Worker's Compensation Act No Longer Protects Against Employment Discrimination Claims

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By Carol Nolan Skinner

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Until recently, an employee who sustained an emotional injury from harassment on the job was barred from pursuing a claim for the harassment under the Wisconsin Fair Employment Act (WFEA). The Labor Industry Review Commission (LIRC) dismissed such claims on grounds that the Worker's Compensation Act (WCA) contains an exclusive remedy provision barring all claims against an employer when liability exists under the WCA. LIRC's position has been upheld by the Wisconsin Court of Appeals in often-cited decisions such as Schachtner v. DILHR ¹ and Norris v. DILHR.. ²

All that has been changed by the 1997 Wisconsin Supreme Court decision in Byers v. LIRC.³ In Byers a female employee terminated a sexual relationship with a male coworker. Due to problems Byers had terminating the relationship, she obtained a restraining order against the coworker. After showing the restraining order to her employer and explaining its meaning, Byers continued to be harassed by the coworker. Byers reported the problem to her employer on numerous occasions. The employer talked to the coworker, but the harassment continued. Despite the fact that the coworker was jailed several times for violating the restraining order, he was not suspended, terminated, or otherwise reprimanded by the employer. After this had continued for more than a year, Byers notified her employer that she could not return to work while the coworker continued to work there.

Procedural history of Byers

Byers' sexual discrimination claim under the Wisconsin Fair Employment Act ⁴ was dismissed by the Equal Rights Division. The dismissal was affirmed by LIRC, because the discrimination resulted in emotional injury, which is covered by the Worker's Compensation Act; thus Byers' exclusive remedy against the employer was under the WCA. On review of LIRC's decision, the circuit court decided that Byers could pursue both a claim under the WCA and the WFEA. The circuit court's decision was reversed by the District III Court of Appeals, which held that the exclusive remedy provisions of the WCA barred Byers' sexual discrimination claim.⁵ That holding was reversed by the Wisconsin Supreme Court, which unanimously decided that discrimination claims are not barred by the WCA.

WCA's exclusive remedy

The exclusive remedy provision of the Worker's Compensation Act, section 102.03(2), provides that when the conditions for an employer's liability under the WCA exist, the employee's right to recover under the WCA shall be the employee's exclusive remedy against an employer. This provision was enacted to insulate employers from common law tort claims arising out of workplace injuries, in exchange for smaller but more certain recoveries under the WCA, regardless of fault. ⁶ However, the use of this exclusive remedy provision in the last several years has expanded to include any claims arising out of or relating to a workplace injury. Notably, employees bringing discrimination claims under the WFEA have been turned away by decisions barring their claims under the exclusive remedy provision of the WCA.

The status of the law before Byers

In 1988 the court of appeals decided Schachtner v. DILHR, holding that the exclusive remedy provision of the WCA barred an employee who was refused rehire after a work-related injury from pursuing a handicap discrimination claim under the WFEA. Two years later a similar result was reached for part of an employee's discrimination claim in Norris v. DILHR. In Norris a mentally retarded employee, who was refused rehire after a work-related injury, was barred from bringing a disability discrimination claim based on the work-related injury, but was permitted to bring the same claim based on his mental retardation.

The LIRC, relying on Schachtner and Norris, has routinely barred employees' disability discrimination claims where the discrimination is based on a work-related injury. ⁷ Using the same reasoning, it also has barred sexual discrimination claims.⁸ Later court of appeals decisions, Marson v. LIRC (1993)⁹ and Finnell v. DILHR (1994),¹⁰upheld the notion that the right of an employee to recover compensation provided by worker's compensation is exclusive of all remedies against the employer. Unlike Byers, neither Marson nor Finnell dealt specifically with the issue of whether a discrimination claim was barred by the WCA's exclusivity provision. However, both the Marson and Finnell courts, relying on Schachtner and Norris, stated that such claims were barred by that provision.

In 1994 the supreme court in County of La Crosse v. WERC ¹¹ held that an employer's refusal to rehire an employee because of a work-related injury is not controlled by the WCA's exclusive remedy provision when the refusal to rehire is "distinct in time and place from the injury." The plaintiff employee claimed that her termination was based upon her work-related disability, and violated the collective bargaining agreement between her employer and union. The court stated that the WCA exclusive remedy provision barred common law tort claims, not contract claims, as that case involved. It therefore distinguished, but did not overrule Schachtner and Norris, which involved statutory, rather than contract claims.

The Byers decision

Byers, however, presented the supreme court squarely with the issue of whether the WCA's exclusivity provision barred other statutory claims against the employer, that is, discrimination claims under the WFEA. Byers' position was that the WCA and the WFEA serve entirely different purposes. The WCA focuses on remedying an employee's physical or mental workplace injury. The purpose of the WFEA is to eradicate discrimination in the workplace, focusing on employer conduct that violates employees' civil rights. The employer argued that where a claim is cognizable under both the WCA and the WFEA, the WCA is the only remedy. The court disagreed, recognizing the different purposes of the two Acts, and pointing out the irony in the employer's position:

"If we were to interpret the WCA exclusive remedy provision as the employer proposes, only employees whose claims were not covered under the WCA would be afforded relief under the WFEA. Those employees whose claims for physical or mental injuries were covered by the WCA, those perhaps most harmed by discriminatory conduct violating the WFEA, would be limited to worker's compensation." ¹²

Principles of statutory construction cited by the Byers court include the court's duty to harmonize two statutes that appear to conflict in a way that will give effect to the Legislature's intent in enacting both statutes. The court reasoned that because the WCA does not identify, fully remedy or adequately deter an employer's discriminatory conduct, it cannot adequately address discrimination in the workplace. To allow the WCA to bar WFEA claims, would make enactment of the WFEA "a hollow legislative gesture." ¹³

Concluding that it could best preserve the purposes of both the WCA and the WFEA by "steering a different course than did the court of appeals in Schachtner and Norris," the Byers court overruled Schachtner and disavowed the reasoning of Norris, on the premise that those decisions did not give effect to the Legislature's intent in enacting the WFEA. The court went on to overrule Marson and Finnell, "to the extent they stand for the proposition that 'the right of the employee to recover compensation provided for by worker's compensation is exclusive of all remedies against the employer.'" ¹⁴ Byers was remanded for hearing.

WCA and federal claims

Generally parallel state and federal laws address employment discrimination for Wisconsin employees. (See the accompanying sidebar article.) While Wisconsin's Worker's Compensation Act does not bar federal discrimination claims brought under Title VII of the Civil Rights Act or the Age Discrimination in Employment Act (ADEA), for example, many employees cannot avail themselves of the relief afforded by the federal laws. Employers with fewer than 15 employees are not subject to Title VII, the ADEA, or the Americans with Disabilities Act (ADA), so those employees typically have only one avenue of relief from discrimination ­ the WFEA, a state statute. These small employers will be the most noticeably affected by Byers, because they now can be sued under WFEA, regardless of any worker's compensation claim their employees may have. Byers also will affect larger employers, because many claimants, often unemployed, cannot afford to pursue federal discrimination claims in state or federal court, and thus are forced to proceed under the WFEA, regardless of their employers' size.

Where do we go from here?

The Byers court did not reach the issue of double recovery, a possibility because the same set of circumstances may form the basis for a claim under both the WCA and the WFEA. An award of lost wages under the WCA, for example, overlaps an award of backpay under the WFEA.

The nature and degree of emotional injury may dictate whether filing a claim under the WCA is wise. For example, if harassment results in severe emotional injury such that the claimant is unable to work at all, worker's compensation may be the only source of "prompt" relief. The claimant will not be entitled to unemployment compensation, as he or she will not be "available for work." In a perfect world, worker's compensation is "prompt and assured relief"; that is, a claim for temporary wage loss and medical treatment is supposed to be paid without undue delay or protracted litigation, as liability is not premised upon fault of the employer. (However, in reality, many WCA emotional injury claims are hotly contested.) Later damages recovered in a discrimination suit can be offset for whatever wages were paid under the WCA. If the emotional injury is long lasting or permanent, and the employer is not subject to Title VII, which provides for compensatory damages, the only way a claimant can receive redress for such injury would be a loss of earning capacity claim under the WCA.

The downside of filing a worker's compensation claim while awaiting the discrimination hearing is that the employer may argue issue and/or claim preclusion. A determination of certain facts by the Worker's Compensation administrative law judge, for example, could be binding in the discrimination proceeding either at the administrative level or in state or federal court. Attorneys should ensure that their clients are well represented in any WCA proceeding, and attempt to limit that proceeding to WCA issues only (that is, whether the claimant sustained an injury that arose out of the employment, and not whether the employer took appropriate action to eliminate harassment in the workplace). Although the Equal Rights Division administrative law judge in Byers denied the employer's claim of issue preclusion, neither LIRC nor any court reviewed that decision because Byers settled. Undoubtedly, this issue will appear before the supreme court in the future.

Conclusion

The impact of Byers is far-reaching. The exclusive remedy provision of the Worker's Compensation Act will no longer protect employers against employment discrimination claims. After Byers, employees of small employers will not be barred from bringing state law discrimination claims simply because the discrimination caused, or was the result of, a work-related injury. Further, employees of any size employer who cannot bear the expense of litigating a federal discrimination claim may have their day in court.

Endnotes

¹Schachtner v. DILHR, 144 Wis. 2d 1, 422 N.W.2d 906 (Ct. App. 1988).

²Norris v. DILHR, 155 Wis. 2d 337, 455 N.W.2d 665 (Ct. App. 1990).

³ Byers v. LIRC, 208 Wis. 2d 388, 561 N.W.2d 678 (1997).

⁴ Wis. Stat. §§ 111.31 - 111.77.

⁵Byers v. LIRC, 200 Wis. 2d 728, 547 N.W.2d 788 (Ct. App. 1996).

⁶ See County of La Crosse v. WERC, 182 Wis. 2d 16, at 30, 513 N.W.2d 579, at 583 (1994).

⁷ Holze v. American Family Mut. Ins. Co., (LIRC 5/4/90); Wright v. Computer People Unlimited, (LIRC 3/28/95); Byrne v. West Allis-West Milwaukee School Dist., (LIRC 9/18/91).

⁸ Cameranesi v. John Charles Hair Designs Inc., (LIRC 3/7/94); Petri v. Midwest Lodging PTR 7, (LIRC 9/20/94); Genger v. Waukesha County Technical College, (LIRC 9/21/94).

⁹ Marson v. LIRC, 178 Wis. 2d 118, 503 N.W.2d 582 (Ct. App. 1993).

¹⁰ Finnell v. DILHR, 186 Wis. 2d 187, 519 N.W.2d 731 (Ct. App. 1994).

¹¹County of La Crosse v. WERC, 182 Wis. 2d 16, 513 N.W.2d 579 (1994).

¹²Byers v. LIRC, 208 Wis. 2d at 401; 561 N.W.2d at 683.

¹³Id. at 399; 561 N.W.2d at 682.

¹⁴ Id. at 406, note 13; 561 N.W.2d at 685, note 13.

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