Third Party Liability Waivers

Episode Notes

Transcript

Workers Comp Matters

Third Party Liability Waivers

05/31/2017

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Intro: This is Workers Comp Matters, hosted by attorney Alan S. Pierce, the only Legal Talk Network program that focuses entirely on the people and the law in workers’ compensation cases. Nationally recognized trial attorney, expert, and author Alan S. Pierce is a leader committed to making a difference when workers’ comp matters.

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Alan S. Pierce: Welcome to another edition of Workers Comp Matters here on the Legal Talk Network. My name is Alan Pierce. I am with the Salem, Massachusetts’ Law Firm of Pierce, Pierce & Napolitano. We represent injured workers in workers’ compensation, Social Security disability and related matters.

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Today’s guest is a law student, it’s Alex Lonnet. He is a third-year student at the University of Pittsburgh School of Law. He has worked with law firms that practice extensively in the field of civil litigation during his school. And I met Alex recently in Phoenix at the Annual Meeting and Induction Dinner of the College of Workers’ Compensation Lawyers, and Alex was the first place winner of the 2017 College of Workers’ Compensation Lawyers’ Student Writing Contest.

Alex’s paper, the subject of which we’re going to discuss in a few moments, extensively examined a very interesting issue, something I’ve seen in my practice, it’s the issue of third party liability waivers in employment contracts. He will explain what that means. Alex plans on taking the bar exam and passing the bar exam and practicing in the fields of litigation and workers’ compensation.

So Alex, welcome to Workers Comp Matters.

Alex Lonnet: Thanks for having me today Alan.

Alan S. Pierce: All right. I am going to read the title of your paper and then perhaps you can define the terms a little bit for us. The paper is entitled Employee Waivers of the Right to Sue Third-party Tortfeasors: Law, Policy, Recent Developments, and Implications for Workers’ Compensation and the Injured Workers it Serves. Very interesting, yet lengthy topic.

We all know that when workers are injured at work, their remedy is workers’ compensation benefits and their employer, the person they work for, as part of the deal, the bargain that was created, that created workers’ comp law cannot be sued for negligence or civil liability, or be considered a tortfeasor. But there is a whole area of law where somebody or some company other than the employer, if they or he or it caused the injury, that entity could be sued in tort and the workers’ comp insurer and the injured worker share in any recovery.

So tell us what these waivers are all about.

Alex Lonnet: All right. Well Alan, these waivers are, I think the first thing to note about them is that they are in employment contracts and they are really prevalent among certain types of workers. So most of the cases that have been litigated up to the Supreme Court level deal with security guards, but temporary workers, I mean temps so to say, a lot of agencies that furnish employees also contain these provisions.

And what it does is when the employee signs the employment contract he gives up the right to sue any negligent or reckless third party that is a client of his employer. So using the example of a security guard, say someone works for AlliedBarton or Universal, one of the big security firms and they have a contract with a warehouse. They send security guard Joe to the warehouse.

Security guard Joe is walking around, there’s a gaping hole in the floor. He trips and breaks his leg. Normally the security guard would be able to collect workers’ comp from his immediate employer, which would be the security firm, Allied, Universal, whoever, and then if he wanted to he would have the opportunity to sue the owner of that warehouse.

When he has signed a third party waiver in his employment contract he can’t sue the owner of that warehouse, so he is limited to just workers’ compensation benefits. So I guess in a nutshell that’s what these things are. And they are quite prevalent among lower paid temporary workers.

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Alan S. Pierce: It would seem to me that the workers’ comp insurance company in that case wouldn’t be happy, because if they are paying benefits because somebody else caused the injury and they would otherwise be able to recover monies if that other entity were sued, they could not get paid back what they paid and the employer’s premium would be affected. Yet, from the employer’s perspective, they have customers that they bring their employees to and they don’t want to alienate their customer base by having them being exposed to a lawsuit.

So how do the workers’ comp insurers feel about these waivers or are they pretty much a silent participant in this?

