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Senate of Pennsylvania
Session of 2017 - 2018 Regular Session

MEMORANDUM

Posted: January 5, 2017 05:01 PM
From: Senator Mike Folmer
To: All Senate members
Subject: Reintroduction of Clarifying Exclusivity Provision of Workers’ Compensation
 
I plan to reintroduce my Senate Bill 1378 from last Session to clarify the exclusivity provision of Pennsylvania’s Workers’ Compensation Law. SB 1378 cosponsors were Senators Gordner, Wagner, Scarnati, Smucker, Hutchinson, Aument, Mensch, Reschenthaler, and Stefano.

When Pennsylvania’s Workers’ Compensation Law was enacted in 1915, it reflected a key compromise between employees and employers. Employees gave up the right to sue for workplace injuries and illnesses in exchange for compensation for work-related injuries and illnesses.

The purpose of the law is two-fold:
  • Provide fair treatment of, and fair compensation to, those experiencing a workplace injury all while promoting a safe workplace, and;
  • Provide employers with the protection against future lawsuits for injuries that have been compensated under Pennsylvania workers’ compensation system.

Pennsylvania’s workers’ compensation system is intended to provide an “exclusive remedy” to employers and employees as a result of a work place injury. However, Pennsylvania law has now been interpreted by the courts as allowing an injured employee to sue a corporate parent for injuries to an employee even though a subsidiary has already paid (and will continue to pay) every dollar in medical and wage loss payments that are required to be paid by Pennsylvania’s Workers’ Compensation laws.

Specifically, a Court decision in Pennsylvania, the Pennsylvania Supreme Court case of Kiehl v. Action Manufacturing, is being used to create a “catch-22” scenario. When a parent company participates in a subsidiary’s workplace safety plan, the parent company can be sued and be held independently negligent for its attempt to try to help. On the other hand, if the parent company does not get involved, another Pennsylvania court has determined that the parent company’s failure to get involved may create liability because the parent has a legal duty to take an active role in the workplace safety program of its corporate subsidiary.

This exposure of an employer to litigation in the event of a workplace injury is the very situation that the Workers’ Compensation system was designed to prevent. This litigation is made possible solely because of the corporate structure of the employer (the addition of a parent corporation), not because of the severity of the injury or because the employer is not providing benefits to the employee. Moreover, the fact that a parent company can be held “independently negligent” in the case of injuries sustained by its subsidiary’s employee actually discourages major employers from ensuring that its subsidiaries have a robust workplace safety program.

Because nearly every major company in Pennsylvania has a corporate structure consisting of more than one entity, the Kiehl decision puts Pennsylvania businesses in a legal jeopardy. However, simply changing a corporate structure to enjoy the employer immunity that had been a long established practice prior to this court case is not a realistic option for these companies because of the repercussions it has on corporate operations in Pennsylvania and the other states in which they operate.

The result of these factors is that the certainty the workers’ compensation system was designed to create has been undermined. Despite the original intent behind the creation of the workers’ compensation system in Pennsylvania, it is no longer the “exclusive remedy” to employers and employees for workplace injuries.

As a result, I intend to reintroduce SB 1378 regarding the exclusivity provision contained in the present Workers’ Compensation Law to clarify that a parent company will not be punished for trying to provide a safer workplace for the employees of its subsidiaries. The legislation will seek to restore the original purpose of the workers’ compensation system, making it once again the exclusive remedy of employers and employees in the event of a work place injury.



Introduced as SB520