Workers compensation

For almost a century, employers in the United States have been required by jurisdictional State Laws to provide compensation to injured employees. This compensation is intended to cover the employees’ loss of wages, earning capacity and medical expenses resulting from an on-the-job injury. The basic concept of a workers’ compensation is not new. The Babylonians had compensation systems 4,000 yr ago, and ancient Greeks provided compensation due to military service. These systems had intuitive means for cash awards for permanent injury, with amputation of extremities being the easiest cases to assess and assign specific benefits. Although a form of “workers’ compensation” existed officially in Europe as early as 1838 in Germany, it was not until the early Twentieth Century that “Workers’ Compensation” became a legislated in the United States, with all 50 states adopting some form of workers’ compensation legislation by 1949.

Basic principals in U.S. workers’ compensation system include the following:

  • Exclusive remedy for employee
  • Employee gives up right to sue employer, except in extreme circumstances
  • Limited liability for employer
  • Employer enjoys immunity for civil action from employee
  • Employer’s liability is predictable
  • Employee’s right to sue third parties remains

In the United States, each individual state determines and administers its own workers’ compensation system. These benefits include:

  • Expeditious resolution of disputed issues.
  • Limited liability without fault.
  • Automatic benefits, which include: a) medical treatment coverage including: medical care, services and supplies as necessary, such that the employee incurs no “out of pocket” medical expenses related to the injury. b) Indemnity payments replacing wages while the injured employee recovers to medical stability. c) Death benefits, for the surviving spouse and dependent children in the case of employee death. d) An impairment settlement giving compensation to an injured worker for permanent physical loss from a work-related injury, according to the state’s defined compensation schedule.

Those injuries which are determined to result in a permanent loss qualify for an “impairment rating” based on a scoring system which varies from one jurisdiction to another, upon which the permanent partial and permanent total disability payments are determined for each case.

The greatest benefit to employees is that they are assured of a degree of compensation for work-related injuries; the trade-off is that they are seldom allowed to sue an employer or co-worker for full compensation because of the “exclusive remedy” provision contained in workers compensation statutes (for a summary of the law in every state, see Albert B. Randall, Jr., The Exclusive Remedy Provision State-by-State Survey). For example, an employee in an office who is bitten by a co-worker’s dog or the employer’s dog is entitled to workers compensation but usually cannot sue for pain, suffering, scarring, and other elements of full compensation. (See, i.e., 2 Witkin, Summary of Cal. Law (9th ed. 1987) Workers’ Compensation, §249, p. 820.)

The citations in the remainder of this brief are to California law but the laws of other states are similar. 

Workers Compensation Is the Employee’s Exclusive Remedy Against His Employer

“Under the Workers’ Compensation Act, all employees are automatically entitled to recover benefits for injuries ‘arising out of and in the course of the employment.'” (Privette v. Superior Court (1993) 5 Cal.4th 689, 696-697.) “When the conditions of compensation exist, recovery under the workers’ compensation scheme ‘is the exclusive remedy against an employer for injury or death of an employee.'” (Id. at p. 697.)

If an employer secures insurance for payment of workers’ compensation benefits for a residential employee, the employee’s exclusive remedy is workers’ compensation and the employee does not have a cause of action for damages in a civil action. (Philip Travis v. Bruce Choder 5 WCAB Rptr. 10, 207)

As a general rule, an employee who sustains an industrial injury arising out of and in the course of employment is limited to recovery under the workers’ compensation system. To be within the scope of employment, the incident giving rise to the injury must be an outgrowth of the employment, the risk of injury must be inherent in the work place, or typical of or broadly incidental to the employer’s enterprise. (See Torres v. Parkhouse Tire Service, Inc. (2001) 26 Cal.4th 995.)

There must be a causal nexus between the tort and the employer’s work; the tort must be engendered or arise from the work; the incident leading to injury must be an outgrowth of the employment. (See Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291.)

The test for whether an injury arises out of the employment is: If the particular act is reasonably contemplated by the employment, injuries received while performing it arise out of the employment, and are compensable. In determining whether a particular act is reasonably contemplated by the employment, the nature of the act, the nature of the employment, the custom and usage of a particular employment, the terms of the contract of employment, and perhaps other factors should be considered. (LaTourette v. Workers’ Comp. Appeals Bd. (1998) 17 Cal.4th 644.)

