by Harlan J. Crossman
In many Superior Court cases where there is a suit by an employee against his employer, the defense of the exclusivity provisions of the Workers' Compensation Act is usually alleged. The defense takes the position that the employee's remedy is exclusively under the workers' compensation laws and the forum is The Industrial Commission rather than Superior Court. For years this has been a successful defense, but in recent times inroads have been made into this defense.
I am sure many of you, like myself, have been faced with the question of whether the exclusivity provisions apply or do not apply, and if so, when A.R.S. §23-906(A) specifically provides:
"Employers who comply with the provisions of section 23-961 or 23-962 as to securing compensation, and the employers' workmen's compensation insurance carriers or administrative service representatives, shall not be liable for damages at common law or by statute, except as provided in this section, for injury or death of an employee wherever occurring. . ."
A.R.S. §23-1022(A) provides:
"A. The right to recover compensation pursuant to this chapter for injuries sustained by an employee or for the death of an employee is the exclusive remedy against the employer or any co-employee acting in the scope of his employment, and against the employer's workmen's compensation insurance carrier or administrative service representative, except as provided by §23-906 . . ."
These are the exclusivity provisions of the Workers' Compensation Act which is the basis for the employer's defense. There are two exceptions to these exclusivity provisions. A.R.S. §23-1022(C) gives the employee the right to sue for medical malpractice an employee of a hospital maintained by the employers. A.R.S. §23-1022(A) provides the other exceptions:
". . . if the injury is caused by the employer's willful misconduct, or in the case of a co-employee by the co-employee's willful misconduct, and the act causing the injury is the personal act of the employer, or in the case of a co-employee, the personal act of the co-employee, or the employer is a partnership, on the part of an elective officer of the corporation, and the act indicates a willful disregard of the life, limb or bodily safety of employees, the injured employee may either claim compensation or maintain an action at law for damages against the person or entity alleged to have engaged in the willful misconduct."
In the case of Serna v. Statewide Contractors, 6 Ariz. App. 12, 429 P. 2d 504 (1967), the plaintiffs were the widows of two laborers who had been killed while digging a ditch. The widows did not pursue any workers' compensation remedies but sued the employer. The ditch was 25 feet deep, and the sides were not sufficiently sloped or shored up to prevent the sandy sides to cave in. For five months prior to the accident, inspectors from the Industrial Commission had constantly warned the defendant employer of the very conditions which caused the death of the decedents. The employer had been warned that the sides of the ditch were not sloped properly and needed more shoring, as well as escape ladders should have been provided. An affidavit by the safety inspector of The Industrial Commission had been filed which said that on numerous occasions the employer had been advised of the unsafe conditions on the job, and there had even been a meeting between the employer's representative and the Labor Management's Safety Committee of The Industrial Commission. Not less than eleven times had the employer been written up for safety violations, most of which included the failure to shore up the ditch.
The plaintiffs allege in their complaint that the failure of the agents of the defendant employer to act was willful misconduct, and if not willful misconduct, then constructive intent or transferred intent would satisfy the requirement necessary for the willful misconduct rule under the workers' compensation statutes so as to allow the Superior Court action.
The court held that the definition of "willful misconduct" was plain and unambiguous, and was construed to mean an act done knowingly and purposely with the direct object of injury to another. The court held that to get around the exclusivity provisions of the Workers' Compensation Act there must be a deliberate intention as distinguished from some kind of intention presumed from gross negligence. The court held that in this case the plaintiff clearly established the negligence of the defendant employer but failed to show that the employer, through its elective officers, acted with the intent, which is required by statute.
The court in another case the same year again defined the willful misconduct exception to the exclusivity provisions. In Lowery v. Universal Match Corporation, 6 Ariz. App. 98, 430 P. 2d 444 (1967), the plaintiff sued his employer alleging that while working as a mechanic for the employer, he was around certain equipment which contained chemicals and gasses, all of which were highly dangerous to his human life and limb. He further alleged that the employer, through its agent, in willful disregard of the life, health and bodily safety of the plaintiff, failed to take safety measures and to provide safety devices to the plaintiff, knowing that such failure would cause the plaintiff great bodily harm. As a direct and proximate result of this misconduct of the defendant, the plaintiff sustained serious disabling and permanent injuries. A summary judgment was granted to the defendants on the grounds of the exclusivity provisions of the Workers' Compensation Act. The Court of Appeals affirmed the summary judgment by stating:
"The legislature has set two requirements which must be proved in order to exempt an employee from the workers' compensation act and permit recovery against the employer. The first is that the act must have been done knowingly and purposely, and second is the act must have had the direct object of injuring another. Gross negligence or wantonness amounting to gross negligence is not sufficient to constitute a willful act under our statutory definitions. It must be shown that the negligence or wantonness was accompanied by the intent to inflict an injury upon another person."
