11-14-11; You can’t be too cautious! New 7th Circuit Ruling confirming statements made by a non-decision makers can make a difference!

This case should serve as a reminder to all employers, you can never be too careful! Remember, you cannot prevent litigation 100% of the time, but you can make sure you have the best case possible in settings that could give rise to litigation. You have to be careful of what your team members say, as those statements could come back to haunt you.

Normally, statements made by employees who are not a decision maker in a Title VII suit would be hearsay, not admissible in a court of law, and not an admission. In Makowski v. SmithAmundsen, LLC, et al., the Seventh Circuit Federal Appellate Court found a human resources director's comments about an employee's termination can be considered a party admission, and thereby get around the hearsay classification in settings where that individual is involved in the “process leading up to the decision to terminate.”

In Makowski, Plaintiff Makowski sued her former employer alleging both pregnancy discrimination and violations of the FMLA. Apparently, while Ms. Makowski was on FMLA leave following birth of her child, her employer decided to terminate her employment. The COO of the company was directed to consult with outside counsel about the potential termination but the officer delegated that task to the company’s HR Director.

Defendant SmithAmundsen later terminated only two persons – Makowski and one other individual in another department. SmithAmundsen alleged the positions were being eliminated due to organizational restructuring. When Makowski came back to the office to collect her personal effects at a later date, the HR Director involved in the outside counsel consultation allegedly told Makowski her termination was due to the pregnancy and because she took her FMLA leave following the birth. The HR Director also allegedly told Makowski her termination was labeled a reduction in force based on the outside counsel's recommendation.

The Federal District Court initially ruled the HR Director's statement was inadmissible hearsay because the Director's "job responsibilities were not related to the decision to terminate Makowski, and because [the Director] was not involved in the decision-making process." The Seventh Circuit reversed, finding although the HR Director was not involved in the decision to terminate, "she was involved in the decision-making process leading up to that action due to her consultation with outside counsel regarding the termination and her job duties, which include ensuring the [employer's] compliance with federal anti-discrimination laws." The Seventh Circuit stressed the "involvement in the process leading up to the employment action at issue is enough to make an employee's statement an admission."

What does this mean for employers? The number one goal is to only terminate people for legitimate reasons. Keep your files updated, keep your personnel reviews honest, and keep a record of all infractions in case you need them later. After that, make sure the people you trust to help you come to these types of decisions understand the need for discretion, and know the old adage “loose lips sink ships.” Again – we stress, termination should be for valid cause, but even in such settings, a stray comment can give rise to a litigated claim, and juries often feel an emotional connection to a plaintiff in situations where they see a pregnant woman getting what looks like a very bad deal.  

This article was researched and written by our resident Blog Administrator, Arik D. Hetue, J. D. who can be reached at ahetue@keefe-law.com. Please feel free to direct any questions to him, or post them on our award winning blog.

11-14-11; Appellate Court, Workers’ Compensation Division again flips the IWCC on “manifest weight.” Are they becoming a “Super-Commission” that will now second-guess every factual ruling below?

In Shafer v. Illinois Workers’ Compensation Commission, 2011 IL App (4th) 100505WC (October 28, 2011), the Appellate Court, Workers’ Compensation Division was confronted with a case where basically every factual ruling was challenged by the side of the claim that didn’t like it. The five-member panel went to great lengths to carefully analyze all of the facts and find most of them to be “within the manifest weight of the evidence.” As we have repeated advised our readers in the last statement of the Illinois Supreme Court on this issue in two exhaustive rulings in Sisbro and Twice Over Clean, our highest Court sternly advised this panel they weren’t supposed to reverse rulings of the Commission on the facts and should limit their focus to proper adherence to Illinois law. The rulings were so clear, it appeared one might get hit with sanctions for filing an appeal simply to seek reversal on the facts.

Now, in the last ninety days or so, we have seen the Appellate Court, Workers’ Compensation Division reverse all or parts of three claims on the facts. As we have advised our business readers, we don’t recall such an appellate reversal ever resulted in denial of benefits—they always seem to reverse to insure benefits are awarded.

