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Court Addresses “Exclusive Remedy” Provision of Workers’ Compensation Law

In Yang v. Abercrombie & Fitch Stores, et. al. (April 30, 2012), the Hawaii Intermediate Court of Appeals (“ICA”) recently held that Section 386-5 of the Hawaii Revised Statutes (“HRS”) barred a plaintiff’s claims against her employer for personal injuries (i.e. stress) she allegedly suffered arising out of and in the course of her employment, which were allegedly caused by the willful acts of her co-employees acting in the course and scope of their employment.

In that case, the plaintiff – a former Abercrombie and Fitch (“A&F”) employee – was interrogated at work by security personnel about money that was missing from a wallet that a patron had lost in the store.  After the interrogation, the plaintiff was escorted out of the AF&F store. She subsequently filed a claim for, and received, workers’ compensation benefits due to “stress” she suffered as a result of the interrogation and related incidents.

The plaintiff also filed a lawsuit against A&F and the security personnel, alleging claims such as false imprisonment, defamation and invasion of privacy, among others.  A&F sought to dismiss the suit on the grounds that workers’ compensation benefits were the plaintiff’s exclusive remedy for workplace stress.  The circuit court denied A&F’s motion, and A&F filed an appeal.

On appeal, the ICA reversed the decision of the circuit court, and ruled that HRS § 386-5 barred the plaintiff’s lawsuit with regards to injuries she suffered (a) because of her employment (b) that were caused by the willful acts of the security personnel acting in the court and scope of their employment.  The ICA also made sure to clarify, however, that HRS § 386-5 did not bar all intentional torts.  Rather, the torts must be committed “because of the employee’s employment.”

Finally, the ICA noted that that HRS § 386-5 did not bar the plaintiff’s claims against the security personnel individually.

While the Yang decision did not create any new law, it certainly clarified that workers’ compensation benefits generally serve as the exclusive remedy for injuries sustained in the course of employment.  The ICA’s decision also clarified that intentional torts that are committed because of on an individual’s employment are covered by workers’ compensation (such as in the Yang instance), whereas intentional torts that are not committed because of an individual’s employment are not.

You can read a copy of the court’s decision here.  You can also view the exclusive remedy provision under HRS § 386-5 here.

The “Cat’s Paw” Theory of Employer Liability

Earlier today, the Supreme Court ruled that an employer can be held liable for employment discrimination under the “cat’s paw” theory of liability.  Specifically, in Staub v. Proctor Hospital (S.Ct., March 1, 2011), the Supreme Court addressed the issue of whether an employer may be held liable for employment discrimination based on the discriminatory animus of an employee who influenced, but did not make, an ultimate employment decision.

In Staub, the plaintiff sued his former employer alleging discrimination under the Uniformed Services Employment and Reemployment Rights Act (“USERRA”).  The plaintiff argued that two of his supervisors – Mulally and Korenchuk – were hostile towards his military obligations.   The Plaintiff also alleged that Mulally gave him a disciplinary warning, which included a directive requiring the plaintiff to report to Mulally or Korenchuk when his cases were completed.  After receiving a report from Korenchuk that the plaintiff did not comply with the directive, the company’s Vice President of Human Resources decided to fire the plaintiff.

In his lawsuit, the plaintiff did not contend that the VP of Human Resources was motivated by hostility to his military obligations.  He did, however, contend that Mulally and Korenchuk’s actions were motivated by anti-military hostility, and that their actions led to his eventual termination.

In addressing this case under the “cat’s paw” theory of liability,  the Court noted that a violation of USERRA was a “tort.”  The Court then held that “if a supervisor performs an act motivated by anti-military animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA” (italics in original.)  The Court also added that the employer would be liable  either when the supervisor acted within the scope of his employment, or when the supervisor acted outside the scope of his employment but liability can still be imputed to the employer under traditional agency principles.

Although this ruling is bad news for employers, the Court did provide some guidance on how an employer can avoid liability in cat’s paw cases.   Specifically, the Court explained that if the employer’s investigation results in an adverse employment action for reasons that are unrelated to the supervisor’s original biased action, then the employer will not be liable. Thus, applying principles of tort law, if there is an intervening and superceding cause for an employment action, the employer might be able to avoid liability for a supervisor’s earlier unlawful actions.

Finally, although this case dealt with an alleged violation of USERRA, the same principles of liability can be applied to all types of employment discrimination lawsuits.  As the  Court noted,  USERRA is “very similar to Title VII.”  Additionally, although the Court’s holding specifically referred to USERRA, the Court also framed the “cat’s paw” issue in the context of “employment discrimination based on . . . discriminatory animus.”

You can read a copy of the Court’s decision here.  An explanation of the term “cat’s paw” can be found here on Wikipedia:  “cat’s paw.”

SES Seminar on Hiring and Firing in Today’s Economy

Earlier this month, I presented a seminar for Sterling Education Services on “Hiring and Firing Employees.”  I tailored the seminar to issues that are most prevalent in today’s current economy.

Hiring and terminations have always been two of the most important aspects of the employment process.  Whereas hiring the right employees can definitely enhance your workforce and increase profitability, hiring the wrong employees can oftentimes lead to disastrous results, such as poor productivity, workplace harassment, and unnecessary lawsuits.  In addition, there are several legal hurdles and pitfalls involved with the hiring process that employers need to avoid, such as inadvertently placing a job advertisement that could lead to a claim for discrimination.

Terminations are perhaps the most emotional and difficult part of the employment process.  Not only are terminations emotionally draining, but any misstep can lead to the former (and disgruntled) employees to file a lawsuit against your company.  The recent film, Up in the Air touched on a few of these issues.   Although the termination process can be emotionally and legally challenging, by knowing how to handle the process, it makes it a lot easier to go through.

With the current state of the economy, employment related lawsuits are on the rise.  As the economy worsens, people get more litigious.  Therefore, I recommend that all employers be very careful in the hiring and firing process, and consult their labor and employment attorneys when necessary.

Sam’s Club Will Cut 11,200 Jobs

Sam’s Club has announced that it will be cutting about 10% of its workforce – which is equivalent to roughly 11,200 jobs – as part of a decision to outsource product demonstrations within its stores and eliminate positions used to recruit new business members.  The majority of positions cut will be for part-time employees.

Sam’s Club CEO, Brian Cornell, has stated that the company will outline the changes associated with the job cuts in February 2010, when the company releases its fourth-quarter results from 2009.  Sam’s Club’s fiscal year ended on January 31, 2009.

This announcement was made just a couple weeks after Sam’s Club announced it will be closing 10 of its stores.

Sam’s Club currently operates approximately 600 clubs and has about 112,000 employees.