With this strict construction of the "willful misconduct exception" one can see why the exclusivity provisions of the Workers' Compensation Act has been upheld so often in the Superior Court.
If one looks at these two previous decisions, the question arises as to when and under what other circumstances can an employee get around the exclusivity provisions of the Workers' Compensation Act.
The recent case of Ford v. Revlon, 153 Ariz. 38, 734 P. 2d 580 (1987), has become a landmark decision in this area of exclusivity. While this case may not totally resolve all the questions in this area, it does provide inroads for further exceptions to the exclusivity provisions of the Workers' Compensation Act. In this case there is a majority opinion by three judges and a concurring opinion by two judges on different grounds. One of the three judges who participated in the majority opinion is no longer on the bench, and has been replaced so it is not known whether the majority opinion is presently controlling or the concurring opinion will become the law. This becomes important because the rationale of the majority and concurring opinions are different and could cause different results.
Intentional Infliction of Emotional Distress
In Ford v. Revlon, the plaintiff was an employee of Revlon who, initially, was sexually propositioned at dinner by her supervisor in April of 1980. In May, at an awards picnic, the supervisor grabbed the employee and told her he wanted to seduce her, as well as grabbing her and rubbing hands over her breast, stomach and between her legs. The employee complained to the Phoenix comptroller saying she was afraid of her supervisor and wanted help. In the following months the employee continuously complained to different supervisors and personnel directors within the company. At this time the employee was starting to become ill because of the problem.
In December of 1980, the employee called New Jersey and complained that her supervisor was still harassing her. She was told in January of 1981, by the manager of Human Resources, that the situation was too hot for her to handle and she did not want to get "involved." It was suggested to the employee that she put it out of her mind and forget the situation. The employee then contacted the corporate Equal Opportunity specialist and asked help from him.
During this time the employee was developing high blood pressure, a nervous tick in her eye, chest pains, rough breathing, and other symptoms of emotional distress. In October of 1981, the employee attempted suicide.
In April of 1982, the employee sued both the supervisor and Revlon for assault and battery, and for intentional infliction of emotional distress. The jury found the supervisor liable for assault and battery, but not for intentional infliction of emotional distress. The jury found Revlon liable for intentional infliction of emotional distress, but not liable for assault and battery. Only Revlon appealed. The court held that Revlon's failure to take appropriate action in response to Ford's complaint of sexual harassment by her supervisor constituted the tort of intentional infliction of emotional distress. Revlon set up as one of its defenses the Arizona workers' compensation law and its exclusivity provisions. The majority of the court reasoned that under A.R.S. §23-1021(B), workers' compensation covers people who are injured by accident arising out of and in the course of employment. The court determined that this did not come under the workers' compensation provisions of A.R.S. §23-1021(B) or A.R.S. §23-1043.01(b) because the defendant's acts were not "accidents." This is where the concurring opinion differs with the majority's opinion. The concurring opinion says this was "an accident" so as to come within the Workers' Compensation Act as defined in Pauley v. Industrial Commission, 91 Ariz. 266, 371 P. 2d 888 (1962). In Pauley v. Industrial Commission, the court defined an "accident" to have occurred "when either the external cause was unexpected or the resulting injury was unintended." The concurring opinion, written by Justice Feldman, then goes on to discuss the Workers' Compensation Act and the limitations of the exclusivity provisions. Justice Feldman cites with approval 2A, Larson, Workmen's Compensation Law, §68.30, which states:
"If the essence of the tort, in law, is non-physical, and if the injuries are of the unusual non-physical sort, with physical injury being at most added to the list of injuries as a makeweight, the suit should not be barred. But if the essence of the action is recovery for physical injury or death, the action should be barred even if it can be cast in the form of a normally non-physical tort."
