REPORT FROM COUNSEL
SUMMER 2003 ISSUE
Table of Contents
- NEBRASKA RECOGNIZES WORKERS' COMPENSATIONS RETALIATORY DISCHARGE CLAIM
- CASE BY CASE
- ARBITRATION CLAUSES IN EMPLOYMENT CONTRACTS
- EMPLOYMENT LAW GUIDEBOOK
- LIFE INSURANCE CAN BE PART OF YOUR ESTATE PLAN
NEBRASKA RECOGNIZES WORKERS' COMPENSATIONS RETALIATORY DISCHARGE CLAIM
By Sandra L. Maass
On March 7, 2003, the Nebraska Supreme Court held that a public policy exception to the at-will employment doctrine applies to allow a cause of action for retaliatory discharge when an employee is fired for filing a workers' compensation claim. Jackson v. Morris Communications Corp., 265 Neb. 423 (2003). Therefore, if an employee who filed worker's compensation claims is fired, they may in turn sue the employer for wrongful discharge.
Jackson was hired by the Morris Communications doing business as the York News-Times Newspaper in the distribution department in 1994. She was promoted in January of 1995 to bundle driver and in July of 1996 she was promoted again to co-circulation manager. In March of 1997 while Jackson was at work she injured her left wrist operating the labeling machine. She reported the injury and a first report of injury was filed in accordance with the workers' compensation laws. By April of 1997 Jackson was unable to perform some of her required duties because of the injury. As a result her change in duties her pay were adjusted. In May of 1997 Jackson's supervisor began logging alleged problems with performance and met with her three times between May 19th and 27th to criticize her performance. Finally, on June 2, 1997, Jackson's physical therapist contacted her supervisor recommending that Jackson not perform any repetitive duties with her left wrist. Ultimately, the York News-Times Newspaper fired Jackson on June 16, 1997.
Thereafter, Jackson filed suit alleging she was discharged because she filed workers' compensation claim and under the Nebraska Workers' Compensation Act ("Act") it is the public policy of Nebraska that workers receive the benefits of the Act. Jackson argued that the Act required recognition of a cause of action for wrongful discharge when an employee is discharged in retaliation for filing a workers compensation claim under the Act. However, the trial court dismissed Jackson's case stating that a cause of action for retaliatory discharge for filing a workers compensation claim had not yet been recognized by Nebraska law and it was not for a trial court to create new causes of action. Jackson appealed.
On appeal the Nebraska Supreme Court reiterated that "unless constitutionally, statutorily, or contractually prohibited, an employer, without incurring liability, may terminate an at-will employee at any time with or without reason." Malone v. American Bus. Info, 262 Neb 733, 634 N.W.2d 788 (2001). However, under the public policy exception, the court noted that it would allow an employee to claim damages for wrongful discharge when the motivation for the firing contravenes public policy. The court noted that it had rarely recognized the public policy exception. In Ambroz v. Cornhusker Square, Ltd., 226 Neb. 899, 416 N.W.2d 510 (1987) the court applied the public policy exception and recognized a cause of action for retaliatory discharge for an employee who was terminated upon refusal to take a polygraph test. Again, in Schriner v. Meginnis Ford Co., 228 Neb. 85, 421 N.W.2d 755 (1988) the Court applied the public policy exception and allowed a case for retaliatory discharge when an employee was discharged for reporting his suspicions that his employer was violating the state odometer fraud laws. Schriner v. Meginnis Ford Co., 228 Neb. 85, 421 N.W.2d 755 (1988).
The Court noted that, unlike several other states, Nebraska's lawmakers have not specifically prohibited an employer from discharging an employer for filing a workers compensation claim in its statutory framework nor has Nebraska specifically made such a discharge a crime. The court reasoned that the Act was promulgated to serve an important public purpose, and a rule which allows fear of retaliation for the filing of a claim undermines that policy. "We are convinced that the unique and beneficent nature of the Nebraska Workers' Compensation Act presents a clear mandate of public policy which warrants application of the public policy exception. Thus, we recognize a public policy exception to the at-will employment doctrine and allow an action for retaliatory discharge when an employee has been discharged for filing workers' compensation claim. The trial court was reversed and the matter was sent back to the trial court for further proceedings.
CASE BY CASE
Bait-and-Switch Credit Card Offer
In a variation on the typical "bait-and-switch" scheme, a bank made a promotional offer of a "no annual fee" credit card, then changed the terms mid-year to require such a fee. A credit card holder sued the bank under the federal Truth in Lending Act (TILA). She alleged a violation of the requirement in TILA that an issuer of a credit card disclose the terms of the card accurately and without misleading statements. A federal court allowed the lawsuit to continue.
