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The WC Exclusive Remedy

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WC is the original no-fault law where the employer is granted immunity from tort actions in exchange for guaranteed benefits for the injured worker. But how is this “quid pro quo” legal arrangement holding up?

When states began to adopt workers compensation laws in the early part of the twentieth century, the system was predicated on a no-fault philosophy.  Indemnity benefits and medical treatment would be extended by the employer to the injured worker regardless of fault. In exchange, the employee surrendered the right to sue the employer at common law.

WC laws comprised a great social mutual endeavor. Injured employees who were unable to work due to compensable injuries would be the recipients of state mandated wage loss payments, and provided with medical treatment to heal the injury and return the person to work.  No longer did the employee have to sue the employer in tort to perfect economic recovery, with the employer having all common law defenses at their disposal. This ultimate compact remains the underpinning of the WC system in the US. So how is this compromise holding up these days?

As one might anticipate, the resiliency of the “great compromise” has been remarkable over the last century, despite ongoing jurisprudence that may be termed as liberal interpretation in favor of the injured worker.  The employee is still prohibited from tort recovery if injured in the course and scope of employment, but there are exceptions to the exclusive remedy provision. If these situations obtain, an employee may bring an action against his/her employer in tort. The  case is then dependent upon the employee proving negligence (the four elements of which are duty owed, duty breeched, injury, and proximate cause) on the part of the employer to obtain an award rather than the standard WC course and scope issues.

The list of situations where a worker may sue their employer may be larger than you would at first think. They include:

·       Violating a non-delegable duty

·       Gross negligence on death claims

·       Dual capacity (e.g. the employer was the manufacturer of a defective product that caused the injury)

·       Sexual assault

·       Sexual harassment

·       Intentionally removing a guard from a machine to increase productivity

·       Libel and slander

·       Intentional injury

·       Intentional infliction of emotional distress

·       Failure to provide WC coverage 

In all of these examples, the employers’ potential exposure outside of the exclusive remedy is derived from actions that were not intrinsically connected with the worker’s job duties and responsibilities, or the course and scope of his/her employment.

Another exception is when an injury is caused by a co-worker and it can be unequivocally demonstrated that the co-worker’s act was a willful effort to cause injury and was purely personal in nature.  In this instance the injured employee may initiate a tort action against the co-employee. Of course proving that a co-employee’s act was willfully negligent and intended to cause harm to a co-employee is a rather difficult legal burden to sustain.

Of course, if the exclusive remedy armor is breeched, the employee has the ability to perfect an action in the civil court system, and the employer is no longer protected by statutory caps on indemnity benefits. Now the worker is able to make claims for general and special damages without a limit on the pecuniary recovery. This is enough to cause employers tortuous nightmares (befitting of the Halloween season).

Obviously, flagrantly bad behavior by employers toward their employees is not a recipe for success either business wise or in the court system. Clearly, it has always been in the best interests of employers to do everything possible to protect their worker populace. 

The exclusive remedy doctrine has generally held up amazingly well over the last century, but it will always be somewhat of a tightrope walk for employers. Although employees may make indiscriminate attempts to circumvent WC exclusivity, the intent of the law as a carapace against tort actions has been and continues to be an overall success.  As long as the balance is maintained, the WC system, the original no-fault law, will remain viable.    

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About the Author:

John D'AlusioJohn D’Alusio has over 30 years experience in P/C insurance with executive management positions in administration, field operations, and claim technical areas. Mr. D’Alusio has had many articles published in industry periodicals, and is also a contributing author to the LexisNexis published, “Complete Guide to Medicare Secondary Payer Compliance.”  He writes a monthly column for Risk & Insurance Magazine and is a quarterly columnist for AMComp Magazine.

