By:  Fraser                                           S.B. No. 1404
         99S0502/1                           
                                A BILL TO BE ENTITLED
                                       AN ACT
 1-1     relating to workers' compensation insurance coverage under certain
 1-2     agreements and to liability of third parties for an injury to an
 1-3     employee.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1.  Section 406.121, Labor Code, is amended to read
 1-6     as follows:
 1-7           Sec. 406.121.  DEFINITIONS.  In this subchapter:
 1-8                 (1)  "Building or construction" includes:
 1-9                       (A)  erecting or preparing to erect a structure,
1-10     including a building, bridge, roadway, public utility facility, or
1-11     related appurtenance;
1-12                       (B)  maintaining, remodeling, extending,
1-13     repairing, or demolishing a structure; or
1-14                       (C)  otherwise improving real property or an
1-15     appurtenance to real property through similar activities.
1-16                 (2)  "Contractor" means a person who contracts with a
1-17     general contractor or principal to perform all or part of the work
1-18     or services that the general contractor or principal has undertaken
1-19     to perform.
1-20                 (3)  "General contractor" means a person who undertakes
1-21     to procure the performance of work or a service, either separately
1-22     or through the use of contractors [subcontractors].  The term
1-23     includes an owner or lessor of real property; a "hiring contractor"
1-24     subject to Subchapter G; and a "principal contractor," "original
 2-1     contractor," "prime contractor," or other analogous term.  The term
 2-2     does not include a motor carrier that provides a transportation
 2-3     service through the use of an owner operator.
 2-4                 (4) [(2)]  "Independent contractor" means a person who
 2-5     contracts to perform work or provide a service for the benefit of
 2-6     another and who ordinarily:
 2-7                       (A)  acts as the employer of any employee of the
 2-8     contractor by paying wages, directing activities, and performing
 2-9     other similar functions characteristic of an employer-employee
2-10     relationship;
2-11                       (B)  is free to determine the manner in which the
2-12     work or service is performed, including the hours of labor of or
2-13     method of payment to any employee;
2-14                       (C)  is required to furnish or to have employees,
2-15     if any, furnish necessary tools, supplies, or materials to perform
2-16     the work or service; and
2-17                       (D)  possesses the skills required for the
2-18     specific work or service.
2-19                 (5) [(3)]  "Motor carrier" means a person who operates
2-20     a motor vehicle over a public highway in this state to provide a
2-21     transportation service or who contracts to provide that service.
2-22                 (6) [(4)]  "Owner operator" means a person who provides
2-23     transportation services under contract for a motor carrier.  An
2-24     owner operator is an independent contractor.
2-25                 (7)  "Principal" means a person who:
2-26                       (A)  undertakes work for himself or contracts to
 3-1     perform work for another; and
 3-2                       (B)  enters into an agreement with a contractor
 3-3     for execution by or under the contractor of all or any part of the
 3-4     work.
 3-5                 (8) [(5)  "Subcontractor" means a person who contracts
 3-6     with a general contractor to perform all or part of the work or
 3-7     services that the general contractor has undertaken to perform.]
 3-8                 [(6)]  "Transportation service" means providing a motor
 3-9     vehicle, with a driver under contract, to transport passengers or
3-10     property.
3-11                 (9)  "Worker" means an individual who performs work for
3-12     a general contractor or principal but is not a direct employee of
3-13     the general contractor or principal.
3-14           SECTION 2.  Section 406.123, Labor Code, is amended to read
3-15     as follows:
3-16           Sec. 406.123.  ELECTION TO PROVIDE COVERAGE; ADMINISTRATIVE
3-17     VIOLATION.  (a)  A contractor and a general contractor or principal
3-18     [and a subcontractor] may enter into a written agreement under
3-19     which the general contractor or principal provides workers'
3-20     compensation insurance coverage to the contractor [subcontractor]
3-21     and the employees of the contractor [subcontractor].
3-22           (b)  A general contractor or principal engaged in building or
3-23     construction may provide workers' compensation insurance coverage
3-24     in the manner authorized under Section 406.003 or by entering into
3-25     a written agreement with another person under which the other
3-26     person provides the coverage.
