A look at the common exceptions to California’s exclusive remedy rule
Most attorneys understand that when an employee has been injured at work, the employee is limited to the remedies available under the Workers’ Compensation Act, Labor Code sections 3600 et seq. There are only a handful of recognized exceptions to this “exclusive remedy rule.” As a result, it is tempting to concentrate on potential third-party defendants and assume the employer is immune from civil liability, particularly if the injured employee has already filed or received worker’s compensation benefits. But employer immunity is not a foregone conclusion. There are several situations in which injured workers can file and collect workers’ compensation benefits and also sue their employers for the same incident. This article provides an overview of the history and purpose of the exclusive remedy doctrine and the recognized exceptions. (This article is limited to employer immunity under the Workers’ Compensation Act, Lab.Code. §§ 3600 et seq. It does not cover co-employee liability or the liability of general contractors for subcontractor employee injuries.)
California’s workers’ compensation laws have existed for more than 100 years. In fact, California was one of the first states to adopt a comprehensive statutory scheme for workplace injuries. From the very beginning, California’s workers’ compensation laws were designed to strike a bargain between employees and their employers in which employers assumed liability for workplace injury regardless of their fault, and in return, employees gave up their right to sue their employers (or co-employees) in court. This presumed “compensation bargain” is the foundation upon which the exclusive remedy rule was built.
The Roseberry Act of 1911 was the beginning of California’s efforts to compensate injured employees while insulating employers from the potentially devastating financial consequences of civil liability. The Roseberry Act encouraged employers to provide voluntary workers’ compensation disability benefits in exchange for civil immunity. The Workers’ Compensation Insurance Safety Act of 1913, also known as the Boynton Act, made those benefits compulsory and precluded employees from bringing lawsuits against their employers. In 1917, the Workers’ Compensation Industrial Safety Act was amended, becoming far more comprehensive than its predecessors. The 1917 Act specifically precluded employees from filing civil suits and deemed workers’ compensation the “exclusive remedy” for any work-related injuries.
The exclusive remedy rule set forth in the 1917 Act was later codified in Labor Code section 3600, which sets forth the conditions that must exist to trigger the exclusivity rule, and section 3602, which bars civil actions against an employer. Through the ensuing years, judicially-created exceptions threatened to erode these exclusivity provisions. Thus, in 1982, the Legislature amended section 3602, ratifying some of those judicially-created exceptions, including those for assault and fraudulent concealment of an injury, and limiting others, such as the dual capacity doctrine which had greatly expanded employer liability for product defect claims. In the last 20 years, how-ever, the California Supreme Court has consistently held that the Labor Code is not the be-all-end-all for exceptions to the exclusive-remedy rule. Employer liability is still alive and well for certain types of employer conduct that falls outside the compensation bargain. Although the “outside the compensation bargain” exception expands an employee’s right to sue his or her employer, the courts have limited the type of conduct that qualifies for the exception to that which falls outside the normal employment relationship in violation of public policy.
Conditions of compensation – Labor Code section 3600
The exclusive remedy rule applies only when the injury meets the “conditions of compensation” listed under Labor Code section 3600, subdivision (a). If any one of the conditions is not met, the employee may be able to pursue a lawsuit outside the workers’ compensation system. Section 3600 provides a laundry list of conditions; however, the first two are threshold issues in any exclusive remedy analysis.
(1) Where, at the time of the injury, both the employer and the employee are subject to the compensation provisions of this division.
This condition contemplates an employment relationship; if the injured worker is not an “employee,” the exclusive remedy rule does not apply. Not surprisingly, the Workers’ Compensation Act provides a presumption in favor of finding an employment relationship. Under Labor Code section 3357, any person who renders service for another is presumed to be an employee. However, the presumption does not apply if the injured worker is an “independent contractor.” This is an important avenue to explore when analyzing whether a client has a valid case against the person or company that hired him.
The question of whether an injured worker is an “employee” or “independent contractor” is a question of fact that depends on several factors. The most influential factors include whether the alleged employer had the right to control the manner and means of accomplishing the result desired from the services rendered, whether the alleged employer had the right to discharge at will, whether the alleged employer provided tools, equipment, and location, the method of payment, length of time the services were to be performed, etc. (S.G. Borello & Sons, Inc. (1989) 48 Cal.3d 341.)
