Stress and anxiety are common in the workplace. It should come as no surprise that stress and anxiety are often alleged by employees as compensable emotional distress in both workers’ compensation proceedings and civil litigation. This is a popular tactic used by plaintiffs when pursuing claims under the California Fair Employment and Housing Act (FEHA) to seek emotional distress damages for the employer’s allegedly discriminatory or harassing conduct while simultaneously filing a workers’ compensation claim for stress due to the hostile work environment created by the same alleged discrimination or harassment. Employers are consequently faced with two different proceedings - one before the Workers’ Compensation Appeals Board (WCAB) and one in court or arbitration - with different standards and controlling authority with employee plaintiffs seeking compensation for the same injuries arising out of the same allegedly wrongful conduct. Below are a few considerations that employers and counsel should keep in mind when faced with this situation.
Is Plaintiff’s Claim Subject to Workers’ Compensation Exclusivity Provisions?
Under workers' compensation rules, an employer is liable without regard to negligence for any injury sustained by its employees arising out of and in the course of their employment. Lab. Code § 3600(a)(1). In exchange, employees are generally prohibited from pursuing any tort remedies against the employer or its agents that would otherwise apply. Lab. Code § 3602(a). Put differently, the employees’ exclusive remedy for such damages is through workers’ compensation claims. Through this “compensation bargain” employees are afforded relatively swift and certain payment of benefits to address the “effects of industrial injury” without having to prove fault but, in exchange, give up the wider range of damages that might be available in tort. Charles J. Vacanti M.D., Inc. v. State Comp. Ins. Fund (2001) 24 Cal.4th 800-811. However, where the employer's conduct falls outside the scope of this normal and expected risks of employment that are a part of this “compensation bargain,” employees may pursue civil action in addition to workers’ compensation claims.
Actions such as demotion, transfer, or discipline, and “even the employer’s attempt to force the employee into voluntary retirement” are considered to be within the “compensation bargain.” Shoemaker v. Myers (1990) 52 Cal.3d 1, 18. Even if such conduct is characterized as intentional, unfair, or outrageous, because this kind of conduct is a normal part of the employment relationship, it is covered by workers’ compensation exclusivity provisions. Id. However, where an employee alleges that such conduct was the result of discrimination under the FEHA, such claims fall outside of the workers’ compensation bargain as discrimination on the basis of a protected characteristic is not an expected risk of employment. See e.g. Light v. Dep't of Parks & Recreation (2017) 14 Cal. App. 5th 75, 96-97. Similarly, conduct alleged to be unlawful harassment under FEHA is not expected to be part of the “compensation bargain” or a normal part of employment. Accordingly, employees may pursue both a FEHA discrimination or harassment action in addition to a workers’ compensation claim based on the same alleged conduct.
However, where an employee pursues both claims simultaneously, courts will apply exclusivity provisions to limit the employee’s recovery for emotional distress to workers’ compensation if an employer can demonstrate the conduct was not motivated by discrimination. See e.g. Jones v. Department of Corrections and Rehabilitation (2007) 152 Cal.App.4th 1367, 1382 (where appellate court affirmed trial court’s finding that plaintiff did not establish discrimination and therefore plaintiff’s claims for emotional distress were barred by the exclusivity rule of workers’ compensation). Thus, even where workers’ compensation exclusivity provisions may not apply to dismiss FEHA causes of action at the pleading stage, they should be considered as a defense throughout the litigation process.
Does Res Judicata Apply?
