The California Constitution mandates a form of workers’ compensation outside of the common law remedies available in civil lawsuits. The Legislature has implemented this public policy so the workers’ compensation system is the preferred means to remedy employees’ work-related injuries.

Workers’ compensation is described as a compromise between employers and employees. The system is based on the “compensation bargain,” under which employees give up the right to sue for personal injuries occurring in the course of employment. In exchange, they receive a streamlined way of obtaining medical care and compensation, and procedural safeguards.

But the compensation bargain is not always welcome by employers, or employees for that matter. Workers’ compensation laws change with the political winds. Employers face increasing insurance costs when claims experience rises. Employees may be dissatisfied with the compensation offered and the medical care provided for their injuries.

Labor Code Section 132a Prohibits Discrimination Based on Workers’ Compensation

Employers’ resentment toward workers’ compensation costs or workers who claim industrial injuries obviously could result in negative consequences for employees who participate in the system. Labor Code section 132a protects employees who file workers’ compensation claims.

That statute prohibits an employer from discriminating against an employee who is injured in the course and scope of employment. It punishes any employer who discharges, or threatens to discharge, or in any manner discriminates against an employee because he or she has filed or intends to file a workers’ compensation claim.

The available remedies include reinstatement, restoration of lost back pay and benefits, and a penalty of the lesser of 50% of the compensation given to the employee or $10,000. Employees typically pursue section 132a claims before the Workers’ Compensation Appeals Board (WCAB), which has exclusive jurisdiction over claims for workers’ compensation injuries. However, the claim may be asserted in court, and discharged employees may pursue a common law claim for wrongful termination in violation of public policy.

Courts’ Prior Interpretation of Section 132a

Because of early court decisions interpreting section 132a, an employer could be punished for virtually any action taken that disadvantaged an employee who had suffered an industrial injury. The legal standard of proof merely required an employee to establish “that as the result of an industrial injury, the employer engaged in conduct detrimental to the worker.” Therefore, the employee could prevail under 132a by showing that the injury resulted in a loss of some kind of compensation or benefit without proof that the employer treated employees more favorably.

If the employee satisfies this standard, the burden shifts to the employer to prove that the negative action was “necessary” and directly related to “business realities.” This interpretation of section 132a resulted in a lower standard of proof than typically is applied to discrimination claims (such as race or sex), which require proof not only that something negative occurred, but also that others outside the protected group are treated more favorably.

Under the above standard, employers’ policies regarding attendance and leaves of absence were particularly susceptible to attack under section 132a. For example, in Smith v. Workers’ Compensation Appeals Board, the employer applied a rule under which employees who did not call in absences on two occasions were fired. The rule did not distinguish between work-related and non-work-related illnesses. In fact, the employer gave Smith extra chances to comply, but ultimately fired Smith for violating the rule.

Denying Smith’s section 132a claim, the WCAB found Smith indeed had violated the rule, and that the company applied the rule neutrally to employees regardless of the reason for the absence. The Court of Appeal vacated the Board’s decision. Relying on the California Supreme Court’s decision in Judson Steel v. Workers’ Compensation Appeals Board, the Court of Appeal held that the employer’s conduct was “detrimental” to the injured worker, and could be upheld only if justified by “necessity” and business “realities.” The court decided that the Board had not properly scrutinized the “necessity” of the employer’s decision or whether it was truly justified as a business decision.

The “business necessity” defense was a tough burden for employers to meet. For example, in Barns v. Workers’ Compensation Appeals Board, the employee injured a finger in a logging operation. He was granted light duty, but re-injured himself. The employer refused to return Barns to work and filled his job, resulting in termination of Barns’ employment. The company prevailed on Barns’ section 132a claim before the WCAB, and Barns appealed.

The Court of Appeal decided that the employer had not proved the “business realities” defense. First, the company did not justify why it did not return Barns to light duty after doing so before. Second, the company failed to establish why it was necessary to terminate Barns’ employment before he achieved “permanent and stationary” status (meaning Barns’ injuries had reached a stable level so that it could be determined whether he could perform his duties.”