Both the advertisement soliciting customers for the credit card and the card holder agreement stated that no annual fee would be charged, but the agreement also stated more generally that the bank had the right to change any of the terms at any time. The bank maintained that the latter provision gave it the right to impose an annual fee whenever it wanted.
In ruling for the credit card holder, the court found that a reasonable consumer was entitled to assume that the issuer of the credit card would refrain from imposing an annual fee for at least one year. Given the apparent intent of the bank to begin an annual fee after the "bait" had been taken, the statement of "no annual fee" was misleading and in violation of TILA. If the bank had wished to reserve the right to impose an annual fee later, notwithstanding the "no annual fee" solicitation, further clarification would have been necessary to comply with TILA.
Casino Cheats Gambler
Steven was a multimillionaire businessman with a fondness for high-stakes gambling. His reputation as a high roller led a Las Vegas resort to recruit him to gamble at the grand opening of its new casino. The enticement from the casino was a $2 million line of credit.
When Steven was just getting warmed up in what figured to be a long stretch of gambling, casino officials informed him that he had used up the line of credit, plus several million dollars of his own money. Steven had been gambling not with chips but with a "player card," and cameras had been recording his betting results. He strongly disputed how much in the red he really was, but the casino made him leave the premises.
Steven sued the gaming company that operated the casino, and a jury added more millions to his net worth. He convinced the jury that the casino's goal on opening night was to improve its bottom line by forcing him to quit while he was in the hole. The casino officials knew that an experienced gamer like Steven could recoup his losses, and then some, in the same night, so they created the conflict over the amount of the gambling debt as an excuse to ask Steven to leave. This breached the agreement between the parties.
Evidence of underhanded tactics of the casino no doubt made an impression on the jury. Steven produced gambling debt invoices that the casino had generated even before he began to gamble. The videotapes from the night in question, which were key to proving just how much gambling debt Steven had incurred, had been destroyed by the casino. These tactics cast a cloud of suspicion over the casino's version of the events.
ARBITRATION CLAUSES IN EMPLOYMENT CONTRACTS
The Federal Arbitration Act requires courts to enforce clauses in commercial contracts that require arbitration of disputes. The U.S. Supreme Court has ruled that transportation workers engaged in interstate commerce are exempt from the Act. For other types of workers, the effect of the Supreme Court ruling was to reaffirm the enforceability of mandatory arbitration provisions in agreements entered into by workers engaged in interstate commerce.
Interstate Commerce Requirement
The Act's requirement that workers be engaged in interstate commerce is not especially difficult to meet, given the interconnectedness of the economy. When a nurse at a hospital tried to avoid binding arbitration of her wrongful discharge claim by arguing that her employment agreement had no impact on interstate commerce, the argument failed. The court pointed out that the nurse's employment depended on the constant use of supplies purchased from other states and that the hospital treated many out-of-state patients. More often than not, similar connections can be made between most jobs and the flow of interstate commerce, especially for large employers.
Level Playing Field
To say that employers and employees generally may bind themselves to arbitration is not to say that there is no judicial oversight. In the time since the Supreme Court cleared the way for mandatory arbitration, courts have been occupied with creating a level playing field when employers make the signing of an arbitration agreement a condition of employment. If its terms weigh too heavily in favor of the employer, the agreement, or at least the offending part, may be ruled invalid.
Finding that an arbitration agreement was "utterly lacking in the rudiments of evenhandedness," one federal court refused to enforce an agreement that allowed only the employer to choose the panel from which an arbitrator would be selected. Supposedly the parties were to achieve a fair result by using an alternate strike method to arrive at one arbitrator, but, given that the whole pool was selected by the employer with no constraints, "an impartial decision maker would be a surprising result." It may be possible to avoid this particular defect by stating in the agreement that the parties will use an arbitration service that takes measures to find an unbiased arbitrator having no potential conflicts of interest.
Paying the Costs
Splitting the costs of arbitration evenly between the parties may seem reasonable on its face, but some courts have invalidated such clauses as being too burdensome for individual employees. Aside from considering the respective abilities of the parties to pay what can sometimes be substantial up-front costs for arbitration, there is a concern that the prospect of shouldering those costs has a "chilling effect" on employees' rights to have their grievances heard. Alternative approaches include payment of all costs by the employer, waiver of the employee's share on a case-by-case basis if it is beyond the employee's means, or capping an employee's share at the level of costs that would be incurred in court.
To Arbitrate or Not?
Even before an arbitration clause is agreed to, and perhaps later scrutinized by a court, the parties need to consider some distinctions between mandatory arbitration and litigation. Since it is easier to request arbitration than to file a formal complaint in court, use of arbitration may mean an increase in disputes to be resolved. A decision maker in arbitration, if he or she is familiar with the industry in question, could understand complex issues better than a jury would. In arbitration, the dispute itself and the terms of any award frequently are kept confidential, affording the parties more privacy than a trial in open court. Finally, some of the same features that make arbitration a simpler and more streamlined approach, like limited fact finding and having no right to appeal, could weigh in one party's favor and against the other, depending on the circumstances of the case.
EMPLOYMENT LAW GUIDEBOOK
The U.S. Department of Labor has published a guidebook to provide businesses with general information on the laws and regulations that the Department enforces. The guidebook describes the statutes most commonly applicable to businesses and explains how to obtain assistance from the Department for complying with them.
The authority of the Department of Labor extends to many statutes, but the following are several that affect most employers: Employee Retirement Income Security Act (ERISA); Occupational Safety and Health Act (OSHA); Fair Labor Standards Act (FLSA); and Family and Medical Leave Act (FMLA).
The Employment Law Guide: Laws, Regulations and Technical Assistance Services can be accessed on the Internet at:www.dol.gov/asp/programs/guide.htm
LIFE INSURANCE CAN BE PART OF YOUR ESTATE PLAN
Even if you have a relatively modest estate, life insurance can be an important aspect of estate planning for the obvious reason that it can substantially increase the value of your estate. Where the death of a person is premature and a young family is in need of support, life insurance may be the primary means for the family's financial survival.
Even in larger estates, life insurance can be useful by providing the liquidity necessary to pay estate taxes and expenses without the necessity of selling off assets that a family would prefer to keep intact. Additionally, life insurance, unlike many other assets, does not have to go through a time-consuming administrative process before it becomes available to beneficiaries. Therefore, life insurance can be an immediate source of funds for a surviving family.
Estate Taxes and Life Insurance
As is true of any aspect of estate planning, one objective is to minimize the federal estate tax effect that life insurance can have. The primary tax issue that arises is whether the insurance proceeds are included in the estate for federal estate tax purposes. Including the proceeds would generate additional estate tax liability and reduce the amount of the proceeds that are available to the decedent's heirs.
The fundamental rule is that the gross estate will include the value of life insurance proceeds if (1) the proceeds are payable to the decedent's estate and are thus receivable by the executor, or (2) the proceeds are payable to other beneficiaries, but the decedent possessed at his or her death any of the "incidents of ownership" with respect to any policy.
The term "incidents of ownership" is defined more broadly than to be limited to the legal ownership of the policy. The term includes the power to change the beneficiary, to surrender or cancel the policy, to assign the policy or pledge it for a loan, and to obtain a loan from the insurer against the surrender value of the policy. There are other indirect ways that the decedent can be found to possess incidents of ownership. For instance, if the decedent is the controlling shareholder of a corporation that possesses an incident of ownership, such possession is attributed to the decedent.
Another scenario that will result in the inclusion of life insurance proceeds in the decedent's estate arises under certain circumstances where the decedent was the initial owner of the policy but transferred such ownership to another person or entity within three years of his or her death. Thus, even where the decedent has rid himself or herself of all incidents of ownership in the policy, there is still the possibility of inclusion under this three-year rule.
Keeping Life Insurance Proceeds Out of Your Estate
A common device for handling the life insurance aspect of an estate plan is the life insurance trust. Typically, a person would initiate the life insurance coverage by acquiring the policy. He or she would then transfer all incidents of ownership of the policy to a previously created irrevocable trust, which would be the named beneficiary on the policy. Assuming that the person survived until at least one day more than three years after the transfer of the policy to the trust, there would be no inclusion of the proceeds in the settlor's estate. If a policy is transferred within three years of death, the proceeds are included in the estate.
If the trust itself acquired the policy, the person would never be the owner and the three-year rule would not apply. The problem would be that the person could neither direct nor require the trust's acquisition of the policy without risking the possibility that he or she would be regarded as the original owner of the policy for purposes of applying the three-year rule. Therefore, it is important that the trustee be completely independent of the decedent.
An insurance trust can also have the practical effect of serving as a means of coordinating the collection, investment, and distribution of the proceeds of several policies. An insurance trust can hold other assets that the decedent transferred to it during his or her life. The trust can also receive assets "poured over" to it by the decedent's will.
If life insurance is to be an element of your estate plan, it should be carefully integrated with the other aspects of the plan. Be sure to seek the guidance of a qualified professional to assist you.
