Defenses to Psychological Claims

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As discussed in the previous section, many actions taken by an employer in response to the coronavirus will be considered "actual events of employment" for the purposes of Labor Code § 3208.3(b)(1). But not every action taken by an employer will result in liability for a psychiatric injury.

Personnel actions that are lawful, nondiscriminatory or made in good faith may not be used to support a psychiatric claim. In addition, employees who have been employed for fewer than six months will have a difficult time asserting that their psychiatric injuries are compensable. We explore these defenses here.

Good-Faith Personnel Action Defense

LC 3208.3(h) states, "No compensation under this division shall be paid by an employer for a psychiatric injury if the injury was substantially caused by a lawful, nondiscriminatory, good faith personnel action." It establishes what is commonly called the good-faith personnel action defense, which is discussed in detail in "Sullivan on Comp" Section 5.33 Psychiatric Injury –– Good-Faith Personnel Action.

The Court of Appeal has explained, "[T]he Legislature's 'good faith personnel action' exemption is meant to furnish an employer a degree of freedom in making its regular and routine personnel decisions (such as discipline, work evaluation, transfer, demotion, layoff, or termination). If a regular and routine personnel decision is made and carried out with subjective good faith and the employer's conduct meets the objective reasonableness standard, section 3208.3's exemption applies."

Analysis for Good-Faith Personnel Action

In Rolda v. Pitney Bowes, Inc., the Workers' Compensation Appeals Board en banc established the required analysis when the good-faith personnel action defense pursuant to LC 3208.3(h) is asserted:

1. The workers' compensation judge must determine whether the alleged psychiatric injury involves actual events of employment, and if so, whether competent medical evidence establishes the required percentage of industrial causation.
2. If these two conditions are met, the judge must decide whether any of the actual employment events were personnel actions.
3. If so, the judge must determine whether the personnel action or actions were lawful, nondiscriminatory and made in good faith.
4. If all these criteria are met, competent medical evidence must determine causation; that is, the personnel action or actions must be a substantial cause, accounting for at least 35%-40% of the psychiatric injury.

That analysis has been approved by the Court of Appeal. So, although judges must determine legal issues regarding whether an employee's psychiatric injury was caused by actual events of employment, whether the events were personnel actions and whether the personnel actions were lawful, nondiscriminatory and in good faith, causation of the psychiatric injury is a medical issue. A doctor must break down the causes of a psychiatric injury, both industrial and nonindustrial, into percentages.

Personnel Action Defined

As discussed in the previous section, an actual event of employment pursuant to LC 3208.3(b)(1) needn't be an action taken by the employer. A personnel action has been defined by the courts as "conduct either by or attributable to management including such things as done by one who has the authority to review, criticize, demote, or discipline an employee." So, in order to satisfy § 3208.3(h), the action must be undertaken by a supervisor or someone else in a position of authority. Moreover, although a personnel action must be taken by a person in a position of authority, not every action taken by those people qualifies as a personnel action.

The courts have explained, "An employer's disciplinary actions short of termination may be considered personnel actions even if they are harsh and if the actions were not so clearly out of proportion to the employee's deficiencies so that no reasonable manager could have imposed such discipline." They explained further that it was unnecessary that "a personnel action have a direct or immediate effect on the employment status. Criticism or action authorized by management may be the initial step or a preliminary form of discipline intended to correct unacceptable, inappropriate conduct of an employee. The initial action may serve as the basis for subsequent or progressive discipline, and ultimately termination of the employment, if the inappropriate conduct is not corrected.”

The courts have explained that what constitutes a personnel action depends on the subject matter and factual setting for each case, and they have provided examples. Specifically, "Personnel actions may include but are not necessarily limited to transfers, demotions, layoffs, performance evaluations, and disciplinary actions such as warnings, suspensions, and terminations of employment."

In contrast, the appeals board has held that changes in an employee's working conditions do not constitute personnel actions –– it has held that increased workloads or changes in job duties are not personnel actions. Similarly, the implementation of a new computer system was not consider a personnel action, because it merely changed how the employees were required to complete their work. Although these actions did not qualify as "personnel actions" per § 3208.3(h), and thus could not be used to defend a claim, they were considered "actual events of employment" for the purposes of § 3208.3(b)(1), so they could be used to support a claim.

So, if an employee's psychiatric injury was caused by a termination, layoff, transfer or reassignment related the COVID-19 crisis, it probably would be considered a personnel action. Shift changes related to the coronavirus also probably would be considered a personnel action.

Not just any stress caused by changed working conditions from the coronavirus, however, would be deemed a personnel action. Stress related to changes in job duties, new computer systems or requirements to maintain physical distance probably aren't barred by LC 3208.3(h). It's also unlikely that requiring an employee to work from home would qualify as a personnel action, as this changes only where and how a job is performed.

Ultimately, only a physician can determine whether an employee has psychiatric injury, and if so, break down the different causes of it, whether industrial or nonindustrial. If the industrial causes predominate, the courts must determine whether any of them were personnel actions, and if so, whether they were a substantial cause of the injury.

Personnel Action Must Be Lawful, Nondiscriminatory and in Good Faith

Difficult economic times caused by the coronavirus have forced employers to make tough personnel decisions. Many have laid off some or all of their workers. Some have transferred and consolidated workers. Such actions would be considered personnel actions, and per LC 3208.3(h), they must be lawful, nondiscriminatory and in good faith.

The Court of Appeal has explained, "If a regular and routine personnel decision is made and carried out with subjective good faith and the employer's conduct meets the objective reasonableness standard, section 3208.3's exemption applies." It further explained that "[a]ny analysis of the good faith issue ... must look at the totality of the circumstances, not a rigid standard, in determining whether the action was taken in good faith. To be in good faith, the personnel action must be done in a manner that is lacking outrageous conduct, is honest and with a sincere purpose, is without an intent to mislead, deceive, or defraud, and is without collusion or unlawful design."

The appeals board has defined "discrimination" as "[a] failure to treat all persons equally where no distinction can be found between those favored and those not favored." It adds that "the real issue is whether the employer treated applicant differently than others similarly situated without justification ....

In deciding which employees to lay off, employers must be careful not to discriminate against anyone. For example, it would not be permissible to lay off only disabled employees while keeping only able-bodied workers. Such laid-off employees could file stress claims that would not be barred by § 3208.3(h) if the actions were deemed to be unlawful and discriminatory. In addition, such employees could argue that they were discriminated against in violation of Labor Code § 132a, as well as state and federal anti-discrimination laws.

Six-Month Rule for Psychiatric Injuries

Generally, in order to bring a claim for a psychiatric injury pursuant to Labor Code § 3208.3(d), the employee must have been "employed by that employer for at least six months." LC 3208.3(d) makes an exception, however, when the "psychiatric injury is caused by a sudden and extraordinary employment condition." The courts have been clear that § 3208.3(d) applies to "all claims for psychiatric injury."

The question then becomes whether an employee who worked for fewer than six months but contracts COVID-19 on an industrial basis is barred from receiving benefits for a psychiatric injury resulting from the exposure. Whether an event is sudden and extraordinary is a question of fact, and there's a lot of case law about it. Some is confusing and seemingly contradictory. A full exposition can be found in "Sullivan on Comp" Section 5.31 Psychiatric Injury –– Six-Month Rule.

A "sudden and extraordinary employment condition" has been described as "the type of events that would naturally be expected to cause psychic disturbances even in a diligent and honest employee." In one case, the Court of Appeal noted that "sudden" was defined as "happening without previous notice or with very brief notice : coming or occurring unexpectedly : not foreseen or prepared for." It also defined "extraordinary" as "going beyond what is usual, regular, common, or customary”; and “having little or no precedent and usu[ally] totally unexpected.” The court, however, then broadly stated that if "the event or occurrence that caused the alleged psychiatric injury was something other than a regular and routine employment event or condition, that is, that the event was uncommon, unusual, and occurred unexpectedly, the injury may be compensable even if the employee was employed for less than six months."

In another case, the Court of Appeal held that the nature of an injury is not considered in determining whether the psychiatric condition is caused by a “sudden and extraordinary employment condition.” So the work condition –– not the resulting medical condition –– must be uncommon, unusual or totally unexpected.

For example, in one case, an applicant contracted a bacterial infection while working at an animal theme park. Ultimately, it manifested as Guillain-Barre syndrome, which was described as a rare condition. The applicant alleged that the injury was caused by eating tainted food, picking up trash or eating a berry given to him by a co-worker. The appeals board found nothing unusual, uncommon or unexpected about his employment activities to cause the injury.

Certainly, the COVID-19 outbreak is "extraordinary," but it would be difficult to classify as "sudden." So, it's not likely that contracting COVID-19 alone would constitute a sudden and extraordinary employment condition. Although it's possible to imagine a scenario in which this exception could be met (for example, contracting COVID-19 after being attacked by someone who has the disease), the underlying employment event –– not the COVID-19 diagnosis –– would support the exception. So it's likely that most employees who contract COVID-19 at work during the first six months of employment would not be able to pursue a claim for psychiatric injury.

Nevertheless, even if a psychiatric injury is barred by § 3208.3(d), an employee could receive psychiatric treatment. The general rule is that an employer is required to treat a nonindustrial condition if it is necessary to cure or relieve an employee from the effects of an industrial injury. So, even if an employee has worked for fewer than six months, he or she might receive treatment for a psychiatric injury flowing from a COVID-19 diagnosis.

See Also

• Psychiatric Impairment Arising from COVID-19
• Psychiatric Injuries Caused by COVID-19

References

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