Injured workers often invoke the “independent contractor” stance when they are sent by one employer to perform services for a third party, such as when a temporary employment agency supplies a business with workers. In this situation, injured workers argue they are independent contractors for the third-party hirer. California courts, however, have routinely rejected this argument pursuant to the “special employment doctrine.” Under the special-employer doctrine, an employee can have two employers (a general employer and a special employer) as long as both employers have some right of control over the employee’s performance. Both employers will be responsible for workers’ compensation benefits and both will be immune from civil liability under the exclusive remedy rule. (Ybarra v. John Bean Technologies Corp. (E.D. Cal. 2012) 853 F.Supp.2d 997).
(2) Where, at the time of the injury, the employee is performing service growing out of and incidental to his or her employment and is acting within the course of his or her employment.
Assuming the plaintiff is an employee, the second issue is whether the injury happened in the “course of employment.” If not, the employee may bring a tort action against the employer, assuming some basis of tort liability can be shown. This situation arises when an off-duty employee is injured on work premises or when an employee is injured while performing services outside the scope of his normal job duties or outside normal work hours. This would appear to be a straightforward exception. The courts, however, have been reluctant to allow employees to sue their employers in these situations. Generally, if there is a nexus between the employee’s work and his injury, the injury arose in the course of employment and the exclusive remedy applies.
For example, in Eckis v. Sea World Corp. (1976) 64 Cal.App.3d 1, 9, the Court held that the employee was in the course and scope of her employment while she was riding a whale at her employer’s request, even though she had been hired as and regularly performed the work of a secretary. The court concluded the exclusive remedy rule applies, if: “(1) an employee is injured on the employer’s premises during regular working hours, (2) when the injury occurs while the employee is engaged in an activity which the employer has requested her to undertake, and (3) when the injury-causing activity is of service to the employer and benefits the employer’s business.” This is largely true even if the “activity causing the injury was not related to the employee’s normal duties or the circumstances surrounding the injury were unusual or unique.” (Ibid.)
Additionally, an off-duty injury might still fall within the “course of employment” if the injured employee reasonably expects that the activity is expressly or implicitly required by the employment. (Kidwell v. Workers’ Comp. Appeals Bd. (1989) 33 Cal.App.4th 1130. [CHP officer’s injury incurred at home, while off duty, while practicing long jump required for annual physical fitness test, was considered in course of employment because officer reasonably believed practice was required to pass test].)
The Labor Code exceptions
If the conditions in Labor Code section 3600 are met, an employer is immune from civil liability unless one of the recognized exceptions applies. The most commonly recognized exceptions to employer immunity are found in Labor Code sections 3602(b), 3706, and 4558.
(1) Employer’s willful physical assault - §3602(b)(1)
Courts have limited this exception to situations where an employer uses force or violence, or makes a physical move coupled with the threat of violence (pulling a gun on an employee and threatening to kill him). Employees must also show an actual, specific intent to cause injury. (Magliulo v. Superior Court (1975) 47 Cal.App.3d 760 [waitress could sue restaurant owner whom she accused of violently striking and pushing her]; Herrick v. Quality Hotels, Inns, Resorts (1993) 19 Cal.App.4th 1608 [security guard could sue his employer where security director threatened guard with a gun, pointing it at him and saying “I am going to blow your head off”].)
This exception may also apply where the employer “ratifies” one employee’s willful physical assault and battery of another. “Ratification,” however, can be difficult to prove. (Fretland v. County of Humboldt (1999) 69 Cal.App.4th 1478, 1489-1490 [employer did not ratify co-employee’s alleged assault and battery where there was evidence the employer investigated the plaintiff’s complaints and reprimanded co-employee].)
(2) Employee’s injury is aggravated by the employer’s fraudulent concealment of the existence of the injury and its connection with the employment. § 3601(b)(2).
This exception is triggered when an employee’s injury or disease was caused by exposure to harmful chemicals or substances in the workplace. However, for the exception to apply, an injured worker must prove three elements: (1) the employer knew of the employee’s injury and its connection to employment; (2) the employer concealed that knowledge from the employee; and (3) the concealment aggravated the employee’s injury. (Foster v. Xerox Corp. (1985) 40 Cal.3d 306, 311.) The first element requires a plaintiff to prove the employer had actual knowledge of the specific injury and its connection to the workplace; mere awareness of a risk, even a substantial risk, is insufficient. (Santiago v. Firestone Tire & Rubber Co. (1990) 224 Cal.App.3d 1318, 1331.)
