Court Opinion

ID: 9404769
Source: CourtListenerOpinion
Date Created: 2023-06-25 14:08:23.758566+00
Date Added: 2024-06-11T17:20:17.072774
License: Public Domain

Supreme Court of Texas
                          ══════════
                           No. 21-0496
                          ══════════

              Houston Area Safety Council, Inc. and
                   Psychemedics Corporation,
                             Petitioners,

                                  v.

                       Guillermo M. Mendez,
                            Respondent

   ═══════════════════════════════════════
              On Petition for Review from the
       Court of Appeals for the First District of Texas
   ═══════════════════════════════════════

                     Argued October 25, 2022

      CHIEF JUSTICE HECHT delivered the opinion of the Court, in which
Justice Blacklock, Justice Busby, Justice Bland, Justice Huddle, and
Justice Young joined.

      JUSTICE YOUNG filed a concurring opinion, in which Justice
Blacklock joined.

     JUSTICE BOYD filed a dissenting opinion, in which Justice
Lehrmann and Justice Devine joined.

      We are asked as a matter of first impression whether a third-
party entity hired by an employer to collect and test an employee’s
biological samples for drugs owes the employee a common-law duty to
perform its services with reasonable care. Applying established
principles, we conclude that the common law does not recognize such a
duty. Accordingly, we reverse the court of appeals’ judgment1 and render
judgment for Petitioners.
                                      I
      Guillermo Mendez, a pipefitter employed by Turnaround Welding
Services, was assigned to work the Valero Ardmore Refinery. Following
Valero policy for all on-site workers, Turnaround directed Mendez to
report to the Houston Area Safety Council to provide hair and urine
samples for drug and alcohol screenings. The Safety Council collected
the samples from Mendez and delivered them to Psychemedics for
laboratory testing. Psychemedics reported that Mendez’s hair sample
tested positive for cocaine and a cocaine metabolite.2 Mendez had taken
numerous drug tests over the more than 25 years he worked as a
pipefitter and had never had a positive result. Mendez denies that he
has ever used cocaine.
      Valero required Mendez to provide a second sample to a different
collection entity, DISA Global Solutions, which also sent the sample to
Psychemedics for testing. The second sample tested negative for cocaine,
as did a third that Mendez had tested by a different laboratory at his
own expense. Mendez was required to complete a substance-abuse

      1   634 S.W.3d 154, 163 (Tex. App.—Houston [1st Dist.] 2021).
      2 Metabolites are substances produced by the body when it breaks down
a drug. See Mission Petroleum Carriers, Inc. v. Solomon, 106 S.W.3d 705, 707
(Tex. 2003).

                                      2
course, and when he did, DISA approved him to return to work.
Nevertheless, Turnaround refused to reassign him to the Valero facility
or to any other jobsite. After collecting unemployment benefits for a
time, he found work with a different employer.
      Mendez sued Turnaround in federal court and settled those
claims. He then filed this suit against the Safety Council and
Psychemedics, alleging that they negligently collected, transported,
tested, and reported the results of his first hair sample, causing him to
lose his job with Turnaround. The Safety Council and Psychemedics
filed traditional and no-evidence summary-judgment motions, asserting
that they did not owe Mendez a legal duty of care and that there is no
evidence of breach, causation, or damages. The trial court granted the
traditional summary-judgment motions, agreeing with the Safety
Council and Psychemedics that they did not owe Mendez a legal duty.
      The court of appeals reversed, holding that “when an individual
is required, as a condition of employment, to submit to drug testing, the
law recognizes a duty to use reasonable care in collecting and processing
biological samples between third-party collection and testing agencies
and the employees they test.”3 We granted the Safety Council’s and
Psychemedics’ petitions for review.
                                   II
      The existence of a legal duty, which is “a prerequisite to all tort

      3   634 S.W.3d at 163.

