Senator Robert "Bob" Deuell, M.D.
The Texas State Senate
District 2

For Immediate Release
March 11, 2005

***CAPITOL UPDATE***

Issues Facing the 79th Legislature

Worker's Compensation

(Austin) - In the next few days, it is very likely the Texas Senate will take up Senate Bill 5, dealing with the continuation and operation of the worker's compensation system in Texas. Reforming worker's compensation has been identified as one of the top legislative priorities this session, and I am looking forward to debating this issue on the floor of the Senate.

Copies of Senate Bill 5, as well as the interim committee report of the Senate Select Committee on Worker's Compensation, are available on the Texas Senate website at www.senate.state.tx.us. You may also contact my office if you would like a hard copy.

WORKERS' COMPENSATION

Studies show that Texas has among the highest workers' compensation cost per claim and utilization rates in the nation, but one of the lowest return-to-work rates for injured workers. All parties to the workers' compensation system--workers, health care providers, and employers--agree that the system is in crisis. Health care providers complain about cumbersome administrative burdens, low reimbursement rates, and problems with preauthorization, because a physician may treat an injured worker, only later to have the medical necessity of the treatment challenged. Workers complain about a confusing system and an inability to obtain the medical help they need. Employers argue that the system is too costly and that there is overutilization and fraud. Although all parties agree there is a problem, there is no consensus regarding solutions.

The legislature may consider ways to limit fraud and overutilization in the workers' compensation system, such as implementing some form of a network system, in which injured employees would be directed to a network of preselected care providers. It may also look at the method by which the reimbursement rates are set and the procedures regarding authorization of treatment.

Statutory Employees

Under Texas law, the exclusive remedy available to an employee injured on the job whose employer subscribes to the state's workers' compensation system is the recovery of workers' compensation benefits. Under Section 406.123 (Election to Provide Coverage; Administrative Violation) of the Texas Labor Code, a general contractor and a subcontractor may agree that the general contractor will provide workers' compensation insurance coverage to the subcontractor and the subcontractor's employees. Such an agreement makes the general contractor the employer of the subcontractor and its employees for purposes of the state's workers' compensation laws. The subcontractor and its employees in effect become the statutory employees of the general contractor.

Often a subcontractor will contract out work to other subcontractors. A question has arisen over whether the statutory employee protection granted by Section 406.123 to the contractor applies to all the lower tiers of subcontractors who were not part of the original agreement. In January 2004, a Texas appellate court ruled in Etie v. Walsh and Albert Company, Ltd., et al., 135 SW3d 764 (Tex. Ct. App. 2004), that the statutory employer/employee relationship extends throughout all tiers of subcontractors; therefore, all the employees of the contractor and its subcontractors are covered by the workers' compensation system, and the contractor and all the subcontractors are equally immune from suit by an injured employee. The legislature may review this issue and consider clarifying the extent of the protection offered by Section 406.123.

Portions of the article were taken from the Senate Research Center publication "Issues Facing the 79th Legislature." To view the full publication, please visit www.senate.state.tx.us, or feel free to call my office to request a copy.

To contact Sen. Deuell about the legislative process, contact the Capitol Office at (512) 463-0556 or mail to Sen. Bob Deuell, Texas Senate, P.O. Box 12068, Austin, TX 78711. The website for the Texas Senate is www.Senate.state.tx.us. The e-mail address for Sen. Deuell is: bob.deuell@senate.state.tx.us.

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