Workers’ compensation is the exclusive remedy for a housekeeper bitten by the homeowner’s dog and bars the personal injury action against the homeowner under Civil Code §3342, a strict liability statute for personal injury caused by dog bites. (Rosa Pale v. Sabrina Coble 8 WCAB Rptr. 10, 332 ___Cal.App.4th___ . WARNING: UNPUBLISHED DECISION, not to be cited as authority. Cited herein for purpose of analysis.)

Injuries caused by unsafe working conditions are compensable solely under workers’ compensation, even if the employer recklessly or deliberately failed to correct known safety violations. (See Vuillemainroy v. American Rock & Asphalt, Inc. (1999) 70 Cal.App.4th 1280.)

Exceptions to the Exclusive Remedy Aspect of Workers Compensation

Willful and unprovoked physical act of aggression of a co-employee-Labor Code §3601(a)(1): The exception to the exclusive remedy of workers’ compensation when the injury is proximately caused by the willful and unprovoked act of aggression of a co-employee applies when the injured employee proves the other employee had an intent to injure. (See Torres v. Parkhouse Tire Service, Inc. (2001) 26 Cal.4th 995.)

Not a bar to a premises liability claim by injured employees of independent contractor against landowners: Workers’ compensation exclusivity precludes an injured employee from suing hirers only when the injury arises from the act or omission of the contractor employing the injured worker. In a premises liability action, the claim is that a known pre-existing condition of the property affirmatively contributes to the injury, the Privette doctrine does not bar liability; the rule creates a bar only when the dangerous condition is determined to be the result of the contractor’s negligence. (See Sheeler v. Greystone Homes Inc. (3003) 113 Cal.App.4th 908.)

Employer who brings dog to work for purely personal reasons unrelated to the business: If an employer brings dog to work, and dog is unrelated to any activity of the business, the employer can be sued for dog bite to employee under the dual capacity doctrine, which holds that an employer who steps out of his role as employer cannot rely on the exclusive remedy provisions of the workers compensation law. “If the duty flows solely from the employment relationship and the injury “arises out of” and “during the course of” that employment, then the recited policy considerations behind the exclusive remedy in workers’ compensation mandating that the employer be immune from tort liability have viability. If, however, an additional concurrent duty flows from an “extra” employer status or a relationship that is distinct from that of employer-employee and invokes a different set of obligations, then a second capacity arises and the employer status is coincidental. The employer should then be treated as any third party tortfeasor, not immune from a common law tort action.” Bell v. Industrial Vangas, Inc. (1981) 30 Cal.3d 268, 277.

Third party tortfeasors: A worker can sue in tort a third party whose negligent or intentional act has injured the employee. (Privette v. Superior Court (1993) 5 Cal.4th 689, 697.) The employee is entitled to a full range of tort relief; the third-party tortfeasor is liable for non-economic damages to the extent of his proportionate fault. (DaFonte v. Up-Right, Inc. (1992) 2 Cal.4th 593, 598, 604.) 

Uninsured dual employer: A pet sitter who is employed by a pet sitting company and thereafter is furnished to a dog owner who does not have workers compensation insurance can use the workers compensation laws as a means to sue the dog owner. Pursuant to the “dual employment” doctrine, the dog owner is considered to be the dual employer or general employer of the pet sitter. (Kowalski v. Shell Oil Co. (1979) 23 Cal.3d 168, 174; Caso v. Nimrod Productions, Inc. (2008) 163 Cal.App.4th 881, 888.) The exclusive remedy of the workers compensation laws shall not apply because the dog owner has not secured the payment of workers compensation benefits. (Labor Code section 3706.) Liability is based on the negligence of the dog owner, which is presumed. (Labor Code section 3708.) None of the usual defenses against canine professionals apply, such as comparative or contributory negligence or assumption of the risk. (Ibid.)

Employee’s Right to Sue Non-Employer Who Cause Injury

An employee who is injured in the course of employment by the negligence of a third party, not the employer, may sue the third party for damages. (Neighbarger v. Irwin Industries, Inc (1994) 8 Cal.4th 532; Rodgers v. Workers’ Comp. Appeals Bd. (1984) 36 Cal.3d 330, 334; 1 Hanna, Cal. Law of Employee Injuries and Workers’ Compensation (rev. 2d ed. 1993) § 11.20[2], p. 11-61.)