An additional factor to consider is whether to stay one action pending the resolution of the other action. The benefits of such a strategy are two-fold. First, this could reduce the opportunity of costly duplicative discovery as to the employee’s injuries as damages under workers’ compensation claims and emotional distress claims under FEHA are supported by much of the same evidence - medical records including prescription history, psychiatric evaluations and witness testimony regarding the alleged distress. Second, res judicata or claim preclusion could apply and eliminate either action as was the case in Ly v. Cnty. of Fresno, (Ct. App. 2017) 223 Cal. Rptr. 3d 875, 882
In Ly, plaintiffs Va Ly, Travis Herr and Pao Yang, three Laotian correctional officers, alleged that they were subjected to racial and national origin discrimination, harassment, and retaliation by their employer, the County of Fresno. Each simultaneously brought workers’ compensation claims for psychiatric injuries arising from the alleged discrimination harassment and retaliation. Id. at 877. The trial court stayed the FEHA civil action pending the workers’ compensation proceedings. The plaintiffs each alleged various conduct by the employer was discriminatorily motivated including denial of assignment swap requests, “hiding” overtime opportunities, denial of time off, and disciplinary actions. Id. at 878-879. In all three workers’ compensation proceedings, plaintiffs were ordered to take nothing by way of their complaints as the County’s actions were deemed to have been good faith personnel decisions. Id. Moreover, Herr and Yang were found to have not sustained industrial injury to their psyches. Id.
The County moved for summary judgment in the civil action against each plaintiff contending res judicata, or claim preclusion, barred the FEHA causes of action as plaintiffs’ claims were fully litigated in the workers’ compensation proceedings. The trial court granted the motions, and the Court of Appeal affirmed. Id. In doing so, the court noted that it did not matter that the two proceedings did not involve the same cause of action, as res judicata is based on the primary right theory. Id. at 881. Every cause of action is comprised of a “primary right” of plaintiff with a corresponding “primary duty” of the defendant and a wrongful act constituting a breach of that duty. Id. A plaintiff’s primary right is simply the right to be free from the particular injury suffered and a violation of the primary right gives rise to a single cause of action. Id.
In their workers' compensation cases, plaintiffs sought to recover for psychiatric injuries caused by the County's employment actions which they asserted were based on their race and national origin. In the FEHA action, the plaintiffs sought to recover for the same injuries based on the same acts. Id. at 883. Thus, the court concluded, the plaintiffs sought vindication of one primary right—"the right to work in an environment free of discrimination, harassment and retaliation.” Id. Because the plaintiffs elected to pursue the workers’ compensation claims to final, adverse judgments instead of insisting on the primacy of their rights under the FEHA, the WCAB became the exclusive forum to recover for their injuries, and the plaintiffs were barred from pursuing a tort claim for the same injuries. Id.
While no California appellate courts have yet to explore the inverse situation in the FEHA context, where the civil action was resolved before the workers’ compensation proceedings, the California Supreme Court has applied res judicata and the primary right theory to bar recovery under workers’ compensation provisions where the plaintiff had already recovered against the employer for the same injury and conduct. See Busick v. Workmen’s Comp. Appeals Bd. (1972) 7 Cal.3d 967 (workers’ compensation recovery was barred because the Superior Court action on assault and battery had already concluded in the plaintiff’s favor, therefore the plaintiff had already received “redress for injuries suffered from one tortious act”).
Ultimately, while plaintiffs are permitted to pursue emotional and psychiatric damages both as FEHA civil claims and as workers’ compensation claims based on the same conduct, the remedies are mutually exclusive. Therefore, where an employee pursues and receives a money judgement on one of the claims, their other claim has merged in that judgment, and they cannot seek an alternative remedy. See Restatement of Judgments, § 64. Accordingly, it is important for employers to consider the timing of the two actions, and whether one might resolve ahead of the other.
Conclusion
Based on the above analysis, employers facing simultaneous workers’ compensation and civil claims by the same employee should keep in mind:
- If an employee is bringing both a workers’ compensation claim and a civil employment action on the same injuries, consider whether the employee’s injuries are subject workers’ compensation exclusion provisions under the Labor Code.
- If not subject to exclusion, consider whether to continue one of the actions to (1) reduce duplication of costly discovery and (2) apply res judicata or claim preclusion to eliminate the second action.