His Risk & Insurance column is located at:
http://www.riskandinsurance.com/workerscomp.jsp

Subscribe to comments feed Comments (2 posted)

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Sharon Faggiano 11/05/2012 06:46:57
What is your thought on the recent case in Oregon, Cortez v NACCO Materials Handling Group (248 Or App. 435 (2012) )? The injured employee filed for and received benefits under the workers’ compensation act. He had also filed suit against his employer, a member managed LLC, under Oregon's Employer Liability Law. The employer moved to dismiss the lawsuit on the basis that the workers’ compensation act provided an exclusive remedy. The court held that although the statute protects directors and officers, it does not protect members or partners of an LLC. Basically the case found that there is a hole in the exclusive remedy statute that does not protect members or partners of an LLC from lawsuits filed pursuant to Oregon’s ELL, even though the LLC provided workers’ compensation coverage and the claimant received workers’ compensation benefits. Is this unique to Oregon or could more employers be at risk of losing the protection that the exlusive remedy has afforded them in the past?
avatar
John D'Alusio 11/05/2012 10:44:53
Sharon,

You bring up an excellent question on the exclusive remedy regarding the 2012 Appelate Court decision in the Cortez vs. NACCO Materials and Handling Group case in Orgeon.

In that matter, the plaintiff was employed by Sun Studs, LLC. NACCO was the sole owner of Sun Studs. While in the course and scope of employment, Cortez was injured by the forklift when it was backing up. Statutory WC benefits were dispensed in accord with Orgeon requirements. Cortez then filed a tort action against NACCO.

The tort action was based on three claims:
1) Violation of the OR Employer Liability Law
2) Negligence
3) Noncompliance with WC statutes

At the Trial Court level, Nacco filed for a summary judgement based on WC exclusivity. It was clear at the hearing that there was no cause of action against NACCO for non-comliance with the OR WC statutes, so that portion of the plaintiff's claim was dismissed by the Trial Court.

However, the summary judgement against the claim of for relief under the ELL was denied because the Court ruled there was a genuine issue of material fact precluding the granting of a summary judgement in favor of NACCO. The same conclusion was promulgated on the issue of NACCO's immunity from liability under the limited liability statutes.

On appeal, the Court concluded that the exclusive remedy provision of the Oregon WC law didn't apply to "members" of an LLC. That is a bizarre bit of logic. The Appelate Court bifurcated the decision by saying that the lower court properly granted NACCO's motion for summary judgment on Cortez' ELL claim, but improperly granted it on the plaintiff's negligence claim. Since the tort claim was essentially filed against the parent of Sun Studs, who had statutory WC coverage, the Appellate Court took a strange turn is delineating the the supposed legislative intent to include members of limited liability companies (LLCs) among those exempt from liability under the WC exclusive remedy provisions.

In what was surely an oversight, the Oregon legislature neglected to specifically include LLCs in the entities provided an exemption from liability. The Appelate Court ruled that an LLC is a legal entity distinct from its members. Therefore, while the exclusive remedy provision under WC applies to an LLC as an employer, it does not necessarily apply to the LLC's members. In my opinion, that is an exercise in trying to find a loophole to the exclusive remedy!!!

Cortez' basically claimed that the defendant's (NACCO) own conduct in managing Sun Stud's safety protocols caused him injury.The Court agreed with the plaintiff that that the defendant's yet to be determined tortious conduct is not protected under the WC exclusivity doctrine in this instance.

The Appelate Court did strike down the ELL allegation by Cortez, but by rather convoluted logic. The Court then remaded remanded the case back to the lower court to resolve the Cortez' negligence claim against NACCO.

In Orgeon, it now appears by jurisprudence that there is indeed a tear in the fabric of the exclusive remedy when LLCs are the employer. It seems that the members and owners of these organizations are at risk for tort actions against them based on the Oregon legislature not including them in ORS 656.018.

To my knowledge, this is unique to Oregon. The essence of the exclusive remedy is that employer will provide WC benefits in exchange for protection from tort actions. If NACCO manufactured the forklift, and a defect caused the injury, the dual-capacity doctrine normally allows an EL action. But in the instant case, the decision of the Appelate Court was predicated on a technicality that basically undermines the WC exclusivity protection for LLCs.
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