 4-1           (c)  If a general contractor has workers' compensation
 4-2     insurance to protect the general contractor's employees and if, in
 4-3     the course and scope of the general contractor's business, the
 4-4     general contractor enters into a contract with a subcontractor who
 4-5     does not have employees, the general contractor shall be treated as
 4-6     the employer of the subcontractor for the purposes of this subtitle
 4-7     and may enter into an agreement for the deduction of premiums paid
 4-8     in accordance with Subsection (e) [(d)].
 4-9           (d) [(c)]  A motor carrier and an owner operator may enter
4-10     into a written agreement under which the motor carrier provides
4-11     workers' compensation insurance coverage to the owner operator and
4-12     the employees of the owner operator.
4-13           (e) [(d)]  If a general contractor or a motor carrier elects
4-14     to provide coverage under Subsection (a) or (d) [(c)], then,
4-15     notwithstanding Section 415.006, the actual premiums, based on
4-16     payroll, that are paid or incurred by the general contractor or
4-17     motor carrier for the coverage may be deducted from the contract
4-18     price or other amount owed to the subcontractor or owner operator
4-19     by the general contractor or motor carrier.
4-20           (f) [(e)]  An agreement under this section makes the general
4-21     contractor the employer of the subcontractor and the
4-22     subcontractor's employees only for purposes of the workers'
4-23     compensation laws of this state.
4-24           (g) [(f)]  A general contractor shall file a copy of an
4-25     agreement entered into under this section with the general
4-26     contractor's workers' compensation insurance carrier not later than
 5-1     the 10th day after the date on which the contract is executed.  If
 5-2     the general contractor is a certified self-insurer, the copy must
 5-3     be filed with the division of self-insurance regulation.
 5-4           (h) [(g)]  A general contractor who enters into an agreement
 5-5     with a subcontractor under this section commits a violation if the
 5-6     contractor fails to file a copy of the agreement as required by
 5-7     Subsection (g) [(f)].  A violation under this subsection is a Class
 5-8     B administrative violation.
 5-9           (i) [(h)]  Notwithstanding Subsection (c) [(b)], a person who
5-10     performs work or provides a service for an oil or gas well operator
5-11     and who is an independent contractor that has no employees shall be
5-12     treated in the same manner as an independent contractor with
5-13     employees and is not entitled to coverage under the general
5-14     contractor's workers' compensation insurance policy unless the
5-15     independent contractor and the general contractor enter into an
5-16     agreement under this section.
5-17           (j)  If a general contractor or principal has elected to
5-18     provide workers' compensation insurance under Subsection (b), the
5-19     general contractor's or principal's insurance carrier is liable for
5-20     workers' compensation benefits if the worker sustains a compensable
5-21     injury in the course and scope of the work performed by the worker
5-22     for the general contractor or principal.  If the general contractor
5-23     or principal has elected to provide coverage by entering into a
5-24     written agreement that another person will provide the coverage
5-25     under Subsection (a), the general contractor's or principal's
5-26     insurance carrier is liable for benefits only to the extent the
 6-1     other person or the other person's insurance carrier fails to pay
 6-2     benefits to which the worker is entitled under this subtitle.
 6-3           SECTION 3.  Section 408.001, Labor Code, is amended to read
 6-4     as follows:
 6-5           Sec. 408.001.  EXCLUSIVE REMEDY; EXEMPLARY DAMAGES.
 6-6     (a)  Recovery of workers' compensation benefits is the exclusive
 6-7     remedy of an employee covered by workers' compensation insurance
 6-8     coverage or a legal beneficiary against the employer or an agent or
 6-9     employee of the employer for the death of or a work-related injury
6-10     sustained by the employee.
6-11           (b)  Recovery of workers' compensation benefits is the
6-12     exclusive remedy of a worker covered by workers' compensation
6-13     insurance coverage under Section 406.123(b) or the worker's legal
6-14     beneficiary against the general contractor or principal and the
6-15     general contractor's or principal's parent company, subsidiary,
6-16     partner, joint venturer, agent, servant, or employee if the general
6-17     contractor or principal has provided workers' compensation
6-18     insurance coverage under Section 406.123(b).
