A disclaimer in which workers for a security company waived any right to sue their employer’s third-party clients can stand, the state Supreme Court has ruled.
The majority rejected an argument that the disclaimer was invalid as a violation of public policy as stated in the Workers’ Compensation Act.
The decision, which affirms the state Superior Court and comes over a strongly worded dissent, could have broad implications on employment practices where third-party clients use an employer’s workers.
In Bowman v. Sunoco, security guard Sabrina Bowman, an AlliedBarton Security Services security guard, was injured when she slipped and fell at a Sunoco gas station where she was working. Bowman sued Sunoco for damages related to her injuries, but Sunoco secured a judgment on the pleadings in the Philadelphia Court of Common Pleas based on AlliedBarton’s disclaimer. In the disclaimer, Bowman waived her right to sue Allied’s clients for damages related to injuries covered by workers’ compensation.
Justice J. Michael Eakin, writing for the majority, rejected Bowman’s argument that the plain language of Section 204(a) of the Pennsylvania Workers’ Compensation Act does not allow for such disclaimers as a condition of employment.
Section 204(a) says: "No agreement, composition or release of damages made before the date of any injury shall be valid or shall bar a claim for damages resulting therefrom; and any such agreement is declared to be against the public policy of this commonwealth."
"[Bowman's] plain language argument has immediate initial appeal, for the first sentence of [Section] 204(a) speaks broadly of ‘agreements’ and ‘release of damages,’" Eakin said in a 14-page majority opinion. "However, the great bulk of [Section] 204(a) addresses specific offsets to the employer’s obligation under the act, and not to any duty owed by a third party. Section 204(a) does not explicitly address the latter — an employee who waives the right to sue the client for injuries covered by workers’ compensation benefits."
Discussing the history of the Workers’ Compensation Act, Eakin examined a time when workers’ compensation was not an "exclusive remedy" for injured employees, but rather an elective agreement between employer and employee.
"If one looks at Article II of the act as a whole and its relation to the entire act, it is apparent Section 204 is only one of five sections of an article titled ‘Damages by Action at Law,’" Eakin said. "Immediately, one is struck by the curiosity that a section of the act is devoted to ‘Damages by Action at Law,’ when the act provides for an exclusive and comprehensive administrative scheme to provide for medical expenses and a specified, but limited, schedule of compensation for workers injured on the job.
"However, the act did not always provide for an exclusive remedy."
What remains of Article II after considerable modifications, Eakin said, is a "series of provisions pertaining only to offsets enjoyed by the employer to be applied to specific compensation benefits an employer is obligated to pay under" other sections of the act. Additionally, Section 305 of the law provides an action at law when an employer is either uninsured or not an approved self-insurer.
Eakin said the Pennsylvania General Assembly intended Section 204(a) to apply to agreements that bar claims against employers and not employers’ third-party customers. Because the workers’ compensation law used to provide a dual system of recovery and barred employers from avoiding both recovery tracks (actions at law and workers’ compensation claims), Eakin further reasoned that public policy was not violated when Bowman was covered under one of those two tracks, the workers’ compensation scheme provided by Article III of the act.
Eakin was joined by Chief Justice Ronald D. Castille, and Justices Debra Todd, Thomas G. Saylor and Seamus P. McCaffery.
In dissent, Justice Max Baer was adamant that the plain language controlled, adding, "I cannot countenance the majority’s journey into the forbidden land of impermissible statutory construction. Indeed, if there were ever an example of disregarding the plain language of a statute ‘under the pretext of pursuing its spirit,’ it is this case."
"Respectfully, but adamantly, Section 1921(b) of our rules of statutory construction should not be discarded so easily, merely because a statutory provision allegedly ‘speaks broadly,’" Baer added, quoting the majority, in his three-page dissent.
The majority also rejected Bowman’s argument that a third-party release runs counter to the employer’s right to subrogation.
Specifically, Bowman argued Allied’s voluntary waiver of subrogation rights to its clients violates the purposes of the right to subrogation — to prevent double recovery, to ensure an employer is not paying for a third party’s negligence and to prevent a third party from escaping liability.
"While the act provides an employer a right of subrogation, the employer may certainly choose to waive that right," Eakin said, rejecting Bowman’s argument. "Allied’s waiver of subrogation was a business decision affecting only itself — it did nothing to prevent appellant from receiving full and just compensation for her work-related injuries."
In a one-page concurring opinion, Saylor expressed a "modest reservation" with the majority’s use of the phrase "’double recovery,’" explaining that he remains skeptical of its use in the workers’ compensation context because the benefits involved are, in his words, "partial and discounted."
Bowman also made an argument under contract law, saying the disclaimer is invalid because it released liability for actions that had not yet accrued when it was signed.
Eakin, rejecting the plaintiff’s argument, said liability waivers for causes of action that have not yet accrued at the time the release is signed are generally viewed as invalid only if they involve future actions that are entirely different than ones the parties contemplated at the time of the release.
Eakin said Pennsylvania law has upheld numerous releases for claims that had not yet accrued when the release was executed. He further noted Bowman was not forced to sign the release and that it did not prevent her from being compensated for her injuries.
Bowman’s attorney said she had never argued the release was a contract of adhesion.
However, Frances M. Minnis, Bowman’s attorney, said the majority legislated from the bench and crippled the rights of security guards who are similarly situated to her client.
"I think that it’s tort reform," said Minnis, of Oxman Goodstadt & Kuritz in Chester, Pa. "Just think of all of these poor people who go to work for security companies and have to sign that waiver to go to work. If something catastrophic happens to them, they have no recourse against the third party."
"At least under that statute, they have no recourse," she clarified.
Echoing her plain language argument before the high court, Minnis said: "The language says ‘no.’ I don’t understand how you write an exception to ‘no.’"
Henry F. Reichner of Reed Smith represented Sunoco and declined to comment.
Sunoco’s position, however, based on its appellate brief and oral argument, was largely adopted by the majority of the court.
At oral argument last year, Reichner said that while Section 204(a) could be interpreted to support Bowman’s position, the entirety of the Workers’ Compensation Act deflated that argument.
In a brief, Reichner argued that Section 204 was a statutory provision blocking an employer — in this case, AlliedBarton — from attempting to limit its liability to an employee.
"But Sunoco is a third-party non-employer and it is clear that the act was not intended to be so broad as to include the non-employer defendant within its scope for any purpose," he said in a brief. "The act does not create any cause of action against a third party; the right to sue a third party is a common law right that exists quite apart from the act."
The state Superior Court also agreed with Sunoco, reasoning that while other courts had recognized that such releases often put job applicants at a disadvantage while making their employers seem more attractive to prospective clients, such was not enough to rule them contrary to public policy.
(Copies of the 18-page opinion in Bowman v. Sunoco, PICS No. 13-1039, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •