Court Opinion

ID: 9956557
Source: CourtListenerOpinion
Date Created: 2024-04-02 15:16:02.386754+00
Date Added: 2024-06-11T08:17:36.043249
License: Public Domain

Fourth Court of Appeals
                                        San Antonio, Texas
                                             OPINION

                                          No. 04-22-00280-CV

                              HARBOR AMERICA CENTRAL, INC.,
                                        Appellant

                                                   v.

                                          Vielka ARMAND,
                                               Appellee

                      From the 131st Judicial District Court, Bexar County, Texas
                                   Trial Court No. 2018-CI-01895
                             Honorable Norma Gonzales, Judge Presiding

Opinion by:       Irene Rios, Justice

Sitting:          Rebeca C. Martinez, Chief Justice
                  Irene Rios, Justice
.                 Liza A. Rodriguez, Justice

Delivered and Filed: March 27, 2024

AFFIRMED IN PART; REVERSED IN PART; AND REMANDED

           This permissive appeal involves an issue of first impression on whether chapter 91 of the

Texas Labor Code supersedes the application of chapter 21 of the Texas Labor Code. See TEX.

LAB. CODE ANN. §§ 21.001–.556, §§ 91.001–.062.

           A professional employer organization (“PEO”) is a business entity that offers professional

employer services to a client. See id. § 91.001(3) (“Client”), (14) (“Professional employer

services”), (15) (“Professional employer organization”). Chapter 91 of the Texas Labor Code

provides the powers and duties of PEOs. See id. §§ 91.001–.062 Under chapter 91, a co-
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employment relationship is created between the PEO and the client through a contractual

relationship that outlines the sharing or allocation of employment responsibilities to covered

employees under the professional employer services agreement and chapter 91. See id.

§§ 91.001(3–b), 91.0011, 91.031, 91.032.       Chapter 21 of the Texas Labor Code provides

employees protection from discriminatory acts and defines an employer to include a person, or its

agent, who is engaged in an industry affecting commerce and who has 15 or more employees for

each working day for 20 or more calendar weeks. See id. §§ 21.001 (explaining the purposes of

chapter 21), 21.002(8)(A), (B) (defining “employer”).

        In this case, appellant Harbor America Central, Inc. (“Harbor”), a PEO, provides

professional employer services to its client, Legal Eats, LLC (“Legal Eats”), for its cafeteria

personnel. Appellee Vielka Armand worked at the cafeteria. Armand sued Harbor asserting

discriminatory acts under chapter 21. Armand filed a motion for partial summary judgment

contending as a matter of law that (1) Harbor was Armand’s employer as defined by section

21.002(8)(A), and (2) Harbor was Armand’s common-law employer. See id. § 21.002(8)(A). The

trial court granted Armand’s motion and permitted Harbor to file a permissive interlocutory appeal

on the controlling questions of law. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(d)

(providing for a permissive interlocutory appeal when a controlling question of law involves a

substantial ground for difference of opinion, and its immediate resolution may materially advance

the litigation).

        Thus, we must answer the following controlling questions:

    1. Whether a PEO licensed under chapter 91, like Harbor, can be an “employer” as defined
       by chapter 21; and

    2. If so, whether (a) Harbor is an “employer,” as that term is statutorily defined by chapter 21
       and (b) Armand established the existence of an “employment relationship” with Harbor,
       thereby exposing Harbor to liability for the acts of covered employees?

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           We answer the first controlling question in the affirmative. The second controlling question

contains two subparts more fully explained below: (1) whether Harbor satisfies the statutory

definition of employer and (2) whether an employment relationship existed between Harbor and

Armand. We hold Armand has established the first subpart, but a fact question exists as to the

second subpart. Therefore, we affirm the trial court’s partial summary judgment in part and reverse

the trial court’s partial summary judgment in part. We remand the cause to the trial court for further

proceedings consistent with this opinion.

                                                  BACKGROUND

           Harbor entered into a professional employer service agreement with Legal Eats, wherein

Harbor provided professional employer services for Legal Eats’s cafeteria personnel needs. See

TEX. LAB. CODE ANN. §§ 91.001(3), (14), 91.031. The Client Service Agreement (“the

Agreement”) 1 set forth the duties and responsibilities of both Harbor and Legal Eats. See id.

§ 91.031.

           In July 2016, Armand signed an employment agreement as required by Harbor and began

working at Legal Eats. Both Melissa Rose and Larry Perryman also worked at Legal Eats and

executed similar employment agreements with Harbor. According to Armand, Rose and Perryman

were managers at Legal Eats, and Perryman directly supervised Armand. Armand alleged

Perryman subjected her to a hostile work environment by sexually harassing and sexually

assaulting her. After reporting Perryman’s actions to Rose and the owner of Legal Eats, Armand

alleged she was retaliated against, and the retaliation increased after she filed a charge of

discrimination with the U.S. Equal Employment Opportunity Commission and the Texas

Workforce Commission. Armand was terminated in November 2017.

1
    When we refer to the Agreement, we are referring to the original agreement and any addendums.

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         Armand originally sued Harbor, Legal Eats, and several other defendants alleging

numerous claims. However, at the time of the proceedings relevant to this permissive appeal,

Armand’s lawsuit only involved chapter 21 claims against Harbor.

         Armand filed a motion for partial summary judgment. Harbor, a PEO licensed under

chapter 91, responded asserting that chapter 91 supersedes chapter 21 and any other law, and thus

Harbor cannot be liable for the acts of Rose and Perryman. Id. § 21.002(8)(A); §§ 91.001–.062. In

granting Armand’s motion for partial summary judgment, the trial court ruled that: (1) Harbor was

Armand’s employer as defined by section 21.002(8)(A), (2) Harbor was Armand’s, Rose’s, and

Perryman’s common-law employer, 2 and (3) Harbor’s defense that it was not Armand’s employer

should be struck.

                                             STANDARD OF REVIEW

         In a permissive appeal, we limit our review to the controlling legal question on which there

is a substantial ground for disagreement and for which immediate resolution may materially

advance the litigation. See TEX. CIV. PRAC. & REM. CODE § 51.014(d); TEX. R. APP. P. 28.3(e)(4);

TEX. R. CIV. P. 168.

         We review the grant of a summary judgment de novo. BPX Operating Co. v. Strickhausen,

629 S.W.3d 189, 195 (Tex. 2021). To prevail on a traditional motion for summary judgment, the

movant must show that there is no genuine issue of material fact and that it is entitled to judgment

2
  As more fully explained below, Armand correctly contends that a complainant filing an action under chapter 21 must
show (1) the complained of entity meets the statutory definition of employer under section 21.002(8) of the Texas
Labor Code, and (2) “an employment relationship” exists between the parties to subject the entity to potential liability
under chapter 21. See TEX. LAB. CODE ANN. § 21.002(8); Univ. of Tex. at El Paso v. Ochoa, 410 S.W.3d 327, 331
(Tex. App.—El Paso 2013, pet. denied) (citing De Santiago v. W. Tex. Cmty. Supervision & Corr. Dept., 203 S.W.3d
387, 393 (Tex. App.—El Paso 2006, no pet.)); Thompson v. City of Austin, 979 S.W.2d 676, 681–82 (Tex. App.—
Austin 1998, no pet.). The trial court ruled, however, that Harbor satisfied the statutory definition of employer under
chapter 21 but also ruled that Harbor was Armand’s, Rose’s, and Perryman’s common-law employer. For purposes of
this appeal, this court will evaluate whether Armand has established Harbor was her employer pursuant to chapter 21
based on the two-prong test. Moreover, for purposes of this appeal, because Rose and Perryman are similarly situated
as Armand, our discussion will only concentrate on Armand. Rose and Perryman will not be named separately unless
necessary.

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as a matter of law. TEX. R. CIV. P. 166a(c); Strickhausen, 629 S.W.3d at 196. To the contrary, the

evidence raises a genuine issue of material fact, thereby precluding summary judgment, if

reasonable and fair-minded jurors could differ in their conclusions in light of all the summary

judgment evidence. Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007).

Stated differently, evidence is conclusive only if reasonable people could not differ in their

conclusions. City of Keller v. Wilson, 168 S.W.3d 802, 815 (Tex. 2005). We consider the evidence

in the light most favorable to the nonmovant, indulging every reasonable inference and resolving

any doubts in the nonmovant’s favor. Strickhausen, 629 S.W.3d at 196.

                                            ANALYSIS

       In accordance with the two controlling questions presented to us on appeal, Harbor

maintains (1) chapter 91 supersedes chapter 21 and any other law, and therefore Harbor could not

be Armand’s employer under section 21.002(8)(A), and (2) even if this court determines a PEO

can be an employer under chapter 21, under the facts of this case, it was not Armand’s employer

and thereby subject to the liability from the acts of others working at Legal Eats.

   1. Can a PEO licensed under chapter 91 be an “employer” as defined by chapter 21, or does
      chapter 91 supersede the application of other statutes, including chapter 21?

       To determine if chapter 91 supersedes the application of other statutes or law outside

chapter 91, we must first construe chapter 91.

       A. Statutory Construction

       “Issues of statutory construction are reviewed de novo.” ExxonMobile Pipeline Co. v.

Coleman, 512 S.W.3d 895, 899 (Tex. 2017). “In construing a statute, our objective is to determine

and give effect to the [l]egislature’s intent.” Energen Res. Corp. v. Wallace, 642 S.W.3d 502, 509

(Tex. 2022). The reviewing court may not “judicially amend a statute by adding words that are not

contained in the language of the statute.” Lippincott v. Whisenhunt, 462 S.W.3d 507, 508 (Tex.

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2015). Instead, the court should “presume the [l]egislature chose the statute’s language with care,

purposefully choosing each word, while purposefully omitting words not chosen.” In re

CenterPoint Energy Hous. Elec., LLC, 629 S.W.3d 149, 158–59 (Tex. 2021) (orig. proceeding).

       “We recognize a fundamental principle of statutory construction that words’ meanings

cannot be determined in isolation but must be drawn from the context in which they are used.”

Willacy Cnty. Appraisal Dist. v. Sebastian Cotton & Grain, Ltd., 555 S.W.3d 29, 39 (Tex. 2018).

“In ascertaining legislative intent, we read the entire statute as a whole and do not consider isolated

sections, provisions, or terms in a vacuum.” EXLP Leasing, LLC v. Galveston Cent. Appraisal

Dist., 554 S.W.3d 572, 582 (Tex. 2018). “[W]hen the legislature uses certain language in one part

of the statute and different language in another, the [c]ourt assumes different meanings were

intended.” Ineos USA, LLC v. Elmgren, 505 S.W.3d 555, 564 (Tex. 2016) (internal quotation

marks omitted). Moreover, the reviewing court may “consider other matters in ascertaining

legislative intent, including the objective of the law, its history, and the consequences of a

particular construction.” State v. Shumake, 199 S.W.3d 279, 284 (Tex. 2006); see also TEX. GOV’T

CODE ANN. § 311.023(1), (3), (5).

       Furthermore, we must construe statutes in a way that harmonizes and gives effect to the

different provisions when possible. In re Mem’l Hermann Hosp. Sys., 464 S.W.3d 686, 716

(Tex. 2015) (citing TEX. GOV’T CODE ANN. §§ 311.025, 311.026(a)); Tex. Indus. Energy

Consumers v. CenterPoint Energy Hous. Elec., LLC, 324 S.W.3d 95, 107 (Tex. 2010). Only when

provisions are irreconcilable will we look to the general rules of construction—that later-enacted

statutes control or specific provisions prevail over general provisions—to determine which

provision applies. See TEX. GOV’T CODE ANN. §§ 311.025, 311.026(b); In re Mem’l Hermann

Hosp., 464 S.W.3d at 716. We presume the legislature perceives inconsistencies when drafting

legislation: absent any indication it desires one chapter or certain statutory provisions to prevail

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over others, we must also presume it wants all provisions to be fully effective. See Tex. Indus.

Energy Consumers, 324 S.W.3d at 107; see also TEX. GOV’T CODE ANN. § 311.021.

       B. Chapter 91 Statutory Provisions

       Chapter 91 provides the statutory framework for the licensing of PEOs, professional

services agreements, and the powers and duties of PEOs. “Professional employer services”

includes the “services provided through co[-]employment relationships in which all or a majority

of the employees providing services to a ‘client’ . . . are covered employees.” TEX. LABOR CODE

ANN. § 91.001(14). A “[c]o[-]employment relationship” exists through contractual relationships

between “a client and a [PEO] that involves the sharing of employment responsibilities with or

allocation of employment responsibilities to covered employees in accordance with the

professional employer services agreement and this chapter.” Id. § 91.001(3–b). A “[c]overed

employee” is “an individual having a co[-]employment relationship with a [PEO] and a client.” Id.

§ 91.001(7–a); see also id. § 91.0012.

       Additionally, subsections 91.032(a) and (b) provide:

       (a) A professional employer services agreement between a [PEO] and a client
           must provide that the [PEO]:
               (1) shares, as provided by Subsection (b), with the client the right of
                   direction and control over covered employees;
               ....

               (4) shares, as provided by Subsection (b), with the client the right to hire,
                   fire, discipline, and reassign the covered employees; and
               (5) shares, as provided by Subsection (b), with the client the right of
                   direction and control over the adoption of employment and safety
                   policies and the management of workers’ compensation claims, claim
                   filings, and related procedures.
       (b) Notwithstanding any other provision of this chapter, a client retains sole
           responsibility for:

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                (2) the direction and control of covered employees as necessary to conduct
                    the client’s business, discharge any applicable fiduciary duty, or
                    comply with any licensure, regulatory, or statutory requirement;
                (3) goods and services produced by the client; and
                (4) the acts, errors, and omissions of covered employees committed within
                    the scope of the client’s business.
Id. § 91.032(a), (b).

        Chapter 91 also specifically provides that “[n]otwithstanding any other provision in this

chapter, nothing in this chapter preempts the existing statutory or rulemaking authority of any other

state agency or entity to regulate professional employer services in a manner consistent with the

statutory authority of that state agency or entity.” Id. § 91.002(c).

        C. Chapter 21 Statutory Provisions

        Chapter 21 provides employees protection from employment discrimination. See TEX.

LAB. CODE ANN. § 21.001. The Texas Workforce Commission is the state agency entrusted with

the responsibility and authority to protect employees from discriminatory acts. See id. § 21.0015.

Chapter 21 defines “employer” for purposes of explaining who can be held liable for violating the

prohibited discriminatory acts included in chapter 21. An “employer” includes:

        (A) a person who is engaged in an industry affecting commerce and who has 15 or
            more employees for each working day in each of 20 or more calendar weeks
            in the current or preceding calendar year; or
        (B) an agent of a person described by Paragraph (A)[.]

TEX. LAB. CODE ANN. § 21.002(8)(A), (B).

        D. Application

        The provisions in chapter 91 and chapter 21 do not conflict on their face. Neither chapter

specifically references the other. Rather, the two chapters govern different subjects and have

different purposes. See Howlett v. Tarrant Cnty., 301 S.W.3d 840, 846 (Tex. App.—Fort Worth

2009, pet. denied) (explaining a specific statute does not apply over a more general statute when

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the two statutes do not share a common purpose or object). Because these statutes do not conflict,

we must construe them in a way that gives both statutes effect and harmonizes the provisions. See

In re Mem’l Hermann Hosp. Sys., 464 S.W.3d 686, 716 (Tex. 2015).

       Moreover, chapter 91 expressly rejects application of certain statutes but does not mention

chapter 21. Specifically, section 91.008 instructs that section 51.405 of the Texas Occupations

Code does not apply to chapter 91. See LAB. CODE ANN. § 91.008; see also TEX. OCC. CODE ANN.

§ 51.405. And, while chapter 91 explicitly rejects the extension of a co-employment relationship

between PEOs and franchisors, chapter 91 is completely silent as to a PEO’s liability as a co-

employer under chapter 21. See TEX. LAB. CODE ANN. § 91.0013 (excluding co-employment

relationships with franchisors).

       Similarly, chapter 21 also provides for an explicit exclusion stating that “a franchisor is not

considered to be an employer of [] a franchisee; or [] a franchisee’s employees,” but chapter 21

does not exclude its application to PEOs. See id. § 21.022(b). Thus, while the legislature provided

some exclusions from the application of chapter 91 and chapter 21, neither chapter expressly

excludes PEOs from potential liability under chapter 21.

       Nonetheless, Harbor claims section 91.032(b) provides PEOs protection because the statute

requires the professional employer services agreement state that the “client retains sole

responsibility for . . . the acts, errors, and omissions of covered employees committed within the

scope of the client’s business.” Id. § 91.032(b)(3). This subsection identifies contract requirements

of a professional employer services agreement between the PEO and the client. See id. Applicable

to the entire chapter 91, however, section 91.002, entitled “Rules,” directs that “[n]otwithstanding

any other provision in this chapter, nothing in this chapter preempts the existing statutory or

rulemaking authority of any other state agency or entity to regulate professional employer services

in a manner consistent with the statutory authority of that state agency or entity.” Id. § 91.002(c).

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Both section 91.002 and section 91.032(b)(3) were enacted at the same time. See id. §§ 91.002,

91.032(b)(3); see also Act of May 7, 2013, 83rd Leg., R.S., ch. 117, § 4, sec. 91.002, §14, sec.

91.032, § 30.

       Given the language in section 91.002(c) and the purpose of chapter 21—to protect all

employees from discriminatory acts in a manner directed by the Texas Workforce Commission—

section 91.032(b)(3) does not shield Harbor from potential liability under chapter 21. See id.

§§ 91.002(c), 91.032(b)(3); TEX. LAB. CODE ANN. § 21.001; Lopez, 259 S.W.3d at 153; see also

TEX. GOV’T CODE ANN. § 311.021 (instructing when construing statutes, “it is presumed that . . .

public interest is favored over any private interest” and that “a just and reasonable result is

intended”). Had the legislature intended chapter 21 to not apply to PEOs under chapter 91, it could

have expressly said so by legislating the exclusion.

       Therefore, we conclude the provisions of chapter 91 and chapter 21 are not irreconcilable

and can be read in harmony and applied together. Furthermore, we disagree chapter 91 shields

PEOs from potential liability under chapter 21 for discriminatory acts. We conclude a PEO can be

an employer as defined by section 21.002(8). See TEX. LAB. CODE ANN. § 21.002(8).

       Accordingly, we answer the first controlling question in the affirmative and hold a PEO

licensed under chapter 91, like Harbor, can be an employer under chapter 21.

   2. Was Harbor, a licensed PEO, Armand’s employer under chapter 21 and thus subject to
      liability for the acts of its covered employees, Rose and Perryman?

       After concluding chapter 91 does not shield a PEO from being considered an employer

under chapter 21, we must now determine whether, under the circumstances of this case—

including reviewing the specific terms of the Agreement between Harbor and Legal Eats—Harbor

was Armand’s employer under chapter 21, and thereby subject to liability for Armand’s workplace

complaints.

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   A. Applicable Law

       For Harbor to be potentially liable to Armand under chapter 21 we apply a two-prong test:

Harbor must (1) satisfy the statutory definition of employer under section 21.002(8) and (2) have

had an employment relationship with Armand. De Santiago v. W. Tex. Cmty. Supervision & Corr.

Dept., 203 S.W.3d 387, 393 (Tex. App.—El Paso 2006, no pet.) (setting forth the two-part test in

determining whether a defendant is an “employer” under Title VII while (a) considering chapter

21’s purpose is to provide for the execution of the policies of Title VII, and (b) applying analogous

federal precedent when interpreting chapter 21); Ancira Enterprises, Inc. v. Fischer, 178 S.W.3d

82, 88 (Tex. App.—Austin 2005, no pet.); see also Univ. of Tex. at El Paso v. Ochoa, 410 S.W.3d

327, 331 (Tex. App.—El Paso 2013, pet. denied).

       i.      First Prong: Statutory Definition of “Employer”

       Harbor does not dispute the first prong of the test. Harbor acknowledges it is “engaged in

an industry affecting commerce” and has “15 or more employees for each working day in each of

20 or more calendar weeks in the current or preceding calendar year[.]” See TEX. LAB. CODE ANN.

§ 21.002(8)(A). Therefore, we hold Harbor meets the statutory definition of an employer under

section 21.002(8)(A) of the Texas Labor Code.

       ii.     Second Prong: Employment Relationship

       Harbor argues Legal Eats, not Harbor, had the employment relationship with Armand, and

therefore Harbor cannot be liable to Armand under chapter 21. To determine whether an employee

relationship existed between Harbor and Armand, we apply a hybrid economic realities/common-

law control test. See De Santiago, 203 S.W.3d at 396. Accordingly, “[w]hen examining the control

component, courts focus on whether the alleged employer has the right to hire and fire the

employee, the right to supervise the employee, and the right to set the employee’s work schedule.”

Id. “The economic realities component focuses on whether the alleged employer paid the

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employee’s salary, withheld taxes, provided benefits, and set the terms and conditions of

employment.” Id. “The right to control an employee’s conduct is the more important component

of the test.” Ochoa, 410 S.W.3d at 332; see also Deal v. State Farm Cnty. Mut. Ins. Co. Tex., 5

F.3d 117, 119 (5th Cir. 1993).

   B. Relevant Sections from the Agreement Between Harbor and Legal Eats

       Although the Agreement is between Harbor and Legal Eats, it delineates Harbor’s duties

and responsibilities regarding covered employees, such as Armand. Thus, the Agreement sheds

light on whether Harbor had an employment relationship with Armand.

       The Agreement refers to covered employees as “Staff,” and it provides that Harbor and

Legal Eats “agree to co-employ certain employees (“Staff”) and agree to undertake the employer

responsibilities strictly as allocated by this Agreement.” See TEX. LAB. CODE ANN. § 91.001(7–a).

The Agreement continues by stating that Legal Eats shall perform all employer responsibilities

with respect to Staff, with the exception of those responsibilities expressly allocated to Harbor.

With respect to managing or controlling Legal Eats’s business or operations, the Agreement states

       [Harbor] assumes only those responsibilities expressly allocated to [Harbor] under
       the terms of this Agreement or required of [Harbor] under applicable state law
       regulating professional employer organization services. In all other respects, [Legal
       Eats] shall continue to have the exclusive right of control over the operation,
       management[,] and control of its business and of Staff.

Nonetheless, the Agreement limits Legal Eats’s control and direction of Staff by providing that

Legal Eats “retains sufficient direction and control over [Staff] as is necessary to conduct [Legal

Eats]’s business[.]” Legal Eats, thus, does not retain all control and direction of Staff.

       Moreover, with respect to hiring Staff, the Agreement provides that persons will not be

considered Staff until the person completes “Harbor[’s] employment agreement[,]” and Harbor

“approve[s] such new employee.” The Agreement also requires Legal Eats to obtain the “specific

consent of Harbor” to “add additional Staff, reassign, discipline, or remove Staff; or, modify

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positions, benefits, and pay rates for Staff[.]” Noteworthy, the Agreement also provides that any

person hired by Legal Eats “but not disclosed to [Harbor] shall not be Staff, and shall be solely

employed by [Legal Eats]. [Harbor] shall have no obligation or duty of any kind with respect to

such persons.”

       While the Agreement states Harbor is not responsible for any action taken by Legal Eats

regarding its Staff unless Legal Eats “secures prior written authorization from [Harbor’s] corporate

office,” the Agreement contains indemnity provisions wherein Legal Eats must indemnify Harbor

for several reasons including (1) “the acts, errors[,] or omissions of Staff;” (2) “the hiring,

termination, compensation[,] or discipline of Staff except for actions taken at the sole request of

[Harbor];” and (3) “claims by Staff, except for claims directly based upon [Harbor’s] failure to

perform its duties under this Agreement[.]” Also, according to the Agreement, Harbor maintained

an employer practices liability insurance coverage for Legal Eats in the event Staff filed any

charges or claims against Legal Eats.

       Last and most important, following the 2013 legislative session in which chapter 91

underwent substantial revisions, Harbor and Legal Eats added an addendum to the Agreement to

comply with the Act. See id. § 91.032(a), (b). The addendum includes the following provisions:

       [Harbor] and [Legal Eats]:
           1. share the right of direction and control over Staff,
           2. share the right to hire, fire, discipline[,] and reassign Staff, and
           3. share the right of direction and control over the adoption of employment
              and safety polices and the management of workers’ compensation claims,
              claim filings, and related procedures.
       ....
          [Legal Eats] retains responsibility for the acts, errors, and omissions of Staff
       committed within the scope of [Legal Eats]’s business.

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   C. Application

       Since Harbor has conceded it satisfies the first prong of the two-part test—the statutory

definition of “employer” as provided by section 21.002(8)(A)—the following discussion addresses

whether Harbor had an employment relationship with Armand, thereby subjecting Harbor to

potential liability under chapter 21 as her employer.

       The Agreement gives Harbor the right to direct and control Legal Eats’s cafeteria

personnel, including Armand. The Agreement also explicitly gives Harbor the right to hire, fire,

discipline, and reassign Armand. As per the Agreement, and according to the record, Armand

executed Harbor’s employment agreement when she began working, and Harbor approved her

employment. Additionally, the Agreement required Harbor’s consent to reassign or modify

Armand’s and other Staff’s positions, benefits, and pay rate. Although the Agreement limits

Harbor’s liability for Staff, it also expressly provides Legal Eats will indemnify Harbor against

claims arising out of the acts, errors, or omissions of Staff.

       Furthermore, the record indicates Harbor paid Armand, as her paystubs designate Harbor

as the payor, and Harbor withheld taxes from her wages. Harbor issued Armand’s W-2 form and

lists Harbor as her employer. Harbor also offered Armand life insurance benefits. While Harbor

acknowledges it paid Armand and withheld taxes from her paycheck, Harbor maintains that no

evidence, including the Agreement, demonstrates it set the terms and conditions of Armand’s

employment.

       To the contrary, Harbor claims the Agreement directs that Legal Eats “shall continue to

have the exclusive right of control over the operation, management[,] and control of its business

and Staff.” The Agreement also states Legal Eats “retains sufficient direction and control over

these employees as is necessary to conduct [Legal Eats]’s business[.]” Harbor further argues that

Legal Eats hired and fired Armand and asserts it did not set Armand’s or other personnel’s work

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schedules; rather, work schedules were set by Legal Eats. To add, Harbor contends it played no

part in directly supervising Armand or other personnel working at the cafeteria.

       Essentially, Harbor contends it did not have actual control over Armand. The test, however,

does not require the alleged employer to have performed the act; rather, to satisfy the control

component of the test, the alleged employer must have had the right to perform the act, such as

hiring and firing. See De Santiago, 203 S.W.3d at 396 (explaining that “courts focus on whether

the alleged employer has the right to hire and fire the employee”).

       Harbor additionally provides an extensive list of factors related to the economic realities

component of the employment relationship prong and argues nothing in the record indicates a

single factor applies to it. The factors Harbor listed, however, are additional factors generally used

in determining whether an individual is an employee or an independent contractor and thus are not

applicable here. See Benavides v. Moore, 848 S.W.2d 190, 193 (Tex. App.—Corpus Christi–

Edinburg 1992, writ denied) (discussing additional factors used in determining whether a person

is an employee or an independent contractor); see also Culver v. Gulf Coast Window & Energy

Products, Inc., No. 01-11-00080-CV, 2012 WL 151464, *4 (Tex. App.—Houston [1st Dist.] Jan.

19, 2012, pet. denied) (using same additional factors discussed in Benavides to determine whether

an individual was an employee or an independent contractor). Therefore, we are not necessarily

persuaded that Armand must have shown evidence supporting these factors.

       While Armand provided sufficient evidence to support several factors of the hybrid

economic realities/common-law control test, she did not provide conclusive evidence to prove the

second prong of the test—establishing the existence of an employment relationship between her

and Harbor. See De Santiago, 203 S.W.3d at 396. After considering the evidence, we conclude

reasonable minds could differ on whether Harbor and Armand had an employment relationship

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                                                                                                04-22-00280-CV

under the economic realities/common-law control test and therefore, the determination is a fact

question for the factfinder. See City of Keller, 168 S.W.3d at 815.

        After considering the relevant statutes, foregoing authority, the Agreement, and Armand’s

summary judgment evidence, we conclude Harbor satisfies the statutory definition of employer

under section 21.002(8)(A), the first prong of the test. But the evidence fails to conclusively

demonstrate as a matter of law the existence of an employment relationship between Harbor and

Armand, the second prong of the test. See Strickhausen, 629 S.W.3d at 196; see also TEX. R. CIV.

P. 166a(c).

        Accordingly, we affirm the trial court’s order granting Armand’s partial summary

judgment that Harbor satisfies the statutory definition of employer as provided by section

21.002(8)(A). We cannot conclude, however, Armand established as a matter of law she had an

employment relationship with Harbor, and therefore we reverse that part of the trial court’s order

granting Armand’s partial summary judgment. 3 We remand the cause for further proceedings.

                                                CONCLUSION

        We answer the first controlling question in the affirmative; a PEO, like Harbor, can be an

“employer” as defined by chapter 21. We, however, answer the second question in two parts. For

Harbor to be potentially liable to Armand for the acts of other covered employees, Harbor must

satisfy the statutory definition of employer under chapter 21, and Armand must establish she had

an employment relationship with Harbor. Although the summary judgment evidence affirmatively

establishes that Harbor falls within the statutory definition of employer under chapter 21, a fact

question exists as to whether Armand had an employment relationship with Harbor.

3
  The trial court’s judgment adjudicated as a matter of law that Harbor was Armand’s, Rose’s, and Perryman’s
common-law employer and struck Harbor’s defense that it was not Armand’s employer. We further hold that Armand
has not established that Harbor had an employment relationship with Rose and Perryman for similar reasons we held
Armand did not conclusively establish her employment relationship with Harbor.

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                                                                                      04-22-00280-CV

       Therefore, we affirm the trial court’s order granting Armand’s partial summary judgment

that Harbor’s affirmative defense asserting is shielded from liability under chapter 21 as a PEO is

stricken, and that Harbor satisfies the definition of employer under section 21.002(8)(A), and we

reverse the trial court’s partial summary judgment concluding, as a matter of law, that Harbor had

an employment relationship with Armand, Rose, and Perryman that subjects Harbor to potential

liability under chapter 21. We remand the cause to the trial court for further proceedings consistent

with this opinion.

                                                   Irene Rios, Justice

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