April 2006 SBH Quarterly Newsletter
PDF FormatAre the Protections Afforded to Employers Under the Workers’ Compensation Act Being Eroded?
The workers’ compensation system was created as a reciprocal arrangement
between employers and employees. Employees were guaranteed coverage for
work-related injuries, diseases, or death and employers were protected from
negligence lawsuits--or so employers thought.
In Smothers v. Gresham Transfer, 332 Or 83 (2001), the Oregon Supreme Court
found the exclusive remedy provision of the Act unconstitutional if applied
to a worker who was denied workers’ compensation benefits because of failure
to meet the major cause standard. The court found this violated the Oregon
Constitution’s guarantee that all injuries have remedies (if a remedy was
available in 1857). The Smothers worker had an undisputable injury, caused
in part by work, but the major cause standard coupled with the exclusivity
clause gave him no remedy. The court held the worker would have had a common
law remedy even if work was not the major cause of injury, and refused to
bar the civil suit.
The Court of Appeals recently issued another decision expanding the holding
in Smothers. In Olsen v. Deschutes County, 204 Or App 7 (2006), employees
working with mentally ill patients sued for negligence and assault when a
violent patient attempted an attack. The employees had previously complained
about the safety risk this patient posed, and the employer had been told by
a psychiatrist that the patient should be removed from the facility. The
Court of Appeals rejected the exclusive remedy defense and upheld a jury
verdict against the employer.
As expected, the parties’ arguments addressed a statutory exception to the
workers’ compensation exclusive remedy defense for injury resulting from the
deliberate intention of the employer (outlined in ORS 656.156(2)). The
court, however, chose to focus on Smothers and the constitutionality of
applying the exclusive remedy to the case at hand. The majority opinion
found Smothers applied because the workers’ compensation claim had been
denied based on the employee’s failure to prove she had a “diagnosable
condition.” Several procedural issues were tangled in this case and the
decision will be appealed to the Oregon Supreme Court. For now, the decision
represents a willingness on the part of the court to undertake a
case-by-case scrutiny of exclusive remedy defenses and expand the Smothers
holding.
This trend creates many uncertainties for employers. Does the denial of a
claimed injury or disease based on a statutory proof dispute expose the
employer to potential litigation? In certain circumstances, this could mean
that choosing to accept some conditions might be preferable to fighting the
major cause proof when the potential for civil litigation is high.
Settlement for these borderline type cases may become an even more important
tool for the employer. However, when an employer is faced with several
similar lawsuits, litigation may be appropriate.
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