Pennsylvania Labor and Employment Blog : Pennsylvania Labor and Employment Lawyer & Attorney : McNees Wallace & Nurick Law Firm : Human Resources, Workplace and Business Law : Harrisburg, Lancaster, Allentown, Lehigh

This post was contributed by Jodi M. Frankel, Esq. a new Associate in McNees Wallace & Nurick LLC's Labor and Employment Group.

Earlier this year the Superior Court of Pennsylvania held that a worker who was fired after he informed his employer that he was proceeding with legal action against a co-worker may maintain an action against the employer under Pennsylvania's Crime Victims' Employment Protection Act.

In Rodgers v. Lorenz (pdf), Rodgers—an employee of Carload Express—alleged that he was subject to repeated acts of verbal and physical harassment by a co-worker. After Rodgers reported to management that the co-worker threatened him on numerous occasions and, on one occasion, choked him, Rodgers was moved to a different job site. A few months later, Rodgers and the co-worker were assigned to the same site, but on different shifts. Thereafter, Rodgers alleged that the co-worker began to harass him during shift changes. Rodgers informed management of his intent to report the co-worker's conduct to the police. Despite the Company's request that he not call the police, Rodgers filed a complaint with the local authorities against his co-worker for harassment and assault. Carload Express fired Rodgers later that same day.

Rodgers filed a complaint alleging that Carload Express wrongfully terminated him for instituting criminal proceedings against his co-worker.

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Pennsylvania has long been considered an "employment at will" state – meaning that employers and employees may terminate their employment relationship at any time with or without cause or prior notice. However, the number of exceptions to the "at will doctrine" seems to grow every year. The year 2010 was no exception. In Hamovitz v. Santa Barbara Applied Research Inc., 2010 WL 4117270 (W.D. Pa. Oct. 19, 2010), the U.S. District Court for the Western District of Pennsylvania recognized a new exception to the at will doctrine involving an employer's refusal to hire an applicant based on prior service in the National Guard.

In Hamovitz, the plaintiff claimed that the employer refused to rehire him based on his service in the National Guard. In addition to filing statutory claims under the Uniform Services Employment and Reemployment Rights Act ("USERRA") and the Pennsylvania Military Affairs Act ("PMAA"), the plaintiff brought a common law wrongful discharge/failure to hire claim seeking the court to apply a "public policy" exception to the employment at will doctrine. In Pennsylvania, exceptions to the at will doctrine are rare. Under the "public policy" exception, a plaintiff may have a viable wrongful discharge claim if he can show that his termination violated a clear mandate of public policy.

In order to show that an employer's actions offended a clear mandate of public policy, the plaintiff must show that he or she was terminated for: (1) engaging in conduct required by law or (2) refusing to engage in conduct prohibited by law. In such cases, the public policy cited by the plaintiff must have legislative or constitutional endorsement, and it must be clear and specific.

In Hamovitz, the court created a new exception to the at will doctrine: "where an employer's actions impinge upon protected rights of employees." The court found that the employer in Hamovitz may have impinged upon the employee's rights under the PMAA, and therefore, the plaintiff was allowed to proceed with his wrongful discharge claim.

By allowing this claim to go forward, the court also enabled the plaintiff to avoid the statutory limitations on damages found in USERRA and the PMAA. Although not available under the PMAA or USERRA, the court found that the plaintiff in Hamovitz would be entitled to recover punitive damages if he were to prevail on his common law wrongful discharge claim.

Unless the Hamovitz decision is reversed on appeal, this new exception to the at will doctrine may trigger a wave of litigation as plaintiffs seek broad interpretations of "actions that impinge upon protected rights of employees." Courts have long held that employees sacrifice certain rights in the workplace; for example, an employer may restrict free speech by prohibiting offensive language or behavior at work. Now, however, plaintiffs may argue that a termination, or even a refusal to hire, "impinges upon protected rights" in any number of situations that previously fell under the employment at will doctrine.
 

