Opinion ID: 1227871
Heading Depth: 2
Heading Rank: 3

Heading: employer's intentional misconduct

Text: In Johns-Manville Products Corp. v. Superior Court (1980) 27 Cal.3d 465, 473 et seq. [165 Cal. Rptr. 858, 612 P.2d 948, 9 A.L.R.4th 758], we held that an employee could state a cause of action against the employer where the employer fraudulently concealed from him, from his doctors and from the state that he was suffering from a work-related disease thereby preventing treatment and inducing him to continue working under hazardous conditions. We considered at length the employer's liability for intentional misconduct and the exclusive remedy provisions of the Labor Code. First we consider cases in which the intentional acts of the employer have been held not to justify an action at law. Compensation was determined to be the exclusive remedy for injuries suffered in a case in which the employer concealed the dangers inherent in the material the employees were required to handle ( Wright v. FMC Corp. (1978) 81 Cal. App.3d 777, 779 [146 Cal. Rptr. 740]) or made false representations in that regard ( Buttner v. American Bell Tel. Co. (1940) 41 Cal. App.2d 581, 584 [107 P.2d 439]). The same conclusion was reached on the basis of allegations that the employer was guilty of malicious misconduct in allowing an employee to use a machine without proper instruction. ( Law v. Dartt (1952) 109 Cal. App.2d 508, 509 [240 P.2d 1013].) The reason for the foregoing rule seems obvious. It is not uncommon for an employer to `put his mind' to the existence of a danger to an employee and nevertheless fail to take corrective action. (See, e.g., Rogers Materials Co. v. Ind. Acc. Com. [(1965)] 63 Cal.2d 717, 723 [48 Cal. Rptr. 129, 408 P.2d 737].) In many of these cases, the employer does not warn the employee of the risk. Such conduct may be characterized as intentional or even deceitful. Yet if an action at law were allowed as a remedy, many cases cognizable under workers' compensation would also be prosecuted outside that system. The focus of the inquiry in a case involving work-related injury would often be not whether the injury arose out of and in the course of employment, but the state of knowledge of the employer and the employee regarding the dangerous condition which caused the injury. Such a result would undermine the underlying premise upon which the workers' compensation system is based. That system balances the advantage to the employer of immunity from liability at law against the detriment of relatively swift and certain compensation payments. Conversely, while the employee receives expeditious compensation, he surrenders his right to a potentially larger recovery in a common law action for the negligence or willful misconduct of his employer. This balance would be significantly disturbed if we were to hold, as plaintiff urges, that any misconduct of an employer which may be characterized as intentional warrants an action at law for damages. It seems clear that section 4553 is the sole remedy for additional compensation against an employer whose employee is injured in the first instance as the result of a deliberate failure to assure that the physical environment of the work place is safe. Thus, if the complaint alleged only that plaintiff contracted the disease because defendant knew and concealed from him that his health was endangered by asbestos in the work environment, failed to supply adequate protective devices to avoid disease, and violated governmental regulations relating to dust levels at the plant, plaintiff's only remedy would be to prosecute his claim under the workers' compensation law. But where the employer is charged with intentional misconduct which goes beyond his failure to assure that the tools or substances used by the employee or the physical environment of a workplace are safe, some cases have held that the employer may be subject to common law liability. (27 Cal.3d at pp. 473-475.) The court pointed out that cases had permitted action for damages by the employee for an assault by the employer, for fraudulent misrepresentations made as part of a conspiracy with a third party which concealed that the industrial injury was caused by the third party against whom the employee had recourse, and for assault, battery and intentional infliction of emotional distress based on an insurer's deceitful investigation. Those cases relied upon the factors that the employer's and insurer's misconduct had a questionable relationship to the employment and was not considered a risk of the employment. The court concluded that the cases reflect a trend toward allowing an action at law for injuries suffered in the employment if the employer acts deliberately for the purpose of injuring the employee or if the harm resulting from the intentional misconduct consists of aggravation of an initial work-related injury. (27 Cal.3d at p. 476, italics added.) We followed Johns-Manville in the recent decision in Foster v. Xerox Corp. (1985) 40 Cal.3d 306, 310-312 [219 Cal. Rptr. 485, 707 P.2d 858], where we held that the action for fraudulent concealment did not require affirmative misrepresentations so long as it was shown that the employer knew of the industrial injury and that work aggravated it and concealed that knowledge from the employee. Plaintiffs urge that the reasoning of Johns-Manville permits maintenance of an action for intentional infliction of emotional distress whether or not physical injury resulted where the tortious conduct has aggravated a compensable injury. Plaintiffs' contention appears too broad. As noted above (see fn. 7), the intent element for such a cause of action may consist of an intention to cause emotional distress or reckless disregard of the probability of causing emotional distress. To permit liability where the employer did not specifically intend to cause distress but his misconduct reflected a reckless disregard of