                                      3
liability”,4 is the “threshold inquiry in a negligence case”.5 Whether a
legal duty exists under particular facts, and if so, the scope and elements
of that duty, present questions of law that courts must decide.6 To
determine whether a particular defendant owes a negligence duty to a
particular claimant, courts look first to whether we have previously held
that a duty does or does not exist under the same or similar
circumstances.7 If, for example, a “special relationship” exists between
the parties that we have previously held gives rise to a legal duty, that
duty exists in the case presented as a matter of law, and “the duty
analysis ends there.”8 But “[w]hen a duty has not been recognized in
particular circumstances, the question is whether one should be.”9
       To determine whether a duty exists, we consider several
interrelated factors we set out more than 30 years ago in Greater

       4   Graff v. Beard, 858 S.W.2d 918, 919 (Tex. 1993).
       5 Elephant Ins. Co. v. Kenyon, 644 S.W.3d 137, 144 (Tex. 2022) (quoting
Greater Hous. Transp. Co. v. Phillips, 801 S.W.2d 523, 525 (Tex. 1990)); see
also Pagayon v. Exxon Mobil Corp., 536 S.W.3d 499, 503 (Tex. 2017); El Chico
Corp. v. Poole, 732 S.W.2d 306, 311 (Tex. 1987); Otis Eng’g Corp. v. Clark, 668
S.W.2d 307, 309 (Tex. 1983).
       6 Kenyon, 644 S.W.3d at 145; see also Pagayon, 536 S.W.3d at 503;
Nabors Drilling, U.S.A., Inc. v. Escoto, 288 S.W.3d 401, 404 (Tex. 2009); New
Tex. Auto Auction Servs., L.P. v. Gomez De Hernandez, 249 S.W.3d 400, 406
(Tex. 2008); Humble Sand & Gravel, Inc. v. Gomez, 146 S.W.3d 170, 181 (Tex.
2004); Golden Spread Council, Inc. No. 562 of Boy Scouts of Am. v. Akins, 926
S.W.2d 287, 289 (Tex. 1996); Phillips, 801 S.W.2d at 525.
       7 See Kenyon, 644 S.W.3d at 145 (explaining that the duty inquiry
involves evaluating the factual situation presented “in the broader context of
similarly situated actors” (quoting Pagayon, 536 S.W.3d at 504)).
       8   Golden Spread Council, 926 S.W.2d at 292.
       9   Pagayon, 536 S.W.3d at 503.

                                         4
Houston Transportation Co. v. Phillips, often referred to as the Phillips
factors.10        In   undertaking   this       analysis,   we   weigh   “the   risk,
foreseeability, and likelihood of injury . . . against the social utility of the
actor’s conduct, the magnitude of the burden of guarding against the
injury, and the consequences of placing the burden on the defendant.”11
We also consider “whether one party would generally have superior
knowledge of the risk or a right to control the actor who caused the
harm.”12 We have said that some of these factors, like risk and
foreseeability, “may turn on facts that cannot be determined as a matter
of law and must instead be resolved by the factfinder”, but these cases
are unusual.13 More often, “the material facts are either undisputed or
can be viewed in the light required by the procedural posture of the
case.”14 This is because “the factual situation presented must be
evaluated in the broader context of similarly situated actors.”15 Thus,
“[t]he question is whether a duty should be imposed in a defined class of

       10   See 801 S.W.2d at 525.
       11Kenyon, 644 S.W.3d at 145 (quoting Humble Sand & Gravel, 146
S.W.3d at 182); Phillips, 801 S.W.2d at 525.
       12 Kenyon, 644 S.W.3d at 145 (quoting Humble Sand & Gravel, 146
S.W.3d at 182); see also Pagayon, 536 S.W.3d at 504; Nabors Drilling, 288
S.W.3d at 410; New Tex. Auto Auction, 249 S.W.3d at 406; Golden Spread
Council, 926 S.W.2d at 290; Graff, 858 S.W.2d at 920; Phillips, 801 S.W.2d at
525.
       13Pagayon, 536 S.W.3d at 504 (quoting Humble Sand & Gravel, 146
S.W.3d at 182).
       14   Id.
       15   Id.

                                            5
cases, not whether the facts of the case at hand show a breach.”16
                                          III
                                          A
       The Safety Council and Psychemedics argue that we need not
consider the Phillips factors to determine whether they owed Mendez a
legal duty because we have already twice refused to recognize such a
duty in the drug-testing context in Mission Petroleum Carriers, Inc. v.
Solomon17 and SmithKline Beecham Corp. v. Doe.18 We disagree.
Although those cases involved negligence claims arising from
circumstances involving drug-testing activities—and although we held
in both cases that no duty existed—we have not addressed in any case
the specific duty Mendez argues exists here.
       In SmithKline, we considered whether an independent drug-
testing laboratory similar to Psychemedics, which was hired by an
employer to test prospective employees’ biological samples, “owe[d] a
person tested a duty to tell that person or the employer that ingestion of
certain substances will cause a positive test result.”19 The claimant, who
lost her job after testing positive for opiates, did not complain that the

       16  Id. The concurrence argues that the Phillips factors facilitated
judicial restraint when they were adopted. Post at 8 (Young, J., concurring).
“The irony is,” the concurrence explains, “that the dissent would harness the
Phillips factors in service of the repudiated vision of an invasive judiciary,
when the point of Phillips was to do the opposite.” Id. at 10. We agree. But no
party here has asked us to revisit the Phillips factors, and we apply them in
accordance with our precedent.
       17   106 S.W.3d 705.
       18   903 S.W.2d 347 (Tex. 1995).
       19   Id. at 348.

                                          6
laboratory improperly performed the test or reported an incorrect result
but instead complained that it “should have informed her and her
prospective employer that eating poppy seeds could cause a positive test
result.”20
       After concluding that no court had previously recognized such a
duty,21 we considered the Phillips factors and concluded they did not
support recognizing the duty the claimant proposed.22 Although we
acknowledged that the claimant’s job loss was, at least to some degree,
a likely and foreseeable result of the laboratory’s failure to warn her not
to ingest poppy seeds before taking the test, we found that other
considerations outweighed those concerns. Specifically, we concluded
that the proposed duty could not be “readily defined” and was
“unworkable”; that it would require the laboratory to fulfill
responsibilities that, under its contractual agreement, belonged to the
claimant’s employer; and that it would “impinge[] on the liability of
other professionals for services rendered.”23 Importantly, we concluded
our duty analysis in SmithKline by “emphasiz[ing] that we have not
considered whether a drug testing laboratory . . . has a duty to use
reasonable care in performing tests and reporting the results.”24

       20   Id.
       21   Id. at 351.
       22Id. at 353-354; see also id. at 353 (declining to find a duty among the
“very general principles” in Buchanan v. Rose, 159 S.W.2d 109, 110 (Tex. 1942),
regarding a duty to prevent injury in a negligently created dangerous
situation).
       23   Id. at 353-354.
       24   Id. at 355.

                                       7
      Several years after our decision in SmithKline, we came closer to
addressing today’s issue in Mission Petroleum. But Mission Petroleum
did not involve an independent laboratory that tested employees’
samples for an employer (like Psychemedics or SmithKline) or an
independent entity that collected and transported employees’ samples
for an employer (like the Safety Council). Instead, the claimant in
Mission Petroleum asserted a negligence claim against the employer—
which itself collected the employee’s urine sample—alleging that it
failed to use reasonable care in doing so, resulting in a false-positive test
result.25 The issue we addressed in Mission Petroleum was “whether an
employer owes a duty to an at-will employee to use reasonable care when
collecting an employee’s urine sample for drug testing pursuant to
[Department of Transportation (DOT)] regulations.”26 We began our
analysis in Mission Petroleum by noting that we had declined in
SmithKline “to address any duty the employer may owe to an employee
and expressly reserved the question whether a laboratory may be liable
for performing drug tests negligently.”27 And we emphasized that the
question of whether a third-party entity that collects employees’
samples owes a duty of care to the employees was “not before [the]
Court.”28 Instead, Mission Petroleum required us to decide “whether an
employer owes a duty of care when the employer itself collects the

      25   106 S.W.3d at 710.
      26   Id. (emphasis added).
      27   Id.
      28   Id. at 711.

                                     8
employees’ urine samples.”29
      In holding that the employer did not owe such a duty, we
acknowledged that an employer’s negligence in such circumstances
creates a risk of harm and a likelihood of injury, but we concluded that
the DOT regulations substantially reduced the risk and likelihood of
harm to tested employees by “impos[ing] stringent rules” for the process,
“levy[ing] civil penalties for violation[s]”, and providing “a safe harbor
for employees whose test results are tainted by unacceptable breaches
of collection procedures.”30 We also considered how creating such a
common-law duty on the part of an employer could undermine Texas’
fundamental employment-at-will doctrine, since the employee’s claim
“concern[ed] the process by which [his employer] chose to terminate
him”.31
      Balancing the risk and likelihood of harm against the social value
of employee drug testing and the employment-at-will doctrine, we
“decline[d] to impose a common-law duty on employers who conduct
in-house urine specimen collection under the DOT regulations.”32 But
we expressly did not address whether third-party companies like the
Safety Council and Psychemedics owe a common-law negligence duty to
the employees of their clients.33 Until today, that has remained an open
question in this Court.

      29   Id. (emphasis added).
      30   Id. at 713-715.
      31   Id. at 715.
      32   Id.
      33   See id. at 711.

                                    9
                                         B
       When deciding whether to recognize a common-law duty, we
consider “not only the law and policies of this State, but the law of other
states and the United States, and the views of respected and
authoritative restatements and commentators.”34 Lower courts around
the country have split over the issue of whether third-party companies
owe a common-law duty to their clients’ employees to use reasonable
care in collecting and testing their drug-testing samples.35 Only five
state high courts over 20 years have recognized such a duty.36 Although
no state high court has yet rejected such a duty, unlike the dissent, we
do not regard the cases in a handful of states as approaching a
consensus.37
       After we decided SmithKline, the Fifth Circuit made an Erie
guess in Willis v. Roche Biomedical Laboratories, Inc. that, under Texas
law, an independent laboratory does not owe a legal duty “to persons
tested to perform its services with reasonable care.”38 The court

       34   SmithKline, 903 S.W.2d at 351.
       35See Cooper v. Lab’y Corp. of Am. Holdings, 150 F.3d 376, 379-380 (4th
Cir. 1998) (collecting cases).
       36 See Shaw v. Psychemedics Corp., 826 S.E.2d 281, 282 (S.C. 2019);
Landon v. Kroll Lab’y Specialists, Inc., 999 N.E.2d 1121, 1122 (N.Y. 2013);
Berry v. Nat’l Med. Servs., Inc., 257 P.3d 287, 291 (Kan. 2011); Sharpe v. St.
Luke’s Hosp., 821 A.2d 1215, 1221 (Pa. 2003); Duncan v. Afton, Inc., 991 P.2d
739, 740 (Wyo. 1999).
       37 Moreover, as explained in Part V, infra, we find our own well-
established tort jurisprudence persuasive and conclude that declining to
recognize this duty is more consistent with the common law’s treatment of
analogous conduct.
       38   61 F.3d 313, 316 (5th Cir. 1995).

                                        10
acknowledged that we noted in SmithKline that “some jurisdictions had
held that a laboratory owes a duty to persons tested to perform its
services with reasonable care” and that we “distinguish[ed] those
decisions from the failure to warn claims” at issue in SmithKline.39
Nevertheless, the court concluded that our opinion in SmithKline
“seemed to question the soundness of the decisions finding such a duty”,
particularly by making “unfavorable references” to the original panel
opinion, which was withdrawn and replaced with a substituted
opinion.40 The court concluded that under Texas law, the laboratory
owed the employee “no duty of reasonable care in testing his urine for
drugs.”41 As a result, the Fifth Circuit and its district courts have
followed Willis’ holding that under Texas law, an independent
laboratory does not have a legal duty to a person whose specimens are
tested to exercise reasonable care when conducting those tests.42
       Until today, however, this Court has not addressed the issue
presented in this case.
                                       IV
       With these principles and precedents in mind, we turn to the

       39   Id.
       40Id. at 316 & n.2; Willis v. Roche Biomed. Lab’ys, 21 F.3d 1368 (5th
Cir. 1994).
       41   Willis, 61 F.3d at 316.
       42 See, e.g., Calbillo v. Cavender Oldsmobile, Inc., 288 F.3d 721, 730 (5th
Cir. 2002); Brownlow v. Lab’y Corp. of Am., 254 F.3d 1081, 2001 WL 563785,
at *1 (5th Cir. May 14, 2001); Martinez v. DISA, Inc., 435 F. Supp. 3d 747, 753
(W.D. Tex. 2020); Hinds v. Baker Hughes, Inc., MO-06-CV-134, 2007 WL
9710941, at *3 (W.D. Tex. Sept. 28, 2007); Frank v. Delta Airlines, Inc., No.
3:00-CV-2772, 2001 WL 910386, at *2 (N.D. Tex. Aug. 3, 2001).