The employee and employer each have an independent cause of action for damages against a negligent third party. Lab. Code § 3852; Buell v. CBS, Inc. (1982) 136 Cal. App. 3d 823, 825, 186 Cal. Rptr. 455. The employee may simultaneously proceed against the third party for civil damages and against the employer for workers’ compensation benefits for the same injury. Lab. Code § 3852; Finney v. Manpower, Inc. (1981) 123 Cal. App. 3d 1066, 1069, 177 Cal. Rptr. 74. See California: Somebody Else Did It: A Primer on Third Party Claims by Howard Stevens. 

Employer’s or Workers Compensation Insurer’s Subrogation Right

When an employer or insurer pays benefits, it is entitled to recover those benefits from any third party who was responsible for injuring the employee to whom benefits were paid. This right has various names, but often is called a right of subrogation even though it is not technically “subrogation” because the right is based on statutory law. 

The opposite is not true. When the employee obtains workers compensation benefits from his employer and tort damages from a third party, the third party cannot sue the employer for equitable indemnification. California Labor Code section 3864 provides: “If an action as provided in this chapter prosecuted by the employee, the employer, or both jointly against the third person results in judgment against such third person, or settlement by such third person, the employer shall have no liability to reimburse or hold such third person harmless on such judgment or settlement in absence of a written agreement so to do executed prior to the injury.”

Procedures Available Under the California Labor Code for Employer or Workers Compensation Insurer to Enforce Subrogation Right

The following applies to employers who paid benefits, and to the workers’ compensation insurer. The latter is within the definition of employer. (LC §3850). References to “employer” therefore include both the employer and the insurer.

1. Suing the third-party directly by way of Complaint for Subrogation. (LC §3852)

Employer or insurer is full party entitled to service of all pleadings and discovery.

2. Intervening in injured employee’s case on file by way of Complaint-in-Intervention. (LC §3853)

Employer is full party entitled to service of all pleadings and discovery.

Complaint-in-Intervention continues against third-party even if the employee settles the case with that party (LaBorde v. McKesson & Robbins, Inc. (1968) 264 Cal.App.2d 363, 369, 70 Cal.Rptr. 726, 33 CCC 478) or if the employee’s case is dismissed for lack of prosecution (Carnation Co. v. Superior Court (Johnson) (1969) 1 Cal.App.3d 891, 896, 82 Cal.Rptr. 98, 35 CCC 650).

If the employee prevails at trial, the employer is entitled to separate judgment.

3. Filing a lien on an employee’s judgment against the third-party by way of Notice of Lien. (LC §§3856(b), 3862)

The Notice of Lien may be asserted any time before satisfaction of judgment or, where the case is settled, before the settlement proceeds are distributed. (Harvey v. Boysen (1975) 50 Cal.App.3d 756,762, 123 Cal.Rptr. 740, 40 CCC 593)

Employer is not a party, and is not usually served with pleadings and discovery (does receive Court notices). Also, not usually permitted to participate in discovery or propound discovery on parties in case, or participate at trial. Also, there is no liability for third-party defendant’s costs in the event that the injured employee does not prevail at trial.

Notice of Lien is honored and Order directing payment will issue if no employer negligence found with verdict and judgment in injured employee’s favor. But, employer is at the mercy of evidence introduced at trial on employer negligence issue if notice of the issue was previously given and Complaint-in-Intervention is not filed.

Only if injured employee settles with third-party defendant and settlement is intended to include reimbursement claim will the employer prevail on a motion to impress lien on settlement proceeds – subject to potential award of attorney’s fees to injured employee’s attorney. (Marrujo v. Hunt (1977) 71 Cal.App.3d 972, 138 Cal.Rptr. 220, 42 CCC 697)

Notice of lien is advisable only in those cases involving very tenuous liability against the third-party defendant, serious issues concerning the injuries and damages claimed, where there is a potential for a finding of significant employer negligence or where the amount of benefits paid is relatively minimal.

This method is less expensive because of non-participation at Court hearings and during discovery. However, the injured employee can settle around the Lien as long as sufficient notice of the settlement is given to the employer. The employer is also relying on the injured employee to provide such notice.

More for Lawyers

The Veen Firm has published a great article about dealing with a negligent employer who puts a lien on a victim’s tort case when the victim has received workers compensation benefits: Workers Comp Subrogation: Don’t Allow Your Client to Be Extorted. 

Howard Stevens, California: Somebody Else Did It! A Primer on Third Party Cases is an excellent article will copious citations to the authorities.