In this claim, the Workers’ Compensation Commission found the Arbitrator's finding claimant was temporarily totally disabled for about one month "not supported by the record." The IWCC panel noted the treater released claimant to light duty work. Under oath, claimant candidly admitted she applied for unemployment benefits. To do would mean claimant averred to the Illinois Department of Employment Security she was “ready, willing and able to work.”

 In light of those facts, the Commission ruled claimant was "capable of working" for a time period of 23 days. The Commission majority did note she could only work at light duty. The Appellate Court’s ruling reversed that determination:

[T]he fact that the employee *** has the ability to do light work does not necessarily preclude a finding of temporary total disability. `Total disability,' as that term is used in the Act, does not mean total physical and mental incapacity. Rather, an employee is considered totally disabled when, because of a work-related injury, he or she is able only to perform services which are so limited in quality, dependability, or quantity that a reasonably stable labor market for them does not exist. Thus, the fact that an employee can do some light duty work or other useful tasks does not mean that she is ineligible to receive TTD benefits. Moreover, the fact that an employee applies for or receives unemployment compensation does not preclude or diminish her eligibility to receive TTD benefits. Thus, the Commission's reduction of TTD benefits was based on an erroneous legal premise.

There is no evidence in the record suggesting that the claimant was able to do more than light duty work. (TTD period omitted). In  fact, as noted above, the claimant's testimony and the medical records establish that the claimant was in a great deal of pain and severely limited in her physical activities during that time period. Accordingly, we find that the Commission's refusal to award the claimant TTD benefits for that time period was against the manifest weight of the evidence. We therefore reverse that aspect of the Commission's decision. (Citations omitted).

With respect to the members of this august and veteran appellate panel, we completely disagree. We are certain hundreds, if not thousands, of our readers on the business side of the IL WC matrix vehemently disagree with the premise of these rulings. A release to light work is a release to work. If such work is available, there is no conceivable basis to award TTD. In our view, U.S. law requires reasonable accommodation to allow such workers to return to work.

As to the claim for unemployment compensation, if claimant is “ready, willing and able to work” as she is required to assert, we feel it ludicrous to rule she is unable to perform any work and is therefore entitled to “temporary total disability.” In our view, the Appellate Court, Workers’ Compensation Division’s eminent members are again interposing “legal” meanings/interpretations that don’t match the “English language” version of the legislation. As we have advised our readers, they clearly have the power to do so and we have to respect their rulings. But we also feel they should be subject to a modicum of criticism when John Q. Public is challenged to understand how and why they divine these arcane legal concepts.

 In simplest terms, if a claimant is released to light work and the employer can demonstrate light work is available, TTD should not be due. Claimant is healthy enough. In our view, the Appellate majority simply replaced the factual findings of the Commission with their own.

Why is the Appellate Court, Workers’ Compensation becoming a “Super-Commission” a bad idea for the IL WC system? In our view, this is not a complex or intricate claim. It involves a pair of garden-variety soft-tissue strains. Despite its simplicity, please note:

v  These accidents occurred more than four years ago in 2007

v  This claim was heard by the Arbitrator and decided in 2008, more than three years ago.

v  The IWCC issued its ruling over a year ago.

v  The claim is now being remanded to the IWCC and their final ruling will probably be five years or more after the occurrence.

v  The only true change to the Commission’s ruling is a reversal on 23 days of TTD that our reviewing court reinstated.

v  After four years of litigation, the amount changed by this Court was about $750!

We don’t think it is a great idea for simple cases such as this drag out with legal fees and costs expended on both sides to have matters litigated at four levels. If you think that is a solid idea, please let us know your thoughts.

We also feel this is the sort of ruling that appears to be a “slam dunk” for claimant’s counsel. In making that statement, the cross-appeal resulted in reversal so as to award an additional $750 in TTD. We simply don’t feel the Appellate Court needs to be involved in matters that small. These sorts of decisions also don’t give one the impression things are “transparent, fair and impartial” when every part of the ruling appears to focus on giving claimants’ counsels whatever they seek.

