The current prominence of the multi-entity workplace—where so-called “host” employers rely on third-party staffing agencies to perform various functions—makes a clear determination of statutory “employer” status critical in a variety of contexts.  Oftentimes, a host employer will argue that a worker is an independent contractor rather than employee.  This approach typically leaves the staffing agency responsible for classification decisions under the Fair Labor Standards Act and for Occupational Safety and Health Act compliance.

In April 2021, the Texas Supreme Court greatly expanded the responsibility of host employers in the context of workplace injuries.  Specifically, in Waste Management of Texas, Inc. v. Stevenson, the Court held that a worker who was injured on the job while employed by a temporary staffing agency was the host employer’s employee for workers’ compensation purposes, notwithstanding a contract between the host employer and staffing agency that expressly stated workers were independent contractors.

In Waste Management, the plaintiff, Robert Stevenson, was hired by Taylor Smith Consulting, LLC and assigned to work for Waste Management of Texas, Inc. on a temporary basis.  No. 19-0282, 2021 Tex. LEXIS 348, at *3 (Apr. 30, 2021).  In May 2014, Stevenson was working on a Waste Management garbage truck on a garbage-collection route when the driver of the truck accidentally backed over Stevenson’s leg and foot.  Both Waste Management and Stevenson’s staffing agency employer carried workers’ compensation insurance.  Stevenson applied for benefits under the staffing agency’s policy and separately filed suit against Waste Management and the driver, alleging common-law negligence.  Waste Management won summary judgment, successfully arguing that, because it was Stevenson’s employer, the Texas Workers’ Compensation Act barred Stevenson’s claims against it and the driver.  Stevenson unsuccessfully argued that the staffing contract, which expressly stated that temporary workers like Stevenson “shall be independent contractors in respect of Waste Management”, should govern.  The Fourteenth Court of Appeals reversed and remanded, holding there was a genuine fact issue as to whether Stevenson was Waste Management’s employee.

The Texas Supreme Court reversed the Fourteenth Court of Appeals and held that, for workers’ compensation purposes, Waste Management was Stevenson’s employer as a matter of law and entitled to the exclusive remedy protection of the workers’ compensation law.  The Court’s ruling drew upon, and arguably expanded, existing workers’ compensation law.  Specifically in the workers’ compensation context, the case law demonstrates that “[t]he test to determine whether a worker is an employee rather than an independent contractor is whether the employer has the right to control the progress, details, and methods of operations of the work.”  Id. at *5 (citing Limestone Prods. Distrib. Inc. v. McNamara, 71 S.W.3d 308, 312 (Tex. 2002) (per curiam)).  In finding that Stevenson was Waste Management’s employee and there was no fact issue on this point, the Texas Supreme Court relied heavily on both the right to control Stevenson’s work and the presence of actual control.  The agreement between Waste Management and the staffing company was “a factor to be considered” but was “not controlling,” especially given that the definition of “employee” under the Workers’ Compensation Act contemplates workers under a contract of hire.  Ultimately, the Court found that the agreement here did not “create a fact issue sufficient to avoid summary judgment given the conclusive nature of the countervailing facts.”

The Stevenson case reinforces the need for employers to be deliberate in their treatment of temporary workers, both contractually and in practice.  Host employers should recognize the possibility that they will be treated as the employer of a worker, especially where they have the right to control the work of that worker.  In a workers’ compensation case, that may be a good outcome.  In other contexts, it might not be.

If you have any questions about how to classify workers, the Reed Smith Labor and Employment team is ready to speak with you.