The Oregon Supreme Court has recognized an exception to limits on punitive damage awards in certain employment cases where the compensatory damages are low.  In Hamlin v. Hampton Lumber Mills, Inc., the Oregon Supreme Court considered the case of a plaintiff who was injured on the job and whose employer failed to reinstate him as required by ORS 659A.043.  That statute requires employers to reinstate injured workers on request within three years of the injury, unless other exceptions apply.  A jury found the employer had violated ORS 659A.043 and awarded the plaintiff $6,000 in lost wages and $175,000 in punitive damages.

As the Court noted, the Due Process Clause in the Fourteenth Amendment of the United States Constitution imposes limitations on punitive damages awards.  The exact limitations are based on factors including the ratio of compensatory to punitive damages and the reprehensibility of the act, among other things.  Courts have held that in the ordinary case, the ratio of punitive damages to compensatory damages should be limited  to single digits (for example, 4:1).  In this case, the ratio was 22:1.  The Oregon Court of Appeals held that the punitive damages award was unconstitutional and ordered it reduced to $24,000 – or a 4:1 ratio.

The Oregon Supreme Court reversed, upholding the 22:1 ratio because it determined that the compensatory damages were “relatively small” and that a violation of ORS 659A.043  was particularly reprehensible.  The Court noted that “the harm that offending employers inflict may be more than monetary and . . . a plaintiff who is not reinstated and who is, therefore, unemployed, is in a more vulnerable position than is a person who is employed when he or she suffers monetary loss.  A person who suffers a loss of employment is without the present ability to earn money to recover economic loss and to avoid further consequential loss.” 

The plaintiff, a high school guidance counselor, was dating her supervisor, the principal. She complained that the supervisor had sexually assaulted her during a date. The school district investigated the complaint and recommended the supervisor be terminated. The plaintiff sued. In addition to alleging sexual harassment and retaliation, she also alleged that the school district had been negligent by not terminating her supervisor before the incident had even occurred. She based that allegation on three earlier incidents involving the principal’s relationships with other school district employees. The juicy allegations involve (1) the principal’s affair with the wife of another principal in the same school district, (2) the principal’s complaint that another district employee was “stalking” him after he “rebuffed her advances,” and (3) yet another employee’s allegation that she was dating the principal when he slept with yet another employee. The plaintiff alleged that the school district should have investigated those incidents – and that if it had, it would have terminated her supervisor years before.

The trial court dismissed the plaintiff’s negligence claim, but the Court of Appeals reversed, ruling that a jury should be able to decide whether or not the school district’s failure to investigate had caused the sexual harassment. We don’t know what a jury would say about liability in this case, but it is a sobering reminder to employers to investigate all incidents of potential misconduct involving the workplace.
 

This morning, in Mohawk Industries, Inc. v. Carpenter, the Court will consider whether an employer's attorney's investigation of an internal complaint is protected by the attorney-client privilege.  The internal complaint alleged that the company was conspiring to hire individuals who were not authorized to work in the United States.  The case involves a former employee's claim for witness tampering; a separate lawsuit involving the alleged conspiracy is proceeding on a separate track.

On October 7, the Court will hear a case involving the Railway Labor Act.  The issue in Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers is whether the Seventh Circuit Court of Appeals had the power to overturn, on due process grounds, an arbitration award in the railroad's favor.  

On October 14, in Perdue v. Kenny A., the Court will consider whether attorney fee awards under 42 USC 1988 can be enhanced when the lawyer does a particularly good job.  Section 1988 is a common basis for fees in employment-related lawsuits.

On December 9, the Court will hear Stolt-Nielsen SA v. AnimalFeeds International.  This case asks the Court to decide whether an employee bringing a claim under an arbitration agreement may sue, not only on his own behalf, but on behalf of a class of similarly situated employees.  In this case, the arbitration agreement did not specifically allow class claims, but the arbitrators allowed those claims anyway.

