Temporary disability provides injured workers with a replacement for lost wages they would suffer as they recover from an industrial injury. But what happens when an employer terminates an injured worker who is receiving temporary disability, but who has been falsifying his time card? Or an employee who is terminated for being consistently tardy in violation of company policy? May the insurer end temporary disability? What is the potential liability or downfall for doing so? All of these questions can lead to a host of different answers.
Insurers may be eager to terminate benefits, particularly when the employer says that the termination was “for cause.” However, when an injured worker who is receiving temporary disability is terminated, insurers must prove that the employer’s decision was based on “good cause.” But what exactly is “good cause”? There is no statue or regulation defining this term. Unfortunately, good cause is often difficult to prove in the workers’ compensation arena.
Let’s start with an example of what would not constitute “good cause”: A termination is not for “good cause” when it violates an anti-discrimination statute, such as the Fair Employment and Housing Act or the Age Discrimination in Employment Act. For example, if a 65 year old employee who is receiving temporary disability is terminated and there is evidence that the termination was related to the employee’s age, a red flag should go up for the insurer. This is especially true when an employee files a complaint with the Department of Fair Employment and Housing or the Equal Employment Opportunity Commission. In these cases, terminating benefits is extremely risky because an insurer must show that not only was the termination warranted, but that it was not discriminatory. This is a high burden. The trier of fact will likely look at the evidence in a favorable light to the applicant.
Second, the alleged misconduct that is the basis for the termination should, in most cases, be preceded by a warning or disciple other than termination (unless the misconduct is so egregious that it justifies immediate termination). Employers who terminate without proving that (1) they did not need to offer a warning to applicant and (2) this type of misconduct could result in immediate termination, may ultimately be stuck with TTD. Additionally, other liability could arise, such as a wrongful termination action and civil liability for alleged violation of FEHA.
Several cases illustrate the difficulty in proving good cause. In Butterball Turkey Co. v. Workers’ Comp. Appeals Bd. (1999) 65 Cal.Comp.Cases 61 (writ den.), the trial judge awarded temporary total disability after applicant was terminated for failing to clock out. Defendant did not provide “substantial evidence” showing that the misconduct rose to the level by which termination would be proper under the company’s policies. Similarly, in Manpower Temp. Services v. Workers’ Comp. Appeals Bd. (Rodriguez) (2006) 71 Cal.Comp.Cases 1614 (writ den.), the trial judge awarded temporary total disability after applicant was terminated for allegedly lying to a co-worker. The judge noted that applicant’s termination “was without prior reprimand or warning” and that, under the employer’s policy, this type of misconduct would not ordinarily result in discharge on the first offense.
Insurers need to be extremely careful when electing to end temporary disability after an applicant is terminated. They must document their personnel file well. They should document that the misconduct rises to the level of a serious offense. The applicant, in most cases, should receive progressive discipline (i.e., verbal warnings, write-ups, suspension, and then termination), unless the offense is so serious as to warrant immediate termination. Even extreme cases, such as suspected employee theft, should not result in immediate termination before a thorough investigation is completed. Insurers should be careful, for example, when an employer “jumps the gun” and terminates an employee on a “suspicion” of theft. The theft may actually not be a “theft” at all, but rather an accounting error, or somehow not the fault of applicant. Unless an employee receives their “due process” (such as an suspension, followed by an investigation where the applicant has the ability to present her case, and a written decision to terminate), temporary disability should not be terminated.
Finally, a defendant should not rely on conclusory evidence or naked allegations of misconduct to show good cause. A defendant should be prepared to produce a witness(es) who can clearly explain the serious nature of the misconduct, how it violates company policy, and why the termination was justified. In Academy of Arts College v. Workers’ Comp. Appeals Bd., 76 Cal. Comp. Cases 352, temporary disability benefits were reinstated where the defendant’s only evidence related to the applicant’s termination was a termination letter that merely stated that his employment had been terminated for “inappropriate conduct . . . in violation of company policy and procedure.” The trial judge indicated that the letter provided the court with “nothing upn which it could determine if the alleged inappropriate conduct was just and warranted . . ..”
An insurer should consider the following before terminating temporary disability:
- Is there any evidence that the termination violated an anti-discrimination statute? Is there any evidence showing an inference of discrimination? For example, was the employee the only female terminated, while all males involved received a lesser punishment? If so, there is a strong possibility that the WCAB will find that the termination was not made for good cause.
- Is there evidence (in the form of documentary evidence and witness testimony) showing that the termination was justified for the type of misconduct, especially if there is no evidence of progressive discipline? For example, have other employees been terminated without a warning for tardiness?
- If the misconduct is serious (such as theft, assault, etc.), has the employee been suspended and a comprehensive investigation taken place? Mere suspicion that an employee has been stealing, without a thorough investigation (including witness statements), will likely not show good cause.
- What will applicant’s attorney rely upon to support their contention that TTD benefits were improperly terminated?
In summary, simply showing up at trial with evidence that applicant was a poor worker is not, in most cases, sufficient to show good cause. The poor performance needs to be the cause of the termination, and defendant must show that other similarly-situated employees have been or would be subjected to similar discipline. Policies and procedures of the employer will need to be adhered to, and applied equally.
Michael P. Burns is an associate attorney out of Bradford & Barthel’s San Jose office. He can be reached at (408) 392-8202 or via email at mburns@bradfordbarthel.com.
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