On another odd issue, claimant and her counsel argued the Commission erred as a matter of law when it found it had jurisdiction to address the employer's Petition for Review. Claimant maintained because the employer did not include the correct case number on its Petition for Review, no timely appeal of the Arbitrator's decision was filed with the Commission, and the Commission therefore lacked jurisdiction to address the appeal.

The Appellate Court disagreed. The Court held

..from the time the petition was filed, both the parties and the Commission acted as if case number 07-WC-56127 was properly before the Commission for review. The claimant has cited no case (nor have we found any) suggesting that a clerical error in a timely and otherwise properly drafted petition for review strips the Commission of jurisdiction to hear the petition, particularly where, as here, the petition adequately notifies the opposing party and the Commission regarding which case is being appealed. Such a rule would improperly elevate form over substance. (Citations omitted).

Our view is at the end of the day, Respondent received a mulligan on this issue. We all make mistakes, but we firmly believe properly captioning and filing a Petition for Review is not a difficult endeavor. In a mildly rare turn of events, the Appellate Court, Workers’ Compensation Division, handed the employer a gift this time in not summarily dismissing the review. We urge practitioners on both sides, please pay attention to detail; we assure you Santa only comes down the chimney once a year.

This article was researched and written by Joseph F. D’Amato, J.D. Please feel free to forward thoughts and comments to Joe at jdamato@keefe-law.com or post them on our award-winning blog.

11-14-11; “Say it ain’t so, JoePa.” Things U.S. risk managers may take away from the tragic end of Joe Paterno’s coaching career

The U.S. sports community was stunned, dazed and amazed to see Coach Joe Paterno initially announce his retirement and then be summarily terminated by the Penn State University Board of Trustees. Joe Paterno has coached football at Penn State University longer than most of our readers have been reading.

The major issue everyone is talking about was the apparent fact Coach Paterno was advised of a very serious situation involving an eyewitness account of at least one unquestioned and shocking crime. News sources indicate while Coach Paterno did report the event to university officials, it appears he took no further remedial action other than initial reporting. News reports indicate he never “circled back” to see what happened with his report. It appears the failure to take further action led to his termination. While we feel badly for Coach Paterno and his many supporters, it is hard to question the decision of the PSU Board of Trustees. We feel confident their attorneys told the Board they had no real choice other than to terminate asap.

Our best wishes and hopes go out to the victims and their families—we hope they work together to get past this media circus and accompanying madness. We also salute the contributions of 84-year-old Coach Paterno whose mistaken judgment in one crisis over a coaching career that spanned decades caused him to be summarily wrenched from a position he obviously cherished and thrived in.

Where is Penn State University at right now?

Well, they are facing both criminal and civil sanctions and probably lots and lots of litigation. The main perpetrator of this tragic mess left employment with the University about a decade ago; but he left behind a trail of young claimants who are now becoming adults and able to sue the school in their own name as adults. It is our assumption that is the genesis of what has brought this issue to the national spotlight.

To the extent news reports indicate as many as forty claimants have stepped forward, it is possible Penn State may be looking at damage claims of at least $25,000,000 to $250,000,000. Punitive damage counts may make the potential losses stratospherically higher. Please note the litigation may be moved to Pittsburgh or Philadelphia or even Chicago where claimant attorneys will seek juries who are not sympathetic to Penn State University. One may also assume there may be Plaintiff attorney websites springing up across the country seeking more claimants willing to step forward. The cost of hiring attorneys to defend all of the expected civil claims is certain to be well into the millions. Current administrators will also face lots of demands on their time to participate in investigations, depositions and discovery.

From the perspective of U.S. risk managers, we feel this situation parallels the problems faced by the Catholic Church in this country over the last several decades. Thousands of claimants have come forward to assert criminal attacks similar to the Penn State situation. If you aren’t aware of what has happened as components of the Church have struggled to defend themselves, several U.S. Catholic Dioceses have filed for bankruptcy to seek protection from the cost of settlements, verdicts and defense costs.