Alex Lonnet: Yes, obviously if I owned a workers’ comp insurance company, I wouldn’t be a fan of this, but generally they are fairly silent with regard to this and usually, to kind of further illustrate the point you made, the premises owning company, whenever they are hiring a security firm or a temporary staffing firm, a lot of times they make that firm sign a waiver of subrogation, whereby the workers’ comp carrier agrees that it won’t subrogate any amount that is paid out should the employee breach the term of his contract, where he goes and sues the premises owner.

So yeah, there really isn’t a whole lot out there on the feelings of these insurance carriers, but I would agree with you that it really does — it’s not beneficial to them either.

Alan S. Pierce: Yeah. As a matter of fact, you raise an interesting point, because in most jurisdictions, not only does the injured worker have a right to sue a negligent third party, but if that injured worker for whatever reason decides not to sue or in the case of a contract cannot sue, the workers’ comp insurer isn’t party to that contract and it can sue on its own. So these subrogation waivers do the same purpose.

Now, it seems to me at first blush as a lawyer two things strike me as being fundamentally wrong with these contracts. First of all, you are having somebody as a condition of employment releasing somebody for something that hasn’t happened and may not happen, and to me that seems particularly odious.

And secondly, a person looking for work, especially in a lower paying job, doesn’t really have much bargaining power when he or she tries to get a job and they get this probably legalese document put in front of them that they sign and they don’t really know what they are doing. How have those theories or any other theories played out in the courts when these waivers have been tested?

Alex Lonnet: Well, you kind of danced around it with your first theory and that is some lawyers have argued that these are unconscionable, they are unduly oppressive and unconscionable. That theory has not been successful yet at either a trial court or at an appellate court level. And I can kind of understand some of the courts’ reasoning behind that.

I mean, if we look at some of these arbitration provisions that are in employment contracts, that are in cellphone contracts; we give up our constitutionally guaranteed right to a jury trial all the time. So from that angle I do understand that a court might say, well, you waive away a lot of things each day and you don’t realize it, so we are not going to call this unconscionable.

To your second point, that seems to be gaining a little bit more traction. And in the New Jersey Superior Court, Appellate Division’s decision of Vitale v. Schering-Plough that the New Jersey Supreme Court has actually just accepted certiorari on it, so they will hear that argument, in Vitale the judge highlights all of those points you made.

She pointed out that the plaintiff, who was a security guard, who was injured at I believe either a power plant or an oil refinery, I can’t remember that little detail, she brings up that this is a guy who has a high school education, he works for a low hourly wage, none of these guys are unionized, or most of them aren’t, and you are right, there’s very little bargaining power.

I think the plaintiff in Vitale admitted that he never even read this provision. He didn’t even know it existed until he was injured and wanted to sue the tortfeasor, the person who caused his injury.

So that is gaining some traction with the Vitale decision. And that was one of the factors that kind of led the judge to find that it’s while not unconscionable, it was void against the public policy of the workers’ compensation statute that was designed to kind of protect the laborers and the workers of that state.

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And I do kind of understand and I would agree with that, so yes, I would say that second theory is gaining traction. We will see if it kind of keeps rolling at the New Jersey Supreme Court level, but as to whether it’s unconscionable or just unduly oppressive, that argument doesn’t seem to be flying with courts, at least not yet.

Alan S. Pierce: You have surveyed cases from around the country, I would imagine that different results have occurred in different jurisdictions for some of the reasons that you have discussed. Could you speak to some of that?

Alex Lonnet: Well, yes and no. The first thing is for an issue that is as widespread as these waivers are, you referenced, you are in Massachusetts and you have dealt with these, I have talked to practitioners in Pittsburgh who have dealt with these waivers, and I met lawyers from all over the country at the College of Workers’ Compensation Lawyers Symposium in Phoenix who said that they have dealt with these things, for something as widespread as that it’s really only made appellate case law four times.

It happened first in Arkansas, then in your home state, with Horner v. Boston Edison, then in the District of Columbia, and then with Bowman, and really they all reached the same results, they all upheld these waivers. It wasn’t until this past year, in 2016, when the Superior Court Appellate Division of New Jersey heard Vitale v. Schering-Plough that we kind of saw a minority position emerging.

