.2d 422, 429

(Tex. App.--Waco 1997, writ denied). (9) In Cates , the supreme court concluded that "the appellate court

may consider other grounds that the movant preserved for review and trial court did not rule on in the

interest of judicial economy." Cates , 927 S.W.2d at 626 . We believe judicial economy would best be

served by reviewing the Fund's alternative theory of liability. (10)

The Fund's alternative theory of liability presented in its motion for summary judgment

appears to be predicated on the traditional right-of-control test. The Fund argues the leased employees

were entitled to coverage under Del's policy because Del supervised, directed, and controlled the leased

employees. The employees, therefore, qualify as "persons engaged in work that could make [the Fund]

liable" under the policy, entitling the Fund to premiums from Del. In its cross-motion for summary judgment

and response to the Fund's motion, Del argues that the Act supersedes this common law test and defines

the relationship among staff leasing companies, client companies, and the leased workers for purposes of

workers' compensation insurance. Thus, any question of "control" of the employees is "irrelevant." In its

brief to this Court, the Fund admits that the Act supersedes the common law right-of-control test.

Specifically, the Fund states "[t]he Legislature changed that test [right-of-control] as regards employee

leasing arrangements by legislating a statutory 'co-employer' status into the [Act]." We conclude that as

a matter of law the Fund cannot prevail on its right-of-control argument; therefore, it would be inefficient

to remand the case on this one issue to the trial court. Further, we are bound by the rules of appellate

procedure that require us to render the judgment the trial court should have rendered unless a remand is

necessary for further proceedings or the interest of justice requires a remand for another trial. See Tex. R.

App. P. 43.3. Neither exception applies.

CONCLUSION

The Act sets forth a system in which the client company's obligations are determined by

the election of the staff leasing company. The staff leasing company and the client company are

coemployers only to the extent of the statutory consequences of this election. Accordingly, we reverse the

judgment of the trial court and render judgment that Del is not liable to the Fund for premiums on the leased

workers.

Marilyn Aboussie, Justice

Before Chief Justice Yeakel, Justices Aboussie and Jones

Reversed and Rendered

Filed: July 16, 1998

Publish

1. The statute in effect at the time was the Staff Leasing Services Act. Act of May 27, 1993, 74th Leg.

R.S., ch. 994, 1993 Tex. Gen. Laws 4346 (codified at Tex. Rev. Civ. Stat. Ann. art. 9104), repealed by

Act of May 11, 1995, 74th Leg., R.S., ch. 76, § 9.20(b), 1995 Tex. Gen. Laws 458 , 645. This Act was

codified in 1995 as Chapter 91 of the Texas Labor Code. See Act of May 11, 1995, 74th Leg. R.S., ch.

76, § 9.20(a), 1995 Tex. Gen. Laws 458 , 635. As the statutes are substantially similar, we will cite to the

current code for convenience.

2. Under the statute, Administrative Resources, Ltd. is both a "staff leasing services company" and a

"license holder," and Del is the "client company" of Administrative Resources, Ltd. The term "staff leasing

services company" means a business entity that offers staff leasing services. See Tex. Lab. Code Ann. §

91.001 (15) (West Supp. 1998). A "license holder" is a person licensed under the chapter to provide staff

leasing services. See Labor Code § 91.001(11) (West Supp. 1998). "Staff leasing services" is defined

as an arrangement by which employees of a license holder are assigned to work at a client company and

in which employment responsibilities are in fact shared by the license holder and the client company, the

employee's assignment is intended to be of a long-term or continuing nature, rather than temporary or

seasonal in nature, and a majority of the work force at a client company worksite or a specialized group

within that work force consists of assigned employees of the license holder. See Labor Code § 91.001(14)

(West Supp. 1998). "Client company" means a person that contracts with a license holder and is assigned

employees by the license holder under the contract. See Labor Code § 91.001(3) (West Supp. 1998).

3. Del offered summary judgment proof that none of the employees that it leased from Administrative

Resources actually filed any claims for workers' compensation against the Fund.

4. We note also that the new Texas Rules of Appellate Procedure allow an appellant to present issues

or points for review, and the statement of an issue or point will be treated as covering every subsidiary

question that is fairly included. Tex. R. App. P. 38.1(e).

5. Section 406.034 allows employees to waive coverage under workers' compensation insurance law

and to pursue common law causes of action. See Labor Code § 406.034 (West 1996). Section 408.001

states that recovery of workers' compensation benefits is the exclusive remedy of an employee covered

by workers' compensation insurance coverage; however, surviving spouses or heirs of a deceased

employee whose death was caused by an intentional act or omission of the employer or by the employer's

gross negligence may seek exemplary damages. See Labor Code § 408.001 (West 1996).

6. Under section 406.004, employers who do not obtain workers' compensation insurance coverage

are required to notify the commission and failure to comply constitutes an administrative violation. See

Labor Code § 406.004 (West 1996). Section 406.033 prevents employers who do not have workers'

compensation insurance from asserting traditional common law defenses and places the burden of proving

negligence of the employer on the injured worker. See Labor Code § 406.033 (West 1996).

7. In enacting the section on workers' compensation insurance, the legislature could have intended to

prevent the exact situation which the Fund's reading of the statute would cause.