While Penn State’s endowment may protect them from bankruptcy, the hit to the University from the embarrassment and settlements/verdicts isn’t going to be good for school attendance or future fund-raising. The endowment’s credit rating is already taking a hit. We assure our readers some Catholic parishes initially tried to take collections specifically for their defense situation and lots of parishioners revolted, claiming they didn’t want to foster or implicitly condone the conduct leading to the needed defense funds.

Trust us, major corporate and individual contributors to Penn State University will not want to see their hard-earned contributions earmarked to resolve this messy litigation at all levels. One solid thought is to rapidly seek confidential settlement meetings and rapid closure of all criminal and civil claims with the victims, their attorneys and their families. We don’t feel any good will come from dragging this one out.

One simple strategy to avoid such problems in your company

Start and maintain an Harassment Hotline/Email Address

One thought for risk managers is to expand the concept of having an harassment hotline or email address for your facilities and larger community. Please note the hotline shouldn’t be limited to your workers—if you deal with the public, make it available for anyone to relay a concern about a crime or inappropriate conduct of any kind. All complaints, questions and inquiries of any nature need to be kept completely confidential. HIPAA/GINA concerns in such reports should follow the privacy requirements of U.S. law if any medical information is part of the complaint.

The hotline concept is to allow for rapid and open reporting of every questionable activity or action that occurs within your organization. We recommend you advise every worker of the concept at new employee orientation and at employee meetings at least once a year. Complaints of harassment relating to racial/sex/national origin/religion should all be funneled into this system. The complaining party can and should be given a reference number for their call-in complaint. Your decision on resolution of any complaint needs to be reported back to the complaining party to insure you have taken any step needed to resolve it within your discretion.

Please note having such a hotline should allow you to rapidly perform an effective incident investigation you may not be otherwise able to do. When a complaint comes in, your hotline managers can take webcam statements, pull surveillance videos where possible and seek needed documentation to build a solid file. If it is done properly, you can basically build a solid defense case-in-chief to be prepared for civil or criminal litigation. If you don’t have such a hotline, it is wildly difficult to investigate when there is a significant delay in reporting—by the time the situation boils up to the media or a lawsuit, you will have to fight and expend lots more time to try to catch up to what may have occurred weeks, months or years ago.

In our view, the cost of operating and managing an harassment hotline/email address is inexpensive in relation to the cost of one claim that goes awry, as happened at PSU. Effective and confidential management of all complaints will provide your organization with defenses it wouldn’t otherwise have and should limit litigation.

When do you go to the police to relay a hotline complaint?

Ah, this is a delicate question to resolve. In our view, when you receive a report of actions that arguably could be a felony, the authorities have to be involved. At Penn State, senior administrators have already been charged with crimes for not reporting actions that clearly comprised at least one and maybe lots of felonies. Our sources indicate they didn’t consult with University counsel about the issue or investigate further. They basically just buried the reports which probably made them accessories after the fact. We are certain the local police have to be furious to learn they weren’t consulted and therefore couldn’t have quietly and smoothly apprehended the criminal and stopped his actions.

This failure to take action or report to the authorities may have resulted in lots more children being attacked when such attacks clearly could have been prevented. In our view, defending those former PSU administrators in a criminal courtroom will be very challenging based upon the facts as we understand them. Another tragedy of their inaction is the tumultuous end of Coach Paterno’s amazing career and legacy.

If the actions reported are less serious but still indicate there are potential criminal actions, we recommend your organization contact legal counsel and get a detailed opinion of what the best approach would be. Just by doing so, you protect yourself and your organization from later criticism and possibly criminal charges.

At KC&A, we are contacted about such issues by clients and prospective clients on a regular basis. We are happy to assist with setting up or managing an harassment hotline. We are also happy to provide your managers research and analysis of employment law, general liability, criminal situations and other similar concerns. Some of these requests may come from harassment hotline complaints. If you have thoughts, questions and concerns, please send a reply.