Seeking to correct a mess created by an Oklahoma Supreme Court ruling, members of the Oklahoma Senate have advanced legislation that would protect businesses from being sued by the employees of subcontractors.

In a decision handed down in May 2024, the Oklahoma Supreme Court increased the liability of many businesses sued in cases involving subcontractors, including many oil and gas companies.

Under the court’s ruling in Knox v. Oklahoma Gas and Electric Co., a business cannot avoid liability if an employee of a subcontractor is injured on the job and collects workers’ compensation benefits, even in cases where contracts contain an indemnity clause to protect companies from acts of negligence.

Under Senate Bill 642, by Senate President Pro Tempore Lonnie Paxton and House Speaker Kyle Hilbert, the workers’ compensation statute’s exclusive remedy provision will not prohibit general contractors from enforcing indemnity contracts they’ve entered into with subcontractors. 

Additionally, a general contractor and subcontractor may enter into a written agreement under which the general contractor provides workers’ compensation insurance coverage to the subcontractor as well as his or her employees. If the subcontractor does not have employees, the subcontractor will be treated as an employee of the contractor for the purposes of the Administrative Workers’ Compensation Act.

State Sen. Aaron Reinhardt, R-Jenks, urged his colleagues to support the bill, noting that the court’s decision effectively incentivized needless litigation in pursuit of jackpot awards that are unrelated to helping an injured worker cover all medical costs for an on-the-job injury or compensating the worker for the lifetime loss of income caused by an injury.

Reinhardt said the bill “cleans up the double-dipping where it is not clear who is responsible for that injured sub, and oftentimes they get work comp from their subcontractor and then they turn around and sue the general contractor or the business owner.”

He noted that an injured employee receives full payment for on-the-job injuries under workers’ compensation without any need for separate litigation.

SB 642 passed the Oklahoma Senate on a 37-7 vote with bipartisan support. Only Democrats opposed the bill. The legislation now proceeds to the Oklahoma House of Representatives.