6-19           (c)  Subsection (b) does not affect a direct employer's
6-20     status and immunity under this section as an employer against whom
6-21     the recovery of workers' compensation benefits is the injured
6-22     employee's exclusive remedy.
6-23           (d)  This section does not prohibit the recovery of exemplary
6-24     damages by the surviving spouse or heirs of the body of a deceased
6-25     employee whose death was caused by an intentional act or omission
6-26     of the employer or by the employer's gross negligence.
 7-1           (e) [(c)]  In this section, "gross negligence" has the
 7-2     meaning assigned by Section 41.001, Civil Practice and Remedies
 7-3     Code.
 7-4           SECTION 4.  Section 417.001, Labor Code, is amended to read
 7-5     as follows:
 7-6           Sec. 417.001.  THIRD-PARTY LIABILITY.  (a)  Except as
 7-7     provided in Subsection (b), an [An] employee or legal beneficiary
 7-8     may seek damages from a third party who is or becomes liable to pay
 7-9     damages for an injury or death that is compensable under this
7-10     subtitle and may also pursue a claim for workers' compensation
7-11     benefits under this subtitle.
7-12           (b)  A worker or a worker's legal beneficiary may not seek
7-13     damages from the general contractor or principal if the general
7-14     contractor or principal provided workers' compensation insurance
7-15     coverage under Section 406.123(b).
7-16           (c)  If a benefit is claimed by an injured employee or a
7-17     legal beneficiary of the employee, the insurance carrier is
7-18     subrogated to the rights of the injured employee and may enforce
7-19     the liability of the third party in the name of the injured
7-20     employee or the legal beneficiary.  If the recovery is for an
7-21     amount greater than that paid or assumed by the insurance carrier
7-22     to the employee or the legal beneficiary, the insurance carrier
7-23     shall:
7-24                 (1)  reimburse itself and pay the costs from the amount
7-25     recovered; and
7-26                 (2)  pay the remainder of the amount recovered to the
 8-1     injured employee or the legal beneficiary.
 8-2           (d) [(c)]  If a claimant receives benefits from the
 8-3     subsequent injury fund, the commission is:
 8-4                 (1)  considered to be the insurance carrier under this
 8-5     section for purposes of those benefits;
 8-6                 (2)  subrogated to the rights of the claimant; and
 8-7                 (3)  entitled to reimbursement in the same manner as
 8-8     the insurance carrier.
 8-9           (e) [(d)]  The commission shall remit money recovered under
8-10     this section to the comptroller for deposit to the credit of the
8-11     subsequent injury fund.
8-12           SECTION 5.  Section 417.004, Labor Code, is amended to read
8-13     as follows:
8-14           Sec. 417.004.  EMPLOYER LIABILITY TO THIRD PARTY.  In an
8-15     action for damages brought by an injured employee, a worker as
8-16     defined in Section 406.121, a legal beneficiary, or an insurance
8-17     carrier against a third party liable to pay damages for the injury
8-18     or death under this chapter that results in a judgment against the
8-19     third party or a settlement by the third party, a person protected
8-20     from liability under Section 408.001 [the employer] is not liable
8-21     to the third party for reimbursement or damages based on the
8-22     judgment or settlement unless the person [employer] executed,
8-23     before the injury or death occurred, a written agreement with the
8-24     third party to assume the liability.
8-25           SECTION 6.  The changes in law made by this Act do not apply
8-26     to municipalities.
 9-1           SECTION 7.  This Act takes effect September 1, 1999, and
 9-2     applies to a cause of action that accrues on or after that date.  A
 9-3     cause of action that accrued before the effective date of this Act
 9-4     is governed by the law in effect before that date, and the former
 9-5     law is continued in effect for that purpose.
 9-6           SECTION 8.  The importance of this legislation and the
 9-7     crowded condition of the calendars in both houses create an
 9-8     emergency and an imperative public necessity that the
 9-9     constitutional rule requiring bills to be read on three several
9-10     days in each house be suspended, and this rule is hereby suspended.