So the Arkansas, Massachusetts, Pennsylvania and DC higher courts have all held that these waivers are — they are able to be upheld, and they are not void as either unconscionable or void against public policy per the workers’ compensation statutes.

So in terms of seeing a minority position evolve, we are really kind of just starting to see that with this Vitale case.

Alan S. Pierce: At this point why don’t we take a short break and we will come back and discuss the Vitale case in a little more detail with our guest Alex Lonnet. We will be right back

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Alan S. Pierce: Welcome back to Workers Comp Matters with Alan Pierce, talking to Alex Lonnet about third party liability waivers.

Alex, we were chatting a bit about other areas of human endeavors, where people release their rights or give up rights as a condition for some other reason other than working. Maybe to help our listeners understand this a little better, what are some of the other areas we may have ourselves come into contact with waivers of our rights?

Alex Lonnet: Well, Alan, being from Salem I assume you are a Red Sox fan.

Alan S. Pierce: Of course, of course.

Alex Lonnet: Well, if you went to a Red Sox game last season or if you went to any other MLB game or professional sporting event, you very well might have waived your right to sue the sports franchise, the stadium owner, the various vendors within the stadium when you presented that ticket and walked through the gates. A lot of professional sporting event tickets include boilerplate waivers on the back, or when you buy them online and you click through, when you get that long agreement and everyone just clicks agree anyways and gets to the payment part, a lot of those include waivers of the ability to sue the sports team, the stadium, owning company. So these are very prevalent.

Cellphone contracts are another big one. Cable contracts. Netflix, Hulu, things like this. We waive our right to sue someone who wronged us many times in one day. It’s really interesting to think about.

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Now, obviously there’s a big distinction between if I choose to go — I am in Pittsburgh, so if I choose to go to a Steelers game and something happens and I guess I break my leg or something, I chose to do that. I chose to give up my Sunday afternoon and do that.

The plaintiff in Vitale, Mr. Vitale, he didn’t have a choice, he had to go to work; these other plaintiffs, they had to go to work to support their family. So I think there is a big distinction between going to a sporting event, getting a certain cellphone carrier versus going to work everyday and making a living, which is necessary.

Alan S. Pierce: Yeah, or going parasailing or renting a jet ski, I mean you name it, our lives are probably filled with legal waivers of rights.

So tell us a little bit, what’s the story in Vitale, I think from looking at the cases that you cited, they are pretty much, as you said, coming out of the security field or the temp labor field, where a temporary labor supplier sends people to work in a factory and they might have their hand cut off by a defective machine and can’t sue the owner of the factory for having a defective machine. So how did Vitale reach its way to the Supreme Court of New Jersey?

Alex Lonnet: Okay. Well, Philip Vitale, that’s the plaintiff’s name, he actually wasn’t a security guard per se, he was a manager of security guards, and I just had my memory refreshed, Schering-Plough is actually a chemical company, so I believe this was a manufacturing facility where he worked for AlliedBarton and they had a contract to guard that facility.

And while he was there working one of his shifts, kind of patrolling and making sure the security guards were at their stations and properly uniformed, so on and so forth, he fell down a set of stairs. And I believe one of the stairs was actually missing a tread, so his foot went through, he fell down and sustained pretty serious injuries.

So he goes and sues Schering-Plough, who owned the manufacturing facility where he was injured, and Schering-Plough moved for summary judgment. The trial court denied summary judgment, kind of foreshadowing what the appellate court would do. Mr. Vitale actually got a verdict at trial. And Schering-Plough then appealed to the New Jersey Superior Court, Appellate Division. It appealed the denial of summary judgment, and then that’s where we get our decision that strikes down these waivers in employment contracts.

So that’s kind of what happened. And you referenced earlier the sophistication level of a lot of these workers. Judge Koblitz in her decision actually references that Mr. Vitale has a high school education and he just kind of signed his employment contract one day and an AlliedBarton field contract and didn’t read it and went to work the next day.