Justice Feldman agrees with that statement but feels that instead of focusing on the nature of the injury, one must look to the nature of the wrong in question. Justice Feldman states that if the wrong is one not ordinarily resulting from an inherent risk or danger of the employment, and if it is an injury which is non-physical with physical injuries only incidental to emotional, mental or other injuries, then it is outside the field of workers' compensation cases.
The concurring opinion says the intentional infliction of emotional distress is still covered under the workers' compensation statutes because to get around the exclusivity provisions it must be a wrongful act done with the knowing or purposeful act committed with the direct object of injuring the employee (willful misconduct). Revlon obviously didn't do that, but was very negligent. Since that is true, then it would still come within the provisions of the Workers' Compensation Act because negligence is not an exception to the exclusivity provisions. The way he gets around this is to say we should adopt Larson's position that certain areas of injury do not come within the workers' compensation system, nor were they ever contemplated to be covered by workers' compensation.
Justice Feldman cites the case of Renteria v. County of Orange, 82 Cal. App. 3d 833, 147 Cal Rpt. 447 (1978) for this proposition that these sexual acts were not intended to come within the Workers' Compensation Act. The language in Renteria v. City of Orange, which is enlightening, is:
"While it is possible to believe that the legislature intended that employees lose their right to compensation for certain forms of negligently or accidentally inflicted physical injuries in exchange for a system of workers' compensation featuring liability without fault, compulsory insurance, and prompt medical care, it is much more difficult to believe that the legislature intended the employee to surrender all right to any form of compensation for mental suffering caused by extreme and outrageous misconduct by an employer. It would indeed be ironic if the Workers' Compensation Act created to benefit employees were to be interpreted to shield the employer from all liability for such conduct."
In the case of Renteria v. County of Orange, an investigator for the county Social Services filed a complaint against his employer and co-employees for intentional and negligent infliction of emotional distress. He alleged that the employer and fellow employees treated him in a rude and degrading manner, placed him under surveillance, subjected him to lengthy interrogations and discriminated against him because of his Mexican-American descent "with the object and intent to force or cause plaintiff to suffer humiliation, mental anguish, and emotional distress and to cause him to quit or be fired or dismissed." The defendant demurred on the ground that the exclusivity remedy was workers' compensation. The court held that this was an exception to the exclusivity remedy provisions of the Workers' Compensation Act because the intentional infliction of emotional distress and mental anguish were never contemplated by the legislature when it enacted the Workers' Compensation Act.
Bad Faith, Fraud and Deceit
In addition to the aforementioned intentional infliction of emotional distress, there have been other areas where the courts have made inroads into the exclusivity provisions of the Workers' Compensation Act. In Hodges v. Sweetwater Union High School District, 183 Cal. App. 3d 956, 228 Cal. Rpt. 464 (1986), the plaintiff Hodges had sued the District initially because they had transferred him into a non-teaching position. He was awarded $170,000.00 by a jury but settled for $150,000.00. It was the understanding that he would be reinstated as a classroom teacher and given a classroom to teach. After some delaying by the defendant, he was finally reinstated and given the cafeteria as his classroom. He sued defendant and alleged three things: 1. Intentional infliction of emotional distress because the school did not reinstate him to a regular teaching assignment in a regular room. 2. Bad Faith. The District's refusal to give him a regular teaching position after the last suit was settled and constituted bad faith. 3. Fraud and Deceit. The District's representative testified on the stand at the first hearing and told the claimant outside the courtroom that he would get a regular teaching assignment. The failure to give him this teaching assignment constituted fraud and deceit. The defendant employer demurred on the complaint and the trial court would not allow the plaintiff to amend his complaint. The Court of Appeals stated that if the plaintiff would delete the allegations as to physical injury, which were only lightly dealt with in the complaint, then the demurrer would be overruled. The basis for its decision was that emotional distress, bad faith, and fraud and deceit were never contemplated to be covered by the Workers' Compensation Act.
Arizona has also held the exclusivity provisions do not apply in actions for bad faith. In Franks v. U.S.F.&G., 149 Ariz. 291, 718 P. 2d 193 (1985), the court held that the bad faith by the workers' compensation carrier in the handling of the workers' compensation claim does not arise out of and in the courts of employment so it does not come within the Workers' Compensation Act. A.R.S. §23-1021 limits the application of the worker's compensation law to employees who are injured by accident arising out of and in the course of employment.
