Protect Your Customers — New Pennsylvania Case Upholds Disclaimer Waiving an Employee’s Right to Sue
Does your business require your employees to perform work or services offsite at a customer’s place of business? Are you a customer concerned with the risks associated with having third-parties perform work on your premises? Is this an issue for you or your insurance carriers when negotiating customer service contracts? If the answer to any of these questions is yes, a third party release in the form of a “Worker’s Compensation Disclaimer” could limit the associated risks of this rapidly growing business model. This is thanks to a recent decision by the Pennsylvania Supreme Court, holding that such waivers do not violate Pennsylvania’s public policy and can properly waive an employee’s right to sue a customer for work-related injuries covered by the Worker’s Compensation Statute.
In Sabrina Bowman v. Sunoco, Inc., a security guard working for Allied Barton Security Services (“Allied”) signed a worker’s compensation disclaimer at the inception of her employment promising that she would not sue Allied’s customers for work-related injuries. While performing work at the refinery of one of Allied’s customers, Sunoco, Inc. (“Sunoco”), the guard was injured by slipping on snow and ice. As a result, she initiated a worker’s compensation claim against Allied and commenced a lawsuit against Sunoco. The guard claimed that the disclaimer she signed should be voided as against public policy to the extent that it contained a prospective waiver, meaning the employee was asked to waive a cause of action that had not yet accrued. The guard also claimed that the disclaimer contravenes an employer’s right to subrogation, meaning the opportunity for an employer to recoup expenses spent on an injured worker from its customer. Finally, the guard claimed that the disclaimer violated the general principals of contract law because it released liability for actions not accrued at the time of the release. The Court, in a decision of first impression, rejected all three of the guard’s arguments and upheld the worker’s compensation disclaimer that limited the guard’s recovery to only worker’s compensation benefits.
In reaching its finding, the Court interpreted Section 204(a) and Section 319 of the Pennsylvania Worker’s Compensation Act (“Act”). Section 204(a) of the Act provides: “No agreement, compensation, or release of damages made before the date of any injury shall be valid or shall bar a claim for damages resulting therefrom: any such agreement is declared to be against the public policy of this Commonwealth.” 77 P.S. § 71(a). The Court found that this provision only applies to an employer’s attempt to limit its own liability for any future injury the employee may suffer. Section 204(a) does not apply to third-party customers because a third-party release does not attempt to deprive an employee of worker’s compensation rights, as would an employer release. The release rather pertains exclusively to the customer’s tortious liability. Therefore, a third-party release does not undermine the public policy considerations of Section 204(a) of the Act. Section 319 provides: “where the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of the employee…against such third party…” 77 P.S. §671. Although this right is bestowed upon an employer under the Act, the Court noted that an employer can elect to waive this right as a business decision that affects only itself — this election does nothing to prevent the employee from receiving full and just compensation for his or her work-related injuries. Therefore, a third-party release also does not clash with the economic public policy of Section 319 of the Act.
Finally, with regard to waivers that release liability for actions not accrued at the time of the release, the Court relied on a long line of cases holding that these waivers generally are only invalid if they involve future actions entirely different than ones contemplated by the parties at the time of the release. For example, an employee executes a general release of liability from all claims resulting from any automobile accidents. The waiver would not bar a medical malpractice claim against a doctor who performed surgery related to injuries from the accident because the release could not have contemplated negligent treatment for the injuries.
So what do you need to know when preparing a third-party worker’s compensation disclaimer?
• The disclaimer can only waive an employee’s right to sue third-party customers or clients for injuries covered by the worker’s compensation statutes.
• As a matter of public policy, the disclaimer cannot attempt to deprive an employee of his or her rights under the Act, shield the employer from liability, or deprive an employee of compensation for work-related harm.
• The disclaimer effectively waives the employer’s right under the Act to subrogate against its customer.