So that’s really the mechanics of how a lot of these waivers operate. People come in to work, they sign it, they don’t read it, and they go on their way, and then unfortunately something happens and it comes back to bite.

So that’s the story of Vitale so to say.

Alan S. Pierce: Yeah. And we talked about two of the reasons that somebody like me who represents injured workers would have trying to challenge these contracts that contain these waivers. One would be the being void against public policy or the onerous nature of this.

The second would be I guess what the law calls an adhesion contract, an unfair bargaining position, where an injured worker or a prospective employee rather just doesn’t have the power to bargain equally.

The third factor that you identified, you called the social ramifications of these waivers in the modern workforce, and that’s to me an intriguing category, because we are in a different workforce today in the first quarter of the 21st Century than we were when I first started, where we do have these new relationships. We have a lot more companies that provide labor. We have the Uber and Lyft community, the gig economy, where there is a blending or not a clear distinction of who your employer actually is and whether you are truly an employee, an independent contractor, or something in between.

So as we close and as you kind of predict the trend, if you can predict the trend, how does the modern workforce and the social ramifications of these waivers fit together?

Alex Lonnet: Yes. Well, I think you made some excellent points, and I do reference that in my paper that we are moving more and more towards what some economists have called a gig economy. People aren’t working the traditional nine-to-five jobs anymore. Unfortunately, a lot of the protections offered by unions that we saw in years past have been eroded.

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And to the point about being unsure of who your employer is and whether you are an independent contractor, yes, those issues are becoming far more prevalent.

Also more prevalent now are temporary workers, contract workers. A lot of companies are not hiring people to be outright employees. A lot of companies that require laborers, trades people, they will go through staffing agencies first and once someone has worked through a staffing agency at the facility for a few months, they will hire them on.

And because of that I think this issue is important, because there are more people temping now, there are more people in these temporary jobs. And the social policies you referenced at the show’s beginning behind workers’ compensation is that it’s the grand bargain. Labor concedes some things, business interest concedes some things, and the system generally works to keep injured workers — keep them out of destitution and poverty and to allow business to kind of calculate that risk.

These waivers really do chip away at that. As you referenced earlier, you have a situation where there’s two losers and a winner. The two losers are obviously the injured worker, who maybe is getting extremely shorted with having to accept comp benefits as his only remedy against a negligent third party. And the other big loser is his direct employer and their workers’ comp carrier, because they are essentially being forced to pay for that third party’s negligence, and there’s absolutely no hope of recovery or subrogation.

So I do think that the kind of social ramifications of these waivers will come to light a little bit more, and I think we saw that with Vitale. My prediction would be, and if I am wrong I am wrong that I think we are going to see a minority position emerge. I believe that the Supreme Court of New Jersey will uphold the appellate court’s decision in Vitale and in effect will have two positions. And I think this might embolden some claimants’ lawyers and plaintiffs’ lawyers in states where this issue hasn’t been litigated and there is no appellate case law to challenge these waivers. And we might really see over the next 15 years or so a real rollback with these waivers if other courts start going the way of the New Jersey appellate court.

So I think that these are all important things to think about in your practice, representing injured workers, and also if you represent employers and you are helping them draft employment contracts, these are all important considerations.

Alan S. Pierce: Well, we are coming to a close. I really thank you very much Alex, not only for being a guest on Workers Comp Matters, but for your paper. I was familiar with the Horner case, the Boston Edison case that you referenced, and I was surprised that our high court in Massachusetts did not strike down this waiver as either being void against public policy or unconscionable, but as you point out, there’s another side to the story and that’s what makes the cases and makes for what lawyers do.

So good luck for the rest of the short time you have left as a student, your finals, your bar exam, and thank you for being a part of our show.

So for those of you listening, please tune in for the next edition of Workers Comp Matters and go out and make it a day that matters.

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Outro Thanks for listening to Workers Comp Matters today on the Legal Talk Network, hosted by attorney Alan S. Pierce, where we try to make a difference in workers’ comp legal cases for people injured at work. Be sure to listen to other Workers Comp Matters shows on the Legal Talk Network, your only choice for legal talk.

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