From our review of suits

involving workers' compensation claims filed prior to 1993, whether an injured leased worker could

recover from both the client company and the staff leasing company when only one provided workers'

compensation coverage was a frequently litigated question. See Williams v. Brown & Root, Inc ., 947

S.W.2d 673 (Tex. App.--Texarkana 1997, no writ); Brown v. Aztec Rig Equip . Inc ., 921 S.W.2d 835

(Tex. App.--Houston [14th Dist.] 1996, writ denied); Pederson v. Apple Corrugated Packaging, Inc.,

874 S.W.2d 135 (Tex. App.--Eastland 1994, writ denied); Rodriguez v. Martin Landscaping , 882

S.W.2d 602 (Tex. App.--Houston [1st Dist] 1994, no writ); Gibson v. Grocers Supply Co. , 866

S.W.2d 757 (Tex. App.--Houston [14th Dist.] 1993, no writ); Cherry v. Chustz , 715 S.W.2d 742 (Tex.

App.--Dallas 1986, no writ). With the 1993 legislative definition of the relationship between the staff

leasing company and client company, however, it appears that the legislature attempted to put this issue

squarely to rest. By explaining that the staff leasing company and the client company are coemployers, the

legislature insures that both will be treated the same.

8. Not only does our reading of the statute comport with, and preserve, the traditional workers'

compensation system in which the employer has the right to choose whether to obtain coverage for

employees, it also strikes a balance between the cost of business and protection of workers. By placing

the election to obtain workers' compensation insurance in the hands of the staff leasing company, smaller

and medium-sized businesses can acquire workers without providing benefits. At the same time, the

workers still can have workers' compensation insurance if the staff leasing company so elects. Since a

client company is exposed to common law negligence claims and loses certain benefits if the staff leasing

company does not elect to provide coverage, it seems more likely that the client companies would, overall,

choose to do business with staff leasing companies that provide coverage. Consequently, growth of

business would be encouraged without sacrificing the workers' benefits.

9. In his concurrence to the plurality opinion in State Farm Fire & Casualty Co. v. S.S. , Chief Justice

Phillips observed:

At times, the record will be sufficiently clear, and the need for an immediate final disposition

sufficiently strong, that an appellate court will best discharge its duty by reviewing all

summary judgment grounds raised and preserved by movant, regardless of the trial court's

action. More often, however, the administration of justice would probably best be served

by further trial court review.

858 S.W.2d 374, 382 (Tex. 1993) (Phillips, C.J., concurring).

10. Moreover, we do not believe that the Fund's failure to assert its alternative theory of liability in a

point of error on appeal should preclude us from reviewing the issue. Otherwise, movants would be able

to frustrate the judicial system by intentionally failing to bring all grounds advanced in a summary judgment

motion on appeal so that the appellate court would be forced to remand even futile issues to the trial court.

ee Labor Code § 406.034 (West 1996). Section 408.001

states that recovery of workers' compensation benefits is the exclusive remedy of an employee covered

by workers' compensation insurance coverage; however, surviving spouses or heirs of a deceased

employee whose death was caused by an intentional act or omission of the employer or by the employer's

gross negligence may seek exemplary damages. See Labor Code § 408.001 (West 1996).

6. Under section 406.004, employers who do not obtain workers' compensation insurance coverage

are required to notify the commission and failure to comply constitutes an administrative violation. See

Labor Code § 406.004 (West 1996). Section 406.033 prevents employers who do not have workers'

compensation insurance from asserting traditional common law defenses and places the burden of proving

negligence of the employer on the injured worker. See Labor Code § 406.033 (West 1996).

7. In enacting the section on workers' compensation insurance, the legislature could have intended to

prevent the exact situation which the Fund's reading of the statute would cause. From our review of suits

involving workers' compensation claims filed prior to 1993, whether an injured leased worker could

recover from both the client company and the staff leasing company when only one provided workers'

compensation coverage was a frequently litigated question. See Williams v. Brown & Root, Inc ., 947

S.W.2d 673 (Tex. App.--Texarkana 1997, no writ); Brown v. Aztec Rig Equip . Inc ., 921 S.W.2d 835

(Tex. App.--Houston [14th Dist.] 1996, writ denied); Pederson v. Apple Corrugated Packaging, Inc.,

874 S.W.2d 135 (Tex. App.--Eastland 1994, writ denied); Rodriguez v. Martin Landscaping , 882

S.W.2d 602 (Tex. App.--Houston [1st Dist] 1994, no writ); Gibson v. Grocers Supply Co. , 866

S.W.2d 757 (Tex. App.--Houston [14th Dist.] 1993, no writ); Cherry v. Chustz , 715 S.W.2d 742 (Tex.

App.--Dallas 1986, no writ). With the 1993 legislative definition of the relationship between the staff

leasing company and client company, however, it appears that the legislature attempted to put this issue

squarely to rest. By explaining that the staff leasing company and the client company are coemployers, the

legislature insures that both will be treated the same.

8. Not only does our reading of the statute comport with, and preserve, the traditional workers'

compensation system in which the employer has the right to choose whether to obtain coverage for

employees, it also strikes a balance between the cost of business and protection of workers. By placing

the election to obtain workers' compensation insurance in the hands of the staff leasing company, smaller

and medium-sized businesses can acquire workers without providing benefits. At the same time, the

workers still can have workers' compensation insurance if the staff leasing company so elects. Since a

client company is exposed to common law negligence claims and loses certain benefits if the staff leasing

company does not elect to provide coverage, it seems more likely that the client companies would, overall,

choose to do business with staff leasing companies that provide coverage. Consequently, growth of

business would be encouraged without sacrificing the workers' benefits.

9. In his concurrence to the plurality opinion in State Farm Fire & Casualty Co. v. S.S. , Chief Justice

Phillips observed: