Can I Fire My Injured Employee?

Wednesday, November 18, 2009 | 0

By Howard Stevens

Eleven years ago, when our newsletter made its debut, we published an article about Labor Code §132a and recommendations for ways to avoid trouble under this potentially very expensive liability.

With continued downsizing of industry in California, we believe this is a good time to update this important topic. Labor Code §132a prohibits discrimination against an employee for filing a workers’ compensation claim or for making known his or her intention to do so. The statute has been interpreted as prohibiting any form of adverse action against the injured worker, although litigation most often occurs when, for one reason or another, the employee is terminated after filing a claim. Liability under this statute can be extended to claims personnel if an examiner or other representative of a carrier “advises, directs, or threatens an insured …, to discharge an employee because he or she has filed or made known his or her intention to file a claim….”

The burden of proof in a Labor Code §132a discrimination claim has been clearly set forth by the state Supreme Court in Department of Rehabilitation/State of California vs. WCAB (2003) (Lauher), 30 Cal. 4th 1281; 68 CCC 831; 844.  In that opinion, the Supreme Court pointed out that it is insufficient that the injured worker shows only that he or she suffered some adverse result as a consequence of some action or inaction by the employer that was triggered by the industrial injury.  The claimant must also show that he or she had a legal right to receive or retain the deprived benefit or status, and the employer had a corresponding legal duty to provide or refrain from taking away that benefit or status.

The Supreme Court further noted that by prohibiting discrimination under §132a, it is assumed that the legislature meant to prohibit treating injured workers differently, making them suffer disadvantages not visited on other employees because the employee was injured or had made a claim.

The Lahuer Court further noted:  “To warrant an award the employee must establish at least a prima facie case of lost wages and benefits caused by the discriminatory acts of the employer. The employee must establish discrimination by a preponderance of the evidence at which point the burden shifts to the employer to establish an affirmative defense.” (citations omitted) The liability for violating the statute is very severe, calling for a maximum $10,000 uninsurable fine against the employer, reinstatement of the lost job, all lost wages and benefits, and even possible misdemeanor prosecution against the managers that took the offending action against the employee.

Jurisdiction over these issues is vested solely with the Workers’ Compensation Appeals Board. Since the liability issues are dependant in large part on the outcome of the disability case, the §132a case will be typically deferred until the disability case is settled or adjudicated.  It is not unusual, therefore, for potential liability to continue accruing for a prolonged period of time while the underlying disability case remains unresolved. Taken at face value, it might appear that the law simply prohibits doing anything other than keeping an injured employee “on the books” forever, or at least until a voluntary resignation is received.

Happily, the law is not that oppressive. An employer is not necessarily expected to hold a job open forever for an employee on extended industrial leave.  Nor is an employer expected to retain employees in positions which they will never again be able to safely and effectively perform as a result of the injury and its resulting disability.

Here, we must provide a cautionary note, however. For reasons which go way beyond the application of Labor Code §132a, an employer is not free to simply refuse to take employees back to regular, alternative, or modified work without paying strict attention to the requirements of FEHA which include, at the very least, a bona fide attempt to meet and confer with the injured worker to determine whether the “essential functions” of the job can be undertaken with or without reasonable accommodations. While the “meet and confer” interactive process requirement is not a statutory element of an LC §132a claim, a failure or refusal to engage in a dialogue (not a one-sided monologue) or to make available reasonable accommodations for the disability may be interpreted by a WCAB judge as a bad faith attempt to discriminate against the injured employee for filing the claim, especially if the employee can demonstrate disparate treatment when compared to other similar situations involving other employees.

The seminal case is Judson Steel Corporation vs. WCAB (Maese) (1978), 43 CC 1205. Judson provided a major defense to LC 132a claims with what has become known as the “business necessity rule.” The Court stated: “Section 132a does not compel an employer to ignore the realities of doing business by reemploying unqualified employees or employees for whom positions are no longer available.”

We should note, however, that the WCAB is prone to look behind the stated reasons for the termination. In doing so, they may go so far as to judge the reasonableness of the company policies which gave rise to the termination and, if not apparently reasonable, the WCAB may infer a violation even when none may have been intended. Western Electric Company vs. WCAB (Smith) (1979) 444 CCC 1145.  See also  Pacific Enterprises v WCAB (2001) 66 CCC 955. Many employers have blanket leave of absence policies which state a maximum time during which an employee may remain off work for any reason. These policies are often drafted by corporate or labor counsel for internal reasons, but sometimes (as in Judson) they are the result of a collective bargaining agreement negotiated with a labor union.

Such provisions may or may not insulate the employer from liability when the provision is enforced. In order to rely on “company policy” that limits leaves of absence, the policy must be in writing. The policy must be the same for all employees, whether the disability leave is industrial or not. The employer must not make exceptions for favored employees while using the policy to rid itself of annoyances (as was the case in Judson). The employer must be able to demonstrate “sound business reasons” behind the policy by showing the action to be necessary and linked directly to business realities. Dutil v WCAB (1988), 53 CCC 136.

While there is no hard and fast general length of absence rule,  the cases seem to favor employers whose policies allow at least 18 months to two years of disability absence prior to termination. “Business necessity” is an affirmative defense, meaning the burden of producing the evidence lies with the employer.   Evidence that the job requires a relatively high degree of skill, a limited number of employees available to cover the job, and inability of the company to properly function without filling the job should be presented as part of the defense. To put it simply, the more important the job, and the fewer the available employees, the stronger the defense.

An employee on industrial leave may be terminated for reasons unrelated to filing a Workers’ Compensation claim. The first burden is on the employee to show that the reason for the termination violates the statute, but that may shown by inference when the facts lack any better explanation. However, an employer may be prepared to show that the real reason for the termination was something quite different. Violation of a “no call, no show” policy is one of the most common fact patterns we see.

The context of the “no call, no show” case is usually that the employee failed to keep the employer updated during the temporary disability period. The case law here is similar to that involving allowable length of leave: The employer must have a clear, published policy on absence reporting, the rules must be applied to all persons consistently, and there must be a showing that the rule was properly applied. Smith vs. WCAB (1984), 49 CCC 212.

The Smith case cited above also brings up a troublesome problem that often arises in LC §132a cases, when the employer terminates the employee before the employee has reached maximum medical improvement and before permanent limitations, if any, are known.  Absent clear cut leave limitations as previously discussed, an employer may be treading on very thin ice by assuming an employee will never be coming back to work and simply terminating them from the books.

å key case in this regard was Barnes vs. WCAB (1989), 54 CCC 433.  One of the key holdings in Barnes was that the employer may not terminate an injured employee unless the employer has medical evidence to support the belief that the worker is either permanently disabled from doing the job or that temporary total disability will extend so long that termination is required due to the necessities of continuing to do business.

Another problem that has, on occasion, given rise to litigation is termination of employer-provided medical or life insurance while the employee is on leave.  The WCAB en banc has held that where such insurance plans are covered by Federal ERISA statutes, those statutes preempt state law. Allegations that the employer discriminated against the industrially injured employee by failing to maintain provision of premiums for such plans may not be used to support a claimed LC 132a violation.  Navarro vs. A&A Farming (2002), 67 CCC 145.

A similar defense may be available if an allegation is made that the employer’s adverse action violates terms of a collective bargaining agreement.  Interpretations of such agreements are controlled by Federal statute and procedure. In one such case, an airline employee argued that the employer failed to provide seniority benefits because of an industrial injury claim.  The WCAB had no jurisdiction.  45 U.S.C.S. 181. Since WCAB judges are typically not equipped with access to Federal Statute, the burden will be on the defendant to show that the benefits in question are covered by ERISA, and to provide verbatim reprints of the applicable Federal Statutes.

So, to answer the headline question, the answer is a resounding “maybe.”   This battlefield is adorned with obstacles, dark pitfalls, and legal landmines. Not to mention the casualties. Before taking any adverse action against an employee on industrial leave we would recommend strong consideration be given to seeking advice from a certified specialist in Workers’ Compensation Law.   Better yet, consider using the services of a qualified specialist to review your present policies and procedures before any question arises.  Proactive action now may well save your company a lot of money later.

Howard Stevens is an attorney in the Orange officce of McDermott & Clawson. This column was reprinted with the firm's permission from its newsletter, Legal Briefs.