Finally, on a date to be announced, the Court will hear Granite Rock Co. v. International Brotherhood of Teamsters.  This case again involves questions about arbitration.  Here, the issue is whether an arbitrator (not a court) may decide whether a valid collective bargaining agreement exists.

Sprague injured his knee on the job in 1976, filed a workers' comp claim, and sought treatment.  In 1999, he reinjured his knee and filed a new workers' comp claim with a new employer.  He also was successful in expanding his original claim to include a new condition, consequential arthritis in the knee.  In 2000, his knee had deteriorated and his doctor recommended a knee replacement.  However, plaintiff (who weighed over 300 pounds) needed to lose weight to be eligible for the knee surgery and to relieve pressure on the injured knee.  His doctor recommended gastric bypass surgery, but both workers' comp insurers (for his new and old employers) refused to pay for it.  The insurers argued that the gastric bypass was not covered because it was directed at Sprague's obesity, which had existed before the original 1976 injury. 

The Oregon Supreme Court disagreed.  The insurers did not dispute that the current knee problems were compensable, because they were related to the original on the job injuries.  The only relevant issue was whether the gastric bypass surgery was "directed to" the knee injury.  The court ruled that it was, because the medical evidence was undisputed that the weight loss was necessary to the success of the surgery.  It was irrelevant that the Sprague would also obtain free surgery that had substantial cosmetic benefits (as Al Roker, John Popper, Roseanne Barr, Star Jones, Randy Jackson, and others can attest).

As Stoel Rives World of Employment pointed out earlier, this doesn't mean that all gastric bypasses will now be covered by workers' comp.  However, the statute that mandated this decision just doesn't strike the balance that the workers' comp system promised.  The system was created as a compromise between employers and employees.  Employees received a defined benefit for any on-the-job injury regardless of fault.  Employers received protection from high punitive damage awards and the knowledge that their costs would be controlled.  While the system often works well, decisions like this show that it doesn't always.  According to some experts, gastric bypass surgery costs between $20,000-and $25,000.  That's a cost that these employers might not have had to pay absent the workers' comp system.

As the Stoel Rives World of Employment has discussed earlier, wrongful discharge is a common law remedy.  One way a plaintiff may assert the claim is by arguing that the employer terminated him for fulfilling an "important societal obligation."  Oregon courts determine what obligations qualify by reviewing state statutes and the state constitution. 

In this case, the Oregon Supreme Court ruled that plaintiff would have had a wrongful discharge claim if he had been terminated for refusing to engage in illegal practices prohibited by Oregon's Uniform Trade Practices Act..  However, the court determined that plaintiff's evidence did not meet that burden.  Plaintiff had not complained that he was being forced to act illegally; he had complained only that the outside company was acting illegally and urged his employer not to do business with that company.  The court also held that plaintiff would have had a viable claim if he had been terminated for reporting the outside company's illegal practices to a government agency that could have taken legal action about the outside company.  Reporting the allegedly illegal practices to his employer, the court ruled, was insufficient to trigger the common-law remedy.

Lamson does not signal an entirely new direction in the law of wrongful discharge; employers have known for some time that they may be held liable for terminating employees for performing public duties such as jury service or even arresting lawbreakers.  However, Lamson is a valuable precedent for employers because it shows that Oregon courts are not willing to extend a wrongful discharge remedy for every act that a discharged employee can relate (however tangentially) to an Oregon statute.  Plaintiffs asserting wrongful discharge must show how their complaint directly relates to the furtherance of a public policy

Plaintiff Andrea Deatherage was an employee of Super 8 Inn when she filed a health and safety complaint against her employer with Oregon OSHA.  Deatherage was terminated the next day.  She sued for the common-law tort of wrongful discharge, claiming she was terminated in retaliation for filing the complaint. 

