Recent Developments Concerning Employer Defense of Workers’ Compensation Act as a Bar to Wrongful Termination Lawsuits

When a wrongful termination or other employment discrimination lawsuit is brought against an employer, employers sometimes raise the defense that the injuries allegedly sustained by the employee are barred by the Workers’ Compensation Act (the “WCA”), which provides the “exclusive remedy” for work related injuries. In California, the law is now settled that certain types of “work-related” injuries are not subject to this defense because the injury does not come within the “compensation bargain” encompassed by the WCA. Recently, two cases issued that discuss the application and scope of this employer defense.

In Huffman v. Interstate Brands Companies, which issued on August 12, 2004, a state appeals court held that while the plaintiff could sue his employer for alleged age discrimination arising out of his demotion to a lower job classification, the employee could not recover for alleged pain and suffering caused by the fact that the demands of the new job aggravated a pre-existing knee injury. The court held that such a claim was barred by the WCA. The court suggested that the result might be different if the evidence were to show that the employer’s purpose in demoting the employee was to expose him to work assignments that the employer knew would would result in the injury.

The test formulated by the court to determine when the WCA could be successfully asserted as a defense in an employment discrimination lawsuit is whether the acts complained of (here, the demotion) was a “substantial factor” in causing the injury complained of (here, the knee injury). While the court did not define “substantial factor,” the court said that to meet this test, “the conduct must have an effect in producing the injury or harm to regard it as a cause and that it must be more than slight, theoretical, trivial, or negligible to be a substantial factor.” The court concluded that the knee injury sustained by the plaintiff in that case was “because of the physical requirements of the [new] job, which all [persons working in that job] were required to perform, and not because he was unlawfully replaced [in his old job] by a younger man.”

In Claxton v. Waters, which issued on August 30, 2004, the court addressed the question of when a WCA settlement and release form, which is a standard, preprinted form prepared by and for use in proceedings before the Workers’ Compensation Appeals Board, can serve as a bar to a lawsuit covering the same or similar injuries. In Claxton, the employee filed a workers’ compensation claim for, among other things, injuries caused to her “psyche due to sexual harassment.” She also filed a lawsuit against her employer for sexual harassment. She settled her workers’ compensation claim by signing the standard WCA settlement and release form. Her employer then sought to obtain a dismissal of her lawsuit on the ground that the language in the WCA settlement and release form also covered the injuries alleged in her lawsuit, and therefore barred that lawsuit from going forward.

The appeals court did not agree. The court essentially held that while the settlement of a WCA proceeding can operate as a bar to a lawsuit over the same injuries, the standard form used in WCA proceedings does not contain language sufficient to accomplish this purpose. According to the court, the form must expressly refer to the lawsuit as being covered by the settlement and release before it will constitute an effective bar to the lawsuit. The court also held that the employer will be precluded from introducing extrinsic evidence, i.e., evidence outside of the document itself, to show that the parties intended for the WCA settlement and release form to cover not just the WCA proceedings but any pending lawsuits against the employer.

The Claxton case is a substantial departure from prior case law. As noted by a dissenting judge in the case, the court’s decision is based on questionable legal analysis; hence, we expect that the issues raised in that case eventually will find its way to the California Supreme Court for review.

Persons wishing further information or who have questions or comments about either this case or any of the cases that have appeared on this website can contact any of the attorneys at Epstein, Turner & Song.