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Employment Practices Liability Insurance (EPLI) can provide valuable protection; particularly,  given the predicted rise in employment related legal claims and enhanced government enforcement initiatives. Furthermore, EPLI remains a relative bargain in the continued “soft” insurance market and employers should consider adding or increasing insurance coverage to protect against employment claims. EPLI insurance is somewhat quirky and the following are some considerations when evaluating policies:

1.         Coverage: EPLI policies usually cover claims of wrongful discharge, workplace harassment and discrimination. Many offer a more comprehensive list of covered acts, including negligent hiring/supervision/evaluations, invasion of privacy, defamation and intentional infliction of emotional distress. Coverage typically applies to claims made by full time employees so as to exclude those by part-timers, temporary, seasonal and independent contractors. In comparing policies, look for one that has the most expansive coverage. 

2.         Exclusions: EPLI policies exclude many claims based on the statute that creates the legal right or the activity that gives rise to the claim. Exclusions apply to the Fair Labor Standards Acts; the National Labor Relations Act; the Worker Adjustment and Retraining Notification Act (WARN); the Consolidated Omnibus Budget Reconciliation Act (COBRA); the Employee Retirement Income Security Act (ERISA); the Occupational Safety and Health Act (OSHA); the costs associated with providing "reasonable accommodation" under the Americans with Disabilities Act (ADA); as well as claims arising out of downsizing, layoffs, workforce restructurings, plant closures or strikes. Punitive damages are always excluded. Carefully evaluate the excluded claims in light of your business practices. In the case of multi-state operations, be aware that some state laws create substantial employment rights that must also be evaluated under the policy language.

3.         Policy Limits and Deductibles: Policy limits and deductibles usually apply on a per claim and aggregate basis. For example, coverage may be limited to $250,000 for each separate claim with an overall aggregate cap of $1 million for all claims. Employers must formulate their insurance goals in setting the appropriate deductibles and limits. Some employers view EPLI insurance as catastrophic coverage and are willing to accept a high deductible that allows them to handle smaller claims themselves. However, other employers are looking for more blanket coverage.

4.         Defense Costs, Selection of Counsel and Settlement: Defense costs are usually included within the EPLI policy’s limits, which has good and bad points. Many times, the legal expense is the largest cost to an employer in dealing with merit less claims. However, including defense costs means that every dollar an employer spends defending a claim reduces the amount available for settlement or to pay a judgment. Since the existence of insurance coverage must be disclosed as part of discovery in most law suits, a plaintiff’s attorney will factor insurance coverage into his or her case evaluation. The defense cost feature may influence plaintiffs’ counsel to try to settle early, rather than force an employer to incur litigation costs that will only erode the insurance dollars available for potential settlement. Employment claims often have significant employee relations ramifications making settlement a particularly important issue. Insurers view employment claims the same as any other insurance matter by evaluating only the potential for liability and the amount of damages. The employer and insurer may be at odds over settling a case. EPLI policies address this stalemate by either giving the insurer the right to settle without the employer’s approval or, more frequently, giving an employer control over settlement, but adding a “hammer clause”. These clauses are designed to limit the insurer’s potential exposure if the policyholder passes up an opportunity to settle a claim recommended by the insurer. Hammer clauses provide that if there is an offer to settle a claim that the policyholder refuses accept, then the insurer will not be liable for a subsequent settlement or judgment in excess of a rejected settlement amount.  

5.         Policy Types and Insurance Company Notification: EPLI policies are typically written on a “claims made” basis meaning that the claim must be incurred during the coverage period and reported to the insurer during an extended reporting period. Employers who have already experience significant layoffs prior to the effective date of coverage will not have claims arising from those actions covered by new insurance; however, if an employer increases coverage, it may be able negotiate a retroactivity for the larger policy limits. Since employment actions may take years to turn into a claims, an employer may be left with no coverage if the policy is dropped or tail coverage isn’t purchased. Untimely notice to an insurance carrier can void coverage for and employment claim.

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