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By Jeffrey D. Snyder, Esquire and Kevin L. Connors, Esquire
The Pennsylvania Supreme Court’s recent Decision in Bowman v. Sunoco, Inc., decided on April 25, 2013, validates an agreement that an employee had entered into, when initially hired by her employer, Allied Barton, under which the employee agreed that he/she would not bring a third-party claim or action against Allied Barton’s customers, in the event of a work injury which might otherwise have triggered consideration of third-party liability, predicated in a tort-based negligence action for personal injuries.
Thus, we are talkin to you!
Bowman involved a private security guard employed by Allied Barton Security Services, who had signed a workers’ compensation disclaimer, under which she had waived her right to sue Allied’s clients for damages related to any injuries that would otherwise be covered under the Pennsylvania Workers’ Compensation Act.
The disclaimer stated:
“I understand that state workers’ compensation statutes cover work-related injuries that may be sustained by me. If I am injured on the job, I understand that I am required to notify my manager immediately. The manager will inform me of my state’s workers’ compensation law as it pertains to seeking medical treatment. This is to assure that reasonable medical treatment for an injury will be paid for by Allied workers’ compensation insurance.
As a result, and in consideration of Allied Security offering me employment, I hereby waive and forever release any and all rights that I may have to:
- Make a claim, or
- Commence a lawsuit, or
- &nnbsp; Recover damages for losses
from or against any customer (and the employees of any customer) of Allied Security to which I may be assigned, arising from or related to injuries which are covered under the workers’ compensation statues”.
Falling on either snow or ice while providing security at a Sunoco refinery, the employee filed a workers’ compensation benefits claim, and then received workers’ compensation benefits pursuant to the Pennsylvania Workers’ Compensation Act.
She then filed a negligence lawsuit against Sunoco, under which she alleged that Sunoco had been negligent in failing to maintain and inspect its premises, resulting in the employee sustaining her work-related injuries.
In the course of discovery being conducted in the personal injury lawsuit, the employee’s disclaimer, entered into at her hiring by Allied Barton, was produced through discovery, evidencing the employee’s waiver of her right to file a personal injury claim against Allied Barton’s clients or customers, as well as evidencing her receipt of workers’ compensation benefits, with Sunoco filing a Motion for Judgment on the Pleadings, in support of which Sunoco argued that the employee’s negligence claim had to be barred by the employee’s voluntary disclaimer and waiver.
The employee argued that the disclaimer was void, claiming that it was contrary to public policy.
Specifically, the employee argued that the disclaimer violated the public policy considerations embedded in Section 204(a) of the Workers’ Compensation Act. Her argument was framed around the disclaimer allegedly improperly waiving a cause of action that had not yet accrued.
Section 204(a) of the WCA sets forth:
“No agreement, composition, or release of damages made before the date of any injury shall be valid or shall bar the claim for damages resulting therefrom; and any such agreement is declared to be against the public policy of this Commonwealth.”
At the trial court level, the disclaimer was not found to have violated the public policies articulated in Section 204(a), with the trial court granting Sunoco’s Motion for Judgment on the Pleadings.
The employee appealed the trial court Judgment to the Superior Court, with the Superior Court also agreeing that the disclaimer was not violative of public policy, reasoning that the employee had waived only her right to sue third-party customers for injury covered by workers’ compensation laws, and that the waiver/disclaimer was not an attempt to deprive her of rights under the Workers’ Compensation Act, nor was it intended to shield Allied from liability or to deprive the employee of compensation for any work-related harm or injuries.
Finding that the third-party release was not contrary to public policy, the Superior Court agreed with the trial court, affirming the Judgment against the employee and in favor of Sunoco.
The Supreme Court granted allocator to determine:
“Did the Superior Court, in a decision of first impression of state-wide substantial significance, disregard the public policy of the Commonwealth of Pennsylvania and the plain meaning of the Pennsylvania Workers’ Compensation Act when it decided that a third-party release in the form of a ‘Workers’ Comp Disclaimer’, signed in consideration for employment or receipt of compensation benefits, which further required the waiver and eternal release of any and all rights to make a claim, commence a lawsuit, or recover damages or losses not void against public policy when the language of the disclaimer openly conflicts with the language of Section 204(a) of the Pennsylvania Workers’ Compensation Act, which expressly renders such agreements as void against public policy?”
Before the Supreme Court, the employee argued that the disclaimer that she had signed, the same being a condition of her employment and initial hire, violated the first sentence of Section 204(a) of the Pennsylvania Workers’ Compensation Act, as that sentence reads:
“No agreement, composition, release of damages made before the date of any injury shall be valid or shall bar a claim for damages resulting therefrom; and any such agreements declared to be against public policy of this Commonwealth.”
Arguing that the sentence was plain and unambiguous, the employee asked the Supreme Court to invalidate the disclaimer that she had clearly consented to when hired. A second basis for invalidation was asserted by the employee, as she contended that the disclaimer clearly contravene the subrogation clause of Section 319 of the Pennsylvania Workers’ Compensation Act, claiming that it was absurd for an employer to forego an opportunity to recoup expenses spent on an injured worker, effectively arguing that the negation of subrogation resulted in economic harm to her employer, Allied.
