Jottings By An Employer's Lawyer

Friday, April 02, 2004

New Requirement for Texas Non-Subscriber Plans - Must Meet 'Fair Notice' Standard

Non-Texas readers may be surprised to know that Texas, ever the bastion of independence, does not require employers to provide workers compensation insurance for their employees. (It does however penalize non-subscribers by prohibiting them from utilizing any of their common law defenses, such as contributory negligence, assumption of the risk or the fellow servant doctrine.) In lieu of workers compensation a substantial number of employers have adopted their own plans which provide benefits in case of injury, often conditioning them on a post-injury waiver and release. As of today, those plans now have an additional requirement to be enforceable, that they meet the so called "fair notice requirements." Storage & Processors, Inc. v. Reyes (Tex. 4/2/04).

The Court itself explained just what that meant, and its effect:
A contract which fails to satisfy either of the fair notice requirements when they are imposed is unenforceable as a matter of law. See Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 509B10 (Tex. 1993); see also U.S. Rentals, Inc. v. Mundy Serv. Corp., 901 S.W.2d 789, 792 (Tex. App.BHouston [14th Dist.] 1995, writ denied). One fair notice requirement, the express negligence doctrine, requires that "the intent of the parties must be specifically stated in the four corners of the contract." Ethyl Corp. v. Daniel Constr. Co., 725 S.W.2d 705, 707 (Tex. 1987).[1] The other requirement, of conspicuousness, mandates "that something must appear on the face of the [contract] to attract the attention of a reasonable person when he looks at it." Dresser, 853 S.W.2d at 508 (quoting Ling & Co. v. Trinity Sav. & Loan Ass'n, 482 S.W.2d 841, 843 (Tex. 1972)). Language may satisfy the conspicuousness requirement by appearing in larger type, contrasting colors, or otherwise calling attention to itself. Littlefield v. Schaefer, 955 S.W.2d 272, 274B75 (Tex. 1997). However, if both contracting parties have actual knowledge of the plan's terms, an agreement can be enforced even if the fair notice requirements were not satisfied. Dresser, 853 S.W.2d at 508 n.2 (citing Cate v. Dover Corp., 790 S.W.2d 559, 561 (Tex. 1990)).
Because a plan that does not comply is not enforceable, non-subscribers with such plans should review them quickly.

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