Under Barns, Judson Steel, and other decisions, employers basically were required to hold employees’ jobs open until they reached “permanent and stationary” status, which could take years, depending on the injury. Policies limiting leaves of absence to maximum periods of even a year or more were attacked as violating section 132a. Employers seeking to permanently fill jobs vacated for months by injured workers faced the dilemma of hiring long-term temporary workers, or risking the employee’s section 132a claim. Employees terminated after industrial injuries filed section 132a claims as a matter of course, even without proof that the employer singled them out for adverse treatment.

The Supreme Court Re-Examines Section 132a

Ronald Lauher filed a workers’ compensation claim against his employer, the California Department of Rehabilitation. As part of his treatment, Lauher spent several hours away from work. The Department required Lauher to use sick and vacation time to attend these appointments or he could take unpaid time. Lauher claimed this policy violated section 132a. The WCAB dismissed the section 132a claim, finding that the Department’s policy was universally applied to absences caused by industrial and non-industrial injuries. The Court of Appeal affirmed.

The Supreme Court reviewed the decision to determine what “discrimination” means under section 132a in Department of Rehabilitation v. Workers’ Compensation Appeals Board. Disagreeing with the Barns and Smith decisions, the Court decided that employees must prove “disparate treatment” to prevail under section 132a. Thus, the Court found that Lauher could not establish a prima facie case of “discrimination” because he could not show that the Department applied its rule regarding use of sick and vacation leave only against employees with industrial injuries.

Application of the New Interpretation of Section 132a

The Department of Rehabilitation decision has significantly affected claims brought under section 132a. In several cases, the courts have decided that neutral policies applied to all employees do not violate that statute. For example, in Pate v. Workers’ Compensation Appeals Board an employer discharged an employee who was on modified duty due to an industrial injury. The WCAB found the employee was terminated because of his failure to provide the necessary medical documentation to verify three absences and not because of his industrial injury. The WCAB’s decision pointed out that the employer had established there was a policy under a collective bargaining agreement that required employees who were absent to provide a doctor’s note. Since the policy was applied to both industrial and non-industrial injuries, the employee could not establish he was singled out and the Court affirmed the WCAB’s decision.

In Robinson v. Workers’ Compensation Appeals Board, the employee suffered an industrial injury and took a four-month leave of absence. The employee did not return to work on the date she was released to return and was subsequently terminated. The court found the employee was discharged under the employer’s policy of terminating an employee for a three-day absence without providing a medical certification. As the policy was equally applied to all, the employee could not show she was discriminated against as a result of her industrial injury.

On the other hand, section 132a still prohibits discriminatory treatment of employees with industrial injuries. For example, in Crown Appliance v. Workers’ Compensation Appeals Board, the employer fired an employee who had returned to light duty and then full duty. The evidence established that the employer’s management believed the employee was “faking” his injury, and that the reasons for firing the worker were not worthy of belief. The Court of Appeal affirmed the WCAB’s decision that Crown had discriminated against the employee. Nothing in the Department of Rehabilitation case affects claims that the employer violated section 132a by treating an employee with hostility or relies on flimsy excuses to discharge the worker because he or she filed a workers’ compensation claim.

Recommendations

After Department of Rehabilitation, employers need not exempt from neutral policies workers who file workers’ compensation claims for industrial injuries. Employers may apply leave of absence and other neutral policies to workers regardless of whether they have filed workers’ compensation claims. Consistent application of such policies is essential to avoiding liability under section 132a. If the WCAB finds that the employer has inconsistently applied its policies, it may find that the motivating reason for disparate treatment is illegal discrimination.

Section 132a prohibits only discrimination based on participation in the workers’ compensation system. Employers should continue to examine whether other laws, such as the Americans with Disabilities Act and the Fair Employment and Housing Act, as well as leave of absence laws such as the Family and Medical Leave Act, provide additional protections to employees.

Additionally, employers obviously should not take punitive measures against employees who file workers’ compensation claims or who claim to be injured. Section 132a continues to prohibit disparate treatment, as it always has. Moreover, the disability discrimination laws fully apply to employees with disabilities regardless of whether the disabilities were caused by a work-related injury.

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