                                       11
question whether to recognize the legal duty Mendez proposes under the
Phillips factors.
      We first consider the risk, foreseeability, and likelihood of injury
that Mendez would suffer as a result of the negligent collection and
testing of his samples.43 We have noted before the “serious risk that an
employee can be harmed by a false positive drug test.”44 In this case, for
example, Mendez testified that not only was he not allowed to return to
the jobsite where he was working at the time of his positive drug test
but that a second positive test would bar him from all future job
prospects in his profession.
      In Mission Petroleum, we noted that the DOT’s “comprehensive
statutory and regulatory scheme” afforded employees “significant
protection” from that risk.45 We concluded that the DOT regulations
struck the appropriate balance between the need for efficient drug
testing and protections for employees to insist on the integrity of the
process.46 The DOT regulations do not apply in this case, but test
subjects     have    similar   protections.   As   in   Mission   Petroleum,
Psychemedics reviews the chain of custody before testing the sample,
and an independent medical review officer verifies the test results. In
the event of a positive test result, the medical review officer contacts the
test subject to give the subject an opportunity to explain the test result.
Additionally, DISA provides procedural protections such as retesting

      43   See Phillips, 801 S.W.2d at 525.
      44   Mission Petroleum, 106 S.W.3d at 714-715.
      45   Id. at 715.
      46   Id.

                                       12
and a substance abuse program. Finally, Psychemedics notes that its
conduct is in fact highly regulated: it is licensed, certified, and regulated
by numerous federal and state governmental agencies, some of which
have evaluated and approved its testing procedures.
       In light of these protections, Petitioners argue that the nature
and likelihood of risk arising from supposed contamination are minimal.
According to them, Psychemedics’ washing and testing procedure
eliminates contaminants, making the risk “essentially non-existent.”
And in light of the contaminant-eliminating procedures and the
additional procedural protections, Petitioners argue that they could not
have reasonably anticipated a false positive or that Turnaround would
have fired Mendez. However, as in SmithKline, we assume that there is
a significant likelihood that Petitioners could and did foresee the
injury—Psychemedics’ specimen custody and control form, completed by
a Safety Council employee, has a box for “Pre-Employment” testing
purposes, which was checked.47 And the test results delivered to
Mendez’s     employer     also noted that the “Test Use” was for
“Pre-Employment” purposes. But this does not end the inquiry.48
       We next balance the risk, foreseeability, and likelihood of injury

       47 See SmithKline, 903 S.W.2d at 353. The dissent faults us for
“assum[ing]” that there is a significant likelihood of foreseeable injury. Post at
7 (Boyd, J., dissenting). Rather than accept Psychemedics’ contention that it
has “never had a false positive” in over nine million tests, we assume without
deciding that a false-positive result is possible and is a foreseeable harm. We
have no occasion in this case to opine on the truth of Psychemedics’ infallibility
claim, although we note that the summary-judgment evidence suggests a high
degree of accuracy in its testing methods.
       48 See SmithKline, 903 S.W.2d at 353 (“Foreseeability alone, however,
is not sufficient to create a new duty.”).

                                       13
against the social utility of the Petitioners’ services and the magnitude
and consequences of the burden the legal duty would impose on them.
We conclude that the balance of these countervailing factors does not
counsel recognition of a new common-law duty.
      There is great social utility in drug testing employees,
particularly those engaged in occupations that present substantial
dangers to themselves, other employees, property, and the public.
Petitioners contend that the importance of drug testing and the burden
to be imposed on them far outweigh the risk of harm to individual
employees. For one, they argue that imposing the duty will produce a
flood of frivolous and burdensome claims against them for every
employee who receives a positive test result. According to them,
employees will be able to sue the collection facility or laboratory claiming
that they do not do drugs, so the test result must be a false positive.
      The court of appeals concluded that the Safety Council and
Psychemedics are in the best position to guard against the injury to
employees because they are solely responsible for collecting, testing, and
the quality control process, and they are “better able to bear the burden
financially than an individual employee harmed by a false positive
report.”49 Further, the court reasoned that “[a]ccuracy of collection and
testing . . . is of paramount importance to the business success of both
[the Safety Council] and Psychemedics” and that “[c]ontrolling their
processes to ensure accurate results is a good business practice as

      49   634 S.W.3d at 162-163.