In Oregon, wrongful discharge is a "gap filling" remedy that is available only when there is no adequate remedy by statute.  In Walsh v. Consolidated Freightways, 278 Or 347, 563 P2d 1205 (1977), the Oregon Supreme Court ruled that the state and federal statutory remedies for health and safety complaint retaliation were sufficient to preclude a common-law remedy.  Citing Walsh, the trial court dismissed plaintiff's claim.

So why the fuss at the Court of Appeals?  Plaintiff claimed that a federal case issued since Walsh had cast doubt on whether the statutory remedies were actually adequate.  The Court of Appeals rejected the invitation to ignore an Oregon Supreme Court case, and adhered to Walsh, agreeing with the trial court.  (Oddly, the court declined to fill a gap in Oregon law by explaining exactly what remedies are available for an Oregon statutory health and safety reporting claim under ORS 654.062.)

So why is this case important?  At this point, it creates a difference in how these kinds of wrongful discharge cases will be treated in state courts as opposed to federal courts. The Stoel Rives World of Employment will be watching future developments, as the Oregon Supreme Court may have an opportunity to weigh in on this issue.

Plaintiff Barbara Heipel worked for the Oregon Employment Department.  Her supervisors received an escalating string of complaints about her job performance and erratic behavior.  Her actions included:

• standing in the bathroom in a "trance" pulling out paper towels into an overflowing trash can;
• leaning against a bathroom stall in a "despondent state";
• total loss of emotional control with supervisors and coworkers;
• accusing her coworkers of stealing shredded documents from a trash can and pasting them together for personal use; and
• false and contradictory complaints to customers about her employer and coworkers.

Heipel's employer asked her to take an IME to determine whether she posed a threat to herself and others and whether she could perform the essential functions of her position.  Plaintiff refused, and the Employment Department terminated her for refusing.  Plaintiff filed a lawsuit claiming, among other things, that her employer had unlawfully discriminated against her under Oregon employment statutes for having a disability.

ORS 659A.136(1) provides that such examinations are appropriate only where they are "job related and consistent with business necessity."  The Oregon Court of Appeals, relying on federal cases in the Sixth and Eighth Circuits, ruled that, under these circumstances, the requested exam met both requirements.

This decision should not be seen as a blanket endorsement of all IMEs in the workplace.  Although this exam was ruled appropriate, the Court of Appeals' inquiry was fact-specific -- and the facts here were unusual.  Employers should understand the risk of requesting such exams and should carefully evaluate the individual circumstances before forging ahead.

The plaintiff, Kevin Kasten, was reprimanded three times for failing to clock in and out.  In response, he complained that the location of the time clock was illegal because, among other things, it prevented employees from being paid for time donning and doffing protective gear.  After Kasten failed to clock in a fourth time, he was terminated.  Kasten sued under the FLSA, claiming that he had been terminated in retaliation for his complaint. 

The FLSA protects employees who have "filed any complaint" under FLSA and whose employers retaliate against them for complaining.  The Seventh Circuit ruled that because a complaint must be "filed," verbal complaints are not protected by FLSA. 

The takeaway?  Despite this ruling, we at the Stoel Rives World of Employment think that employers should be wary of terminating employees for verbal complaints.   As others have noted, the case law in other circuits may contradict the Seventh Circuit on this issue.   Even more crucially, plaintiffs making verbal complaints may have other causes of action under state statutory law or common law.

One helpful new statute fixes a problem for employers who operate music venues.  In late 2007, Mississippi Studios, a hip North Portland nightspot and recording studio, got nailed in an Oregon Employment Department audit for not paying unemployment taxes on musicians who played at the venue.  Mississippi assumed that the musicians were not employees, but were  independent contractors according to the Department's test.  Not so fast.  Mississippi was unaware of ORS 657.506, an obscure provision in Oregon statute that presumed musicians are employees unless otherwise stated in an employment agreement.

The new statute, which went into effect immediately on passage, repeals the old rule and treats Oregon musicians just like everybody else.  The bill is simply drafted and repairs some bad lawmaking.  Way to go, legislature!  This time you were up there with the best.