Employment law challenges for MD practices
14 May 1999
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By Judith Mackarey, Esq.
It is often difficult for the physician to keep up with the routines of daily practice and to stay current with the ever-changing health care landscape that has prevailed in the last few years. An area that may rival health care in its torrent of changing rules and laws is that of employment law. While its impact may be more indirect than changes in health care on the daily operations of a medical practice, personnel or employment laws are just as pervasive, since the physician group is an "employer" as well as a health care business. Also working against the physician group in the employment law arena is the perception that the medical practice is a "small" employer and so is exempt from many of the federal and state laws governing employees. This vision is outdated in an age where practices are merging in order to stay viable. As groups consolidate, the numbers of employees grow and so do the applicable employment laws. In many areas of employment law, verdicts appear to continue to soar, with juries returning verdicts in excess of $1 million. Despite these statistics, recent studies indicate that the overall trend is to the contrary. That is, many cases are being decided in favor of the employer, not the employee. Reasons for the change vary. Some speculate that jurors are more cynical. Others feel that the difficult cases are settled, and only the strong, clear cases end up going to trial, where the employer is more likely to prevail. These reversals do not hold true with sexual harassment cases. Both the number of cases and the amounts of the verdicts are still on the increase. For example, in 1991, there were about 3300 sexual harassment claims brought nationally and 130 in the Philadelphia area. In 1997, the claims soared to approximately 9000 on a national level, and just over 300 in the Philadelphia area. This increase is also significantly when you consider that other discrimination claims (race, religion and other types of sexual discrimination) remained steady. In addition, there have been more and more big awards. For example, there was an award last year in the Philadelphia area that exceeded two million dollars. This upward trend is not likely to stop. Last summer, the United States Supreme Court created a new legal standard that imposes liability for sexual harassment by supervisors in the workplace when the victim suffers adverse action as a result of the harassment. Strict employer liability is imposed even if the employer was unaware of the harassment. Liability can only be avoided in hostile environment sexual harassment cases if the employer adopts an effective sexual harassment complaint procedure and the employee fails to take advantage of the procedure. Recent decisions interpreting the new Supreme Court case have found that the employer is liable when a supervisor creates a sexually hostile work environment and the employee suffers a tangible job consequence. No defense by the employer is available in this situation. The fact that a sexual harassment policy was in place and the employee never voiced any complaints to the employer was found to be irrelevant when the employee ended up losing her job. Another court reached the same result when one supervisor created a hostile work environment, even though the termination was actually done by a different supervisor. Adverse employment action taken against the victim of the sexual harassment is the relevant issue in these cases in determining if liability is automatically imposed. This distinction has even been extended to a case alleging race discrimination in a recent court opinion. When the harassment results from the actions of a co-worker rather than a supervisor and the employer conducts a prompt, thorough investigation of a claim of sexual harassment, a court recently found that an employer can avoid liability. It is imperative for an employer to implement an effective complaint procedure for a victim of sexual harassment. Existing policies must be reviewed to ensure compliance with the new standard and should be disseminated to all employees. It is critical to conduct regular training sessions for all employees. On the other hand, a recent decision of the Pennsylvania Supreme Court should provide some solace to employers. The court determined that punitive damages are not available to plaintiffs in sexual harassment litigation under the Pennsylvania Human Relations Act. This outcome was contrary to the predictions of state and federal courts on this issue. It also differs from Title VII of the Civil Rights Act that permits punitive damages in sexual harassment cases. However, Title VII caps the amount of the award to $300,000 for the largest employers, which made punitive damages under state law an important feature. Another state law remedy that has a significant impact in the area of sexual harassment in Pennsylvania is the potential for individual liability for sexual harassment. For some time there was a split on the issue of whether the individual who harassed the employee could be found liable for damages, either in addition to or instead of the employer. However, the federal courts have generally decided that, under Title VII (which governs sexual harassment claims) only an employer could be found liable and not the individual harasser. In a recent decision, a court found that, under the Pennsylvania Human Relations Act, which has a similar prohibition against sexual harassment, an individual who is in a supervisory position could be individually liable for his actions, along with the corporation or employer. This is a major change in the law. Another avenue for victims of sexual harassment is the tort claim of intentional infliction of emotional distress. The Pennsylvania Supreme Court recently ruled that a sexually hostile work environment could lead to a damage award for intentional infliction of emotional distress. The ability to prevail under this theory is very limited, however, because evidence of extreme and atrocious conduct must be established. For example, although the court said that retaliation against the victim of sexual harassment is not a mandatory requirement in order to succeed, it did emphasize that the absence of retaliation was a factor in assessing the outrageousness of the employer’s conduct. When an emotional distress claim is made out and the victim claims that the hostile environment resulted in health problems, employers have argued that the claim is barred by the Pennsylvania Workers’ Compensation Act, which is the exclusive remedy for employees suffering work-related injuries. Recent cases have applied an exception to the exclusivity rule in these cases so as to permit the emotional distress claim. Pennsylvania has long been a strong employment "at will" state, recognizing few limitations on the employer’s unfettered ability to terminate employment at any time with or without cause, except in certain extremely limited circumstances. One of the few exceptions that has been recognized is the recent decision of the Pennsylvania Supreme Court, which held that Pennsylvania law recognizes a claim for wrongful discharge when an at-will employee is terminated in retaliation for filing a workers’ compensation claim. Caution is advised when terminating employees who have filed or are receiving workers’ compensation benefits. Finally, the United States Supreme Court has recognized a claim for retaliatory dismissal when an employee is fired for cooperating with a federal criminal prosecution. That case involved a Medicare fraud investigation where the employer attempted to deter the employee from cooperating with the investigation or from testifying during the proceeding. When an employer takes action against an employee in this situation, a claim exists under Section 1985(2) of the Civil Rights Act of 1871. Health care employers need to be aware of this ruling, particularly when dealing with employees during regulatory audits or investigations. Judith Mackarey, Esq., is a partner with Wade, Goldstein, Landau, Abruzzo, Mackarey & Miller, P.C., a health care law firm located in King of Prussia, Pa.
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