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Considerations for Terminating Employees With Potential Workers’ Compensation Claims

Considerations for Termination

California employers need to be very careful when considering the termination of any employee who plans to file a claim for workers’ compensation, or who is currently receiving workers’ compensation benefits.  While most employers understand the risk of disability-based claims under the Fair Employment and Housing Act (FEHA) when terminating an injured employee, employers should also understand the risk of additional Labor Code claims an employee can make related to workers’ compensation discrimination.

Legal Standard

California Labor Code Section 132a provides:

“Any employer who discharges, or threatens to discharge, or in any manner discriminates against any employee because he or she has filed or made known his or her intention to file a claim for compensation with his or her employer or an application for adjudication, or because the employee has received a rating, award, or settlement, is guilty of a misdemeanor and the employee’s compensation shall be increased by one-half, but in no event more than ten thousand dollars ($10,000), together with costs and expenses not in excess of two hundred fifty dollars ($250). Any such employee shall also be entitled to reinstatement and reimbursement for lost wages and work benefits caused by the acts of the employer.”

In order to establish a 132a claim, an employee has to show a strong link between the adverse action and the industrial injury.  California case law states that an employee merely showing “an industrial injury and that he suffered some detrimental consequences as a result is insufficient to establish a prima facie case of discrimination within the meaning of section 132a.  Lauher requires an employee not only to show detriment but also show that he was singled out for disadvantageous treatment because of his injury.”  County of San Luis Obispo v. Workers’ Comp. Appeals Bd. (2005) 133 Cal. App. 4th 641, 648, quoting Department of Rehabilitation v. Workers’ Comp. Appeals Bd. (2003) 30 Cal. 4th 1281, 1301. 

Potential Risks for Terminating Employees With Workers’ Compensation Claims

When considering the termination of any employee planning on or currently receiving workers’ compensation, there are a few things for the employer to keep in mind:

  • Under 132a, employees may be entitled to reinstatement, which would negate the termination behind the 132a claim. Essentially, the Workers’ Compensation Appeals Board (WCAB), which has jurisdiction over 132a violations, may force the employee back into the workplace, which would mean an employer that did not want to return an injured employee to the workplace would have to find work or a position for the employee either way. 
  • There is a risk of the employer facing criminal prosecution for a misdemeanor charge if there is evidence that an employer discriminated against an employee who filed a workers’ compensation claim by terminating or threatening to discharge an employee.
  • A 132a claim opens the door for additional claims of disability discrimination under The California Fair Employment and Housing Act (FEHA). The California Supreme Court has ruled that an employee who was terminated because of a workplace injury is not limited to a workers’ compensation claim, but can also seek remedies under FEHA
  • Typically, workers’ compensation insurance does not cover 132a claims. The employer is responsible for its own defense and attorneys’ fees on the 132a issue, as well as the potential $10,000 penalty. Employment Practices Liability Insurance (“EPLI”) may cover the defense of these claims but likely will not cover any penalties imposed. Please check with your insurance broker (or any agent) to see if your company has this coverage and if it covers the claims made.

Potential Defenses to Labor Code Section 132a Claim

Employers faced with a 132a claim have options and defenses available to them.  For instance, employers can defend 132a claims if they show they had good cause for discharging the employee that were wholly unrelated to the workers’ compensation filing or if there exists a reasonable business necessity for the termination.  Furthermore, lack of a discriminatory or retaliatory act is a defense, which would include returning an employee to the same or similar position at the same wage rate. 

There are other defenses available to employers.  Carmel & Naccasha is here to help employers with defense strategies on 132a claims, or other employee claims of discrimination. If you have any questions or would like to speak to an employment law specialist, please contact Devin Mikulka at Carmel & Naccasha.

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