(3) Employer’s defective product, sold to a third party, and provided for employee’s use by a third person — § 3602(b)(3)
This is often referred to as the “product-liability exception.” Before 1982, employees could sue an employer for products liability if their injuries were caused by an employer’s defective product if that product was manufactured for the sale to the public. If the product was manufactured solely for use in the workplace, the employee’s exclusive remedy was workers’ compensation. This was a common law exception to the exclusive remedy rule known as the “dual capacity doctrine.” However, in 1982 the California Legislature limited the scope of the dual capacity doctrine as a basis for liability by enacting Labor Code section 3602(b)(3).
Under § 3602(b)(3), an exception applies only where the employee’s injury was caused by the employer’s product, which itself was provided to the employee not by the employer, but by an independent third person who obtained the product from the employer for valuable consideration. In other words, the employee must come into contact with the product as a consumer, not as part of his or her job. (Behrens v. Fayette Manufacturing Co. (1992) 4 Cal.App.4th 1567, 1574-1575 [finding the exception did not apply where employee was sent to repair a wind turbine manufactured by her employer and sold to a third party; court concluded the employee did not come into contact with the allegedly defective wind turbine as a consumer, but as the primary objective of her job].)
(4) Employer fails to obtain Workers’ Compensation Insurance — § 3706
This one is obvious. If employer failed to obtain workers’ compensation insurance, the exclusive remedy does not apply and the employer is subject to civil liability.
(5) Power Press Exception — § 4558
To state a cause of action under Labor Code section 4558, the plaintiff must show (1) the machine is a “power press” as defined by the statute; (2) injury or death is proximately caused by the employer’s knowing removal of or knowing failure to install a point of operation guard on a power press, and (3) the removal or failure to install was specifically authorized by the employer under conditions known by the employer to create a probability of serious injury or death.
There are many instances where an employee is injured on a machine that does not have the proper guarding. However, the fact that a machine did not have a guard does not automatically invoke an exception to the exclusive-remedy rule. The Labor Code specifically limits the “power press” exception to “any material-forming machine that utilizes a die which is designed for use in the manufacture of other products.” (Lab. Code, § 4558, subd.(a)(4).) The issue will come down to whether the machine uses a “die” as contemplated by the Labor Code.
While there is no all-encompassing definition of the word “die” for purposes of avoiding the exclusive remedy rule, the California Supreme Court has determined that “die,” refers to a tool that “imparts shape to material by pressing or impacting against or through the material, that is, by punching, stamping or extruding.” (Rosales v. Depuy Ace Medical Co. (2000) 22 Cal.4th 279 [holding that the term “die” does not refer to a tool that imparts shape by cutting along the material in the manner of a blade]; see also, Graham v. Hopkins (1995) 13 Cal.App.4th 1483 (1993) [rejecting the defense’s broad definition of “die” as “a device which shapes materials”]; McCoy v. Zahniser Graphics, Inc. (1995) 39 Cal.App.4th 107 [printing press was not “power press,” since it did not form materials to be used in manufacture of other products].)
The California Supreme Court recently limited the power-press exception with respect to derivative claims, finding Labor Code section 4558 does not provide an employee’s spouse with a cause of action for loss of consortium. In LeFiell Mfg. Co. v. Superior Court, 55 Cal.4th 275 (2012), O’Neil Watrous filed a civil action against LeFiell Manufacturing for injuries O’Neil suffered while he was operating a swaging machine at work. The swaging machine is a “power press machine” within the meaning of Cal. Labor Code section 4558. His spouse filed a claim for loss of consortium; however, the supreme court held that the loss of consortium claim should have been dismissed on demurrer by the trial court because “where, as here, the worker’s power press injuries do not prove fatal, the Legislature has expressly restricted standing to bring the action at law… to the injured worker alone [and not his spouse].” The LeFiell case is a perfect example of how California courts will only interpret the statutory exceptions by their express terms.
Conduct that falls outside the compensation bargain
The Labor Code does not provide the entire universe of exceptions to the exclusive remedy rule. Thanks to the California Supreme Court, there are additional exceptions for employer conduct that falls outside the “compensation bargain.” As the California Supreme Court noted in the landmark case, Fermino v. Fedco, 7 Cal.4th 701 (1994) (“Fermino”), the Labor Code does not “definitively delineate the scope of the compensation bargain.”
While the California Supreme Court expanded an employee’s right to sue his or her employer for misconduct that falls “outside the compensation bargain,” courts have generally limited this exception to employer conduct that is not a “normal part of the employment relationship.” (Id. at 715.) The specifically enumerated exceptions found in the Labor Code clearly meet this test as do other types of conduct not mentioned in the Labor Code such as false imprisonment, disability discrimination, sexual harassment, defamation, and wrongful termination in violation of public policy. (Fermino v. Fedco, supra, 7 Cal.4th 701 [false imprisonment not subject to exclusive remedy rule]; Shoemaker v. Myers (1990) 52 Cal.3d 1 (1990) [exclusive remedy did not bar plaintiff’s claim for wrongful termination in violation of public policy where plaintiff was subjected to harassment and termination in retaliation for whistle-blowing]; City of Moorpark v. Superior Court (1998) 18 Cal.4th 1143 [exclusive remedy rule does not bar discrimination claims brought under the Fair Employment Housing Act, Government Code section 12940]; Davaris v. Cubaleski (1993) 12 Cal.App.4th 1583, 1591 [defamatory statements made to damage employee’s reputation are neither “normal part of the employment relationship” nor risk of employment within exclusivity provision of workers’ compensation act].)
One of the most common misconceptions in determining whether an employer’s conduct falls “outside the compensation bargain” is that any intentional or willful misconduct by an employer escapes the clutches of the exclusive remedy rule. This is an oversimplification of the principles set forth in Fermino. There are some injuries caused by ordinary employer conduct that intentionally, knowingly, or recklessly harms an employee, which are still subject to workers’ compensation exclusivity, but may entitle the employee to increased workers’ compensation benefits. (Fermino v. Fedco, supra, 7 Cal.4th 710; Arendell v. Auto Parts Club (1994) 29 Cal.App.4th 1261.) The real test is whether the employer’s conduct violated public policy: “An inquiry into an employer’s motivation is “undertaken not to determine whether the employer intentionally or knowingly injured the employee, but rather to ascertain whether the employer’s conduct violated public policy and therefore fell outside the compensation bargain.” (Fermino v. Fedco, supra, 7 Cal.4th 715.)
A prime example of intentional employer misconduct that is still subject to the exclusive remedy rule is failure to provide a safe workplace, including willful violation of safety codes or regulations. (See, e.g., Arendell v. Auto Parts Club (1994) 29 Cal.App.4th 1261 [two store employees who were injured in a robbery alleged employer failed to provide security despite knowing the store was in a high crime area; court held the employees failed to allege the employer acted deliberately with the specific intent to injure the employees and found there is no fundamental public policy requiring a retail employer to provide adequate store security]; Gunnell v. Metrocolor Laboratories, Inc. (2001) 92 Cal.App.4th 710, 727 [employer’s concealment of hazardous nature of cleaning substances and failure to provide adequate protective gear and proper training for employees remains within the course of employment and does not fall outside the compensation bargain].)
In other words, simply alleging that an employer intentionally injured an employee is not enough to avoid the exclusive remedy rule.
A note on intentional infliction of emotional distress claims
Claims for intentional infliction of emotional distress are viable only if the emotional distress resulted from conduct that falls outside the compensation bargain (e.g., in connection to discrimination, sexual harassment, defamation, etc.). When emotional distress arises from actions that are a normal part of the employment relationship, the claim will be barred by the exclusive remedy rule. (Fretland v. County of Humboldt, 69 Cal.App.4th at p. 1492 [“emotional distress claims are not barred by the exclusivity rule to the extent they seek emotional distress damages for the alleged work-related injury discrimination”]; La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27 [exclusive remedy rule barred claims for any emotional injury caused by the employer’s alleged failure to give the employee the auditing hours promised, unacceptable rate of pay, cramped office space, poor lighting conditions, leaking roof, and office remodeling; this conduct was clearly the sort that normally occurs in the workplace, even if deemed a constructive discharge].)
Although there are only a handful of exceptions to the exclusive remedy rule, each one has multiple characteristics and nuances. An attorney presented with a client injured at work should take sufficient time to review these exceptions to assess whether the employer is a viable defendant in a civil lawsuit.
Brian S. Kabateck is a consumer rights attorney and founder of Kabateck Brown Kellner LLP. He represents plaintiffs in personal injury, mass torts litigation, class actions, insurance bad faith, insurance litigation and commercial contingency litigation.
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