the probability of injury would be contrary to Johns-Manville. As there pointed out: It is not uncommon for an employer to `put his mind' to the existence of a danger to an employee and nevertheless fail to take corrective action.... The focus of the inquiry in a case involving work-related injury would often be not whether the injury arose out of and in the course of employment, but the state of knowledge of the employer and the employee regarding the dangerous condition which caused the injury. Such a result would undermine the underlying premise upon which the workers' compensation system is based. (27 Cal.3d at p. 474.) Since awareness of the danger by the employer is not a basis for liability for damages, it follows that reckless disregard of the probability of injury should not warrant exemption from the exclusive remedy provisions of the Labor Code. In addition, recovery based on aggravation where there was no intent to injure might encourage employers to seek excuses to terminate rather than attempt to continue employment of injured persons. Nevertheless, the question remains whether the exclusive remedy provisions exclude liability in a limited class of cases of intentional infliction of emotional distress causing disability, namely, where the employer acts with the purpose of causing emotional distress. Permitting such an action would throw open the doors to numerous claims already compensable under the compensation law. An employer's supervisory conduct is inherently intentional. In order to properly manage its business, every employer must on occasion review, criticize, demote, transfer and discipline employees. Employers are necessarily aware that their employees will feel distressed by adverse personnel decisions, while employees may consider any such adverse action to be improper and outrageous. Indeed, it would be unusual for an employee not to suffer emotional distress as a result of an unfavorable decision by his employer. (Cf. Magnuson v. Burlington Northern, Inc. (9th Cir.1978) 576 F.2d 1367, 1369 [[e]very employee who believes he has a legitimate grievance will doubtless have some emotional anguish occasioned by his belief that he has been wronged].) We have concluded that, when the misconduct attributed to the employer is actions which are a normal part of the employment relationship, such as demotions, promotions, criticism of work practices, and frictions in negotiations as to grievances, an employee suffering emotional distress causing disability may not avoid the exclusive remedy provisions of the Labor Code by characterizing the employer's decisions as manifestly unfair, outrageous, harrassment, or intended to cause emotional disturbance resulting in disability. The basis of compensation and the exclusive remedy provisions is an injury sustained and arising out of the course of employment (former Lab. Code, §§ 3600, 3601), and then the essence of the wrong is personal physical injury or death, the action is barred by the exclusiveness clause no matter what its name or technical form if the usual conditions of coverage are satisfied. (See Larson, Nonphysical Torts and Workmen's Compensation (1975) 12 Cal. Western L.Rev. 1, 11-13.) If characterization of conduct normally occurring in the workplace as unfair or outrageous were sufficient to avoid the exclusive remedy provisions of the Labor Code, the exception would permit the employee to allege a cause of action in every case where he suffered mental disability merely by alleging an ulterior purpose of causing injury. Such an exception would be contrary to the compensation bargain and unfair to the employer. In addition, when the employer successfully defends the claim of unfairness in criticisms, reassignments, denial of promotions, or other frictions, he must pay disability benefits while the employee sues and may not recover such payments, because disabilities caused by stresses in the workplace are compensable whether or not the employer was at fault. The employer also may have to pay the costs of a successful defense. Liability for intentionally inflicting injury is not insurable, and if liability can only be established due to such intentional misconduct, an insurer need not furnish a defense. ( Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 275-276, fn. 15 [54 Cal. Rptr. 104, 419 P.2d 168].) Finally, there is a substantial deterrent to employer intentional misconduct since the employer must not only pay compensation but also the additional recovery under section 4553 which may not be insured. The cases that have permitted recovery in tort for intentional misconduct causing disability have involved conduct of an employer having a questionable relationship to the employment, an injury which did not occur while the employee was performing service incidental to the employment and which would not be viewed as a risk of the employment, or conduct where the employer or insurer stepped out of their proper roles. ( Johns-Manville Products Corp. v. Superior Court, supra, 27 Cal.3d 465, 477-478; Unruh v. Truck Insurance Exchange (1972) 7 Cal.3d 616, 630 [102 Cal. Rptr. 815, 498 P.2d 1063]; Magliulo v. Superior Court (1975) 47 Cal. App.3d 760, 779 [121 Cal. Rptr. 621]; Ramey v. General Petroleum Corp. (1959) 173 Cal. App.2d 386, 402 [343 P.2d 787].) Such circumstances are not alleged in the complaint before us. To the contrary, the allegations in the instant case as to the conduct of the employer and the assistant chief reflect matters which can be expected to occur with substantial frequency in the working environment. Some harassment by superiors when there is a clash of personality or values is not uncommon. Disciplinary hearings and demotions and friction in negotiations as to grievances are also an inherent part of the employment setting as are decisions to seek disability retirement and demands to appear at meetings which interfere with personal arrangements.