The ability to sue in Superior Court for bad faith against insurance carriers may be academic and moot because of the recent legislation, HB 2001, which establishes A.R.S.§23-930 giving the Industrial Commission exclusive jurisdiction over complaints of unfair claims practices in bad faith actions against carriers or self-insured employers. This law became effective October 21, 1987.
Slander of Libel
The exclusivity bar has been denied in cases involving slander. In Howland v. Balma, 143 Cal. App. 3 rd 899, 192 Cal. Rpt. 286 (1983), a deputy sheriff sued the sheriff. The sheriff had made statements to a newspaper reporter to the effect that this deputy used unnecessary force in the arrest of an upstanding citizen. The sheriff had put him into a custody position saying that he would never be assigned to patrol again. The deputy filed for workers' compensation against the County (his employer). This was resolved by compromise and release wherein the plaintiff received $1,000.00 plus back pay and disability retirement pension. The deputy also sued the sheriff for slander in Superior Court. The sheriff defended on the grounds that the slander was barred by the exclusivity provisions of the Workers' Compensation Act. The California appellate court held that slander is an injury to one's reputation and is not a physical or mental injury so as to constitute a personal injury. The court also talked about the fact that an injury to reputation was not contemplated by the Workers' Compensation Act, nor was this a risk of employment.
Civil Rights Violations
In the case of Boscaglia v. Michigan Bell Telephone Co., 420 Mich. 308, 362 N.W. 2 nd 642 (Mich. 1984), two cases were combined for decision purposes.
In the first case, the employee refused a lateral transfer to another city in her present job. The following month she was demoted. After demotion she had various employment problems. She was reprimanded by her supervisor and broke down completely in tears and ultimately received psychiatric treatment. The claimant filed actions against three supervisors in the company for sex discrimination, for the demotion, and for discrimination under the Fair Employment Practices Act in Michigan and the Civil Rights Act of Michigan. She applied for workers' compensation and received it.
In the consolidated case, Frank Pacheco sued General Motors and two supervisors because of discrimination against him because of his Spanish-American heritage. He received disability benefits, but he did not apply for workers' compensation benefits. The court held that the Civil Rights legislation did not intend that these benefits would be barred by the Workers' Compensation Act. The court reasoned there is a difference between the Acts. The workers' compensation deals with victims of industrial injury and is intended to guard people from recovering no money by preventing the defense of the assumption of the risk in contributory negligence. The Civil Rights Act, on the other hand, deals with the prejudice and biases on race, sex or religion against another.
The court said the exclusivity remedy provision does not bar an employment discrimination action seeking recovery for physical, mental or emotional injury. This led the court to the conclusion that the Workers' Compensation Act does not prohibit the Circuit Court from exercising original jurisdiction in employment discrimination actions. The court remanded Mrs. Boscaglia's case for consideration of reinstatement of her claims for emotional injuries and future wages, even though she had already received her workers' compensation benefits. Pacheco was allowed to sue for discrimination and was also not barred by the exclusivity provision.
Negligence in Inspection
In Derosia v. Duro Metal Products Co., 519 Atl. 601 (Vt. 1986), the plaintiff alleged in his complaint that the insurance carrier was negligent in his inspection of the work place and that the employee relied upon this inspection and suffered injuries as a result of the negligent inspection. The employee received his workers' compensation and then sued the insurance carrier. The issue was whether the insurance carrier could be liable as a third party. The court held that the insurance company was liable as a third party. The court made a distinction to the effect that when a workers' insurance carrier pays bills it is impossible to cause injury, but when they provide medical treatment or make safety inspection, then they can be sued because they have gone into the business of providing medical services and safety inspections and have stepped out of their role as guarantor and payor for workers' compensation. One interesting aspect of this case is the courts recognition that should the employee be able to collect from insurance companies as a third party, the insurance company might also be entitled to a lien for the amount they expended in the workers' compensation suit.