Sunoco responded by arguing that Section 204(a) only applied to an employer’s attempts to limit its own liability for workers’ compensation benefits and claims, and that it had no application whatsoever to releases that might involve third parties, ones not governed by the well-muscled reach of the Pennsylvania Workers’ Compensation Act.
Further arguing that the employee had never argued that the disclaimer was a contract of adhesion, or that it resulted from mistake, duress, fraud, or that it was either ambiguous or unsupported by consideration, Sunoco sought validation of the disclaimer, as waiver of any claim by the employee against it for a fall of personal injuries.
Dissecting Section 204(a) of the Pennsylvania Workers’ Compensation Act, the Supreme Court, in a majority opinion authored by Justice Eakin, held that only the first sentence of Section 204(a) deals with public policy issues, as the remaining sentences primarily discuss various sources and funds that an employee might receive, that might impact on the employee’s receipt and entitlement to workers’ compensation benefits.
Initially conceding that the first sentence in Section 204(a) was not free from ambiguity, the Supreme Court then examined the inter-relationship between Article II of the Act, in which Section 204 is one of five Sections as that Article related to the Pennsylvania Workers’ Compensation Act as a whole, as Article II is entitled “Damages by Action and Law”. As had been observed by the Supreme Court in its 1999 DecisionFonner v. Shandon, Inc. fundamental premise of the Pennsylvania Workers’ Compensation Act is that the relations between the employee and the employer under the Act are essentially contractual in nature, as the employee embraced the right of exclusive remedy, and the employer embraced the right of statutory immunity, establishing a duality of purpose inuring to the benefit of both parties.
Interpreting legislative history, the Supreme Court determined that the legislature had originally intended that the provisions of Section 204(a) would only apply to agreements between an employer and employee that might bar an employee’s right to make a claim against their employer, and not, by extension, to bar claims against third parties.
Stripping away legislative ambiguities and contractual aversion, the Supreme Court held that the disclaimer and waiver entered into by the employee did not prevent the employee from receiving full and just compensation for her work-related injuries, and that its effective negation of Allied’s potential right of subrogation, was a business decision that only affected Allied, and that it was not a deprivation of the employee’s rights.
Another argument advanced by the employee was that the disclaimer/waiver contemplated actions that could only occur in the future, with the Court holding that the disclaimer was a condition of employment, under which the parties, both the employee and employer, and that it certainly contemplated that it would affect future causes of action, as the disclaimer dictated how claims for work injuries would be handled in the future.
Holding that the employee was never forced to sign the disclaimer, and that the disclaimer did not prevent her from receiving workers’ compensation benefits for her work-related injuries, the Supreme Court held that the disclaimer/waiver was merely a guarantee to Allied’s customers that they would not be held legally responsible or liable for injuries sustained by Allied’s employees.
Justice Eakin’s Opinion was joined in by Justices Castille, Saylor, Todd, and McCaffery.
A concurring Opinion was issued by Justice Saylor, with Justice McCaffery joining in that concurring Opinion.
The concurring Opinion posed a “modest reservation”, in the course of invoking the concept of a “double recovery”, and the public policy reasons behind subrogation, with Justice Saylor confessing to some circumspection as to whether an injured employee is ever able to fully recover in tort, where the recovery is diminished by compromise, settlement, litigation costs, and subrogation.
Justice Baer dissented, predicating the dissent on the first sentence of Section 204(a) of the Act being “clear and unambiguous”, resulting in Justice Baer concluding that the disclaimer/waiver at issue clearly was prohibited by the plain language of that sentence.
Does the Bowman Decision place employers who do not secure the Bowman-type disclaimer/waivers at a competitive disadvantage to employers who do not secure such a disclaimer or waiver?
Will these types of disclaimers raise questions as to the adequacy of consideration, a question that might arise, if someone already employed is asked to execute such a disclaimer/waiver, in the wake ofBowman?
Is it possible to argue that continued retention of employment is, in fact, adequate consideration for aBowman-type disclaimer/waiver?
What if an employee refuses to sign the disclaimer/waiver?
No less true, what if an employee is terminated for refusing to sign the disclaimer/waiver?
And where do we begin to analyze the definition of either a “customer or client” under the disclaimer/waiver?
Given what is at stake by application of the Bowman rule, additional litigation is clearly forecast in the future with this novel issue.
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With every member of our trial practice group being AV-rated, our partnership with the Pennsylvania Defense Institute and the Counsel on Litigation Management magnifies the lens through which our professional expertise imperiously demands that we remain dynamic and exacting advocates for our clients, the same being businesses, corporations, insurance carriers, seeking our trial and litigation acumen, to navigate the frustrating and liability-intensive minefield pervasive throughout Pennsylvania trial practice and procedure.
Questions concerning tort and/or contract liability that might arise in the context of casualty claims can be directed to Kevin L. Connors firstname.lastname@example.org (Phone: 610-524-2100 Ext. 112).