                                    14
employers have an interest in receiving accurate testing results.”50
      But the Petitioners counter that Mendez’s proposed duty is
inappropriate because the Safety Council has no control over an
employer’s response to an employee’s drug-test results. Any harm an
employee sustains as the result of a false-positive drug test necessarily
depends not on an independent entity that collects or tests the sample
but on whether and how the employer chooses to terminate or discipline
the employee in response to the test result. Neither the Safety Council
nor Psychemedics provides any recommendation to employers about
what to do with the test results. Nor do Petitioners have any direct
relationship with an employee whose samples they collect or test.51 And
when a case involves an at-will employee like Mendez, the employer can
terminate the employee for almost any reason, and a third-party entity
has no control over that decision.
      Further, if faced with this burden, Petitioners contend that third-
party facilities may instead “seek to transfer responsibility to employers
through indemnity agreements, drastically increase the price, or choose
not to collect samples for use in the employment context.” This could
lead to a decline in employment drug screens, or employers may be
charged more for drug-screening tests, which could lead to employers
assuming control over the drug-testing program themselves. Petitioners
note that should employers assume control over testing programs, it

      50   Id. at 162.
      51See Mission Petroleum, 106 S.W.3d at 710-711 (noting that Texas
courts have rejected a laboratory’s duty of care because “drug-testing
companies have a direct relationship only with the employer and not the
employee”); see also infra Part V.

                                     15
may erode the employment-at-will doctrine. If third-party entities can
be liable for negligently collecting and testing employee drug samples,
then employers who themselves collect or test such samples may
ultimately face the same liabilities.52 As we recognized in Mission
Petroleum, “[w]e must also balance any risk to employees against the
burden it could place on our employment-at-will doctrine.”53 Although
not directly implicated here,54 “we must consider [Mendez’s] claim in its
overall context.”55
                                        V
       Declining to recognize the proposed duty is consistent with our
existing tort law. Take defamation and the economic-loss rule, for
example. In the defamation context, Texas law recognizes a “qualified
privilege” that “protects a former employer’s statements about a former
employee to a prospective employer.”56 The privilege extends to a former

       52As the dissent notes, we already decided in Mission Petroleum that
employers owe no duty to employees when they perform drug testing
themselves, at least in part because the employer is regulated. But it would
make little sense that an employer—who has a direct relationship with the
employee—has no duty to its employee, but a third-party entity—which has no
relationship with the employee—does.
       53   106 S.W.3d at 715.
       54See id. (“We agree that the employment-at-will doctrine is not directly
implicated here because Solomon has not sued for wrongful discharge.”).
       55   Id.
       56 Smith v. Holley, 827 S.W.2d 433, 436 (Tex. App.—San Antonio 1992,
writ denied). Our Court has not addressed the validity of the qualified privilege
in this precise context, but it has recognized the qualified privilege in a similar
employment context. See Randall’s Food Mkts., Inc. v. Johnson, 891 S.W.2d

                                        16
employer’s “communications made in good faith on subject matter in
which the author has a common interest with the other person, or with
reference to which he has a duty to communicate to the other person.”57
It is widely recognized that “common interest” includes a prospective
employer’s inquiry to a prospective employee’s former employer about
that individual as an employee.58 An employee can defeat the privilege

640, 646-647 (Tex. 1995) (applying the qualified privilege to employer
investigations of employee wrongdoing). And the specific former-to-
prospective-employer privilege has been recognized by Texas courts of appeals
and the Fifth Circuit since 1969 and 1997, respectively. See Duncantell v.
Universal Life Ins. Co., 446 S.W.2d 934, 937 (Tex. App.—Houston [14th Dist.]
1969, writ ref’d n.r.e.); Burch v. Coca–Cola Co., 119 F.3d 305, 323-326 (5th Cir.
1997). The Texas Labor Code also supports recognizing a qualified privilege for
former or current employers. See TEX. LAB. CODE §§ 103.001-103.005; see also
id. § 103.001 (“The legislature finds that the disclosure by an employer of
truthful information regarding a current or former employee protects
employment relationships and benefits the public welfare. It is the intent of
the legislature that an employer who makes a disclosure based on information
obtained by the employer that any employer would reasonably believe to be
true should be immune from civil liability for that disclosure.”); id. § 103.003
(authorizing employers to “disclose information about a current or former
employee’s job performance”); id. § 103.004 (granting immunity to employers
that disclose information about an employee under Section 103.003 unless “the
information disclosed was known by that employer to be false at the time the
disclosure was made or that the disclosure was made with malice or in reckless
disregard for the truth or falsity of the information disclosed”).
       57 Smith, 827 S.W.2d at 436; Patrick v. McGowan, 104 S.W.3d 219, 223
(Tex. App.—Texarkana 2003, no pet.); see also Wheeler v. Miller, 168 F.3d 241,
252 (5th Cir. 1999) (explaining that the qualified privilege is recognized for
“statements that occur under circumstances wherein any one of several
persons having a common interest in a particular subject matter may
reasonably believe that facts exist that another, sharing that common interest,
is entitled to know” (quoting Hanssen v. Our Redeemer Lutheran Church, 938
S.W.2d 85, 92 (Tex. App.—Dallas 1996, writ denied))).
        Pioneer Concrete of Tex., Inc. v. Allen, 858 S.W.2d 47, 49 (Tex. App.—
       58

Houston [14th Dist.] 1993, writ denied); Smith, 827 S.W.2d at 436.

                                       17
by proving actual malice.59
      The reason for this privilege is clear. If an employer can be sued
for speaking in good faith about its former employee to a prospective
employer, the former employer might be hesitant to disclose important
information about the employee’s fitness, including information about
past drug use. The third-party drug-testing companies at issue here are
in a position similar to that held by former employers protected by the
qualified privilege—assuming they are acting without malice, of which
there is no allegation. The drug-testing companies are in possession of
information that is damaging to the prospective employee’s reputation
but pertinent to the employee’s fitness for the job. The common law
already recognizes a qualified privilege shielding from liability the
disclosure of similar information in other contexts. Declining to impose
the requested duty on drug-testing companies thus conforms with the
common law’s treatment of analogous conduct and avoids imposing
greater potential liability on drug-testing companies than on others who
communicate with employers about prospective employees.
      Similarly, although it is well recognized that one who undertakes
services necessary for the protection of a third person and performs
them negligently is subject to liability for that person’s physical harm or
property damage,60 “[t]he law has long limited the recovery of purely

      59   Pioneer Concrete of Tex., 858 S.W.2d at 49.
      60 See Fort Bend Cnty. Drainage Dist. v. Sbrusch, 818 S.W.2d 392, 396
(Tex. 1991) (citing RESTATEMENT (SECOND) OF TORTS § 324A (AM. L. INST.
1965)).

                                       18
economic damages in an action for negligence.”61 “[T]he extent to which
Texas precludes recovery of economic damages in a negligence suit
between contractual strangers” is not entirely clear,62 but our courts of
appeals “have uniformly . . . den[ied] recovery of purely economic losses
in actions for negligent performance of services” absent “[p]rofessional
malpractice”, which is not at issue here.63 The Restatement (Third) of
Torts: Liability for Economic Harm, which we discussed extensively in
LAN/STV v. Martin K. Eby Construction Co., also limits liability for
negligently performed services to “loss suffered (a) by the person
or . . . group of persons for whose benefit the actor performs the service;
and (b) through reliance upon [the service] in a transaction that the
actor intends to influence.”64 In this case, the Safety Council and
Psychemedics performed their collection and testing services for the
benefit of Turnaround, not Mendez.
         Considering the competing factors above—the risk to employees,
public safety, existing protections and regulations, the possible burdens
on   third-party            testing   administrators,   the   employment-at-will
doctrine—as well as our well-established tort principles, we hold that
the third-party testing entities hired by an employer do not owe a

         61   LAN/STV v. Martin K. Eby Constr. Co., 435 S.W.3d 234, 238 (Tex.
2014).
         62   Id. at 243.
        Id. at 243-244. We explained in LAN/STV that the analysis is
         63

somewhat different for claims of negligent misrepresentation. Id. at 244-249.
But Mendez has not alleged such a claim.
          RESTATEMENT (THIRD) OF TORTS: LIAB. FOR ECON. HARM § 6(2) (AM.
         64

L. INST. 2020).

                                            19
common-law negligence duty to their clients’ employees. Whether such
a duty is desirable is a separate policy question for the Legislature,
which can balance competing factors apart from the common law.
                    *      *      *      *      *
      Accordingly, we reverse the court of appeals’ judgment and render
judgment for petitioners Safety Council and Psychemedics.

                                       Nathan L. Hecht
                                       Chief Justice

OPINION DELIVERED: June 23, 2023

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