In the case of LaPare v. Industrial Commission, 1 CA-IC 3454 (filed March 1987), the court was dealing with a bus driver who had been employed for 20 years with Trailways Bus Company. The Trailways Company sent a letter to its driver discussing the financial status of its company, and telling the drivers they might have to reduce their pay. In addition, there were various rumors circulating concerning pay cuts, lay offs and a change of the rotation system. The claimant, while stopping in El Paso, Texas n a layover, attended a union meeting where it was determined that some people would lose their job. The driver left this meeting and became very upset and overwhelmed. By the time he got to Deming, New Mexico he was unfit to drive the bus any further and was replaced. The claimant suffered a mental breakdown which was related to the rumors and claimant's fear of losing his job, but not related to the stress caused by job performance itself, according to one psychiatrist. The Administrative Law Judge found this to be non-compensable because it was not causally related to the employment, and even if it was, the stress was not unexpected, unusual or extraordinary which is required by A.R.S. §23-1043,01. The court held that the possibility of a job loss is a normal and expected feature of employment in life. The court said that had the breakdown been caused by the employer's selective and adverse conduct against the employee and directed towards him, then it would qualify as being unusual, unexpected and extraordinary. The court concluded with:
"In summary, threatened economic hardship, including such naturally traumatic events as layoffs and closures may indeed set the stage for varying degrees of emotional distress on the part of the affected employees. The remedy, however, does not lie with workers' compensation benefits. Other remedies or social programs must be pursued."
Does that mean that LaPare could turn around and sue Trailways at common law because it is not covered under the Workers' Compensation Act?
If you argue that the majority opinion in Revlon, allows one to sue in Superior Court because there was no "accident," and the bad faith in Franks, did not "arise out of and in the course of employment" then could LaPare sue in Superior Court because this was not an "accident"? This would seem especially true because the essence of the tort was emotional distress which was created by the employer rather than the job performance. But, if you argue that the concurring opinion is correct in Revlon, which says the injury must flow from a risk not inherent in the employment, then maybe La Pare cannot sue because job loss is a normal and expected feature of employment and as such would be an inherent risk of employment.
Indemnification
In the very recent case, Tucson Electric Power Company v. Swengel-Robbins Construction Co., 153 Ariz. 486, 737 P. 2d 1385 (App. 1987), the Court of Appeals held that the workers' compensation exclusivity provisions did not prevent an employer being required to indemnify a third party for damages to his own employee.
In this case, the surviving widow of an employee of Swengel-Robbins Construction Co. sued Tucson Electric Power Company and Marco Crane & Rigging Co. for the death of her husband. The deceased was working at a construction site and was killed when the boom or crane operated by another Swengel-Robbins employee came into contact with an energized overhead high voltage line while the decedent was in contact with the crane.
Tucson Electric Power Company, in a third-party complaint, brought in Swengel-Robbins Construction Co., the employer, claiming that said employer failed to notify Tucson Electric Power Company that the equipment would be used within six or ten feet of a high voltage overhead line in violation of A.R.S. §40-360.42 and A.R.S. §40-360.43(A). Tucson Electric Power Company further alleged that this violation of the statute caused the death of the decedent. Under A.R.S. §40-360.44(B) the person or business entity violating this safety statute is liable to the public utility for all damages and all costs and expenses "including damages to third persons" incurred by the public utility as a result of the contact. It was on this basis that Tucson Electric Power Company requested summary judgment and its right of indemnification from the defendant employer.
The defendant employer alleged, among other things, that the indemnity statute violated the exclusivity provisions of the workers' compensation statutes. The court affirmed the summary judgment for Tucson Electric Power Company against the defendant employer on the grounds that the exclusivity provisions of the Workers' Compensation Act limits the employee's options regarding his right to sue the employer, but does not limit the employer's liability based on a legal relationship with a third party. The employer was liable to indemnify the third party public utility because of the separate breach of its statutory duty to notify the public utility that equipment would be used within six or ten feet of a high voltage overhead line.
Conclusion
Inroads into the exclusivity provisions of the Workers' Compensation Act have been made. How far and under what theory these inroads will extend may depend upon the Supreme Court. Whether or not to avail yourself of these opportunities must depend upon the attorney's determination as to what is in the best interests of his client.
The practicing attorney must keep in mind the provisions of A.R.S. §23-1024 which deals with the election of remedy limitations which is placed upon him when one decides to sue in either Superior Court or at The Industrial Commission of Arizona.
Harlan J. Crossman received his J.D. degree from the University of New Mexico in 1965. He is a Certified Worker's Compensation Specialist whose practice is primarily limited to workers' compensation. Mr. Crossman has previously published in the field of workers' compensation, and has taught workers' compensation at the Arizona State University College of Law.
