The question of the effect of the notice and consent provisions of the Labor Code were addressed by the Third Appellate District in this appellate case (McKinnon). The Court in particular considered these issues based upon Labor Code § 3853, 3859 and 3860.
The McKinnon matter involved a slip and fall injury suffered while the worker was exiting an elevator during the course and scope of usual and customary duties. Workers’ compensation benefits were provided. After the provision of some of these workers’ compensation benefits, the employer/carrier filed a civil complaint against defendant Otis Elevator. Subsequent to actually filing a complaint, the subrogation counsel notified the worker that the employer/carrier was “pursuing subrogation against Otis”, and inquired whether a third-party action would be pursued by the worker. The worker replied that she had not yet made a decision whether or not to pursue the third-party action.
Approximately six months later, the employer/carrier’s counsel sent a second letter to the worker, advising that the employer/carrier was in the process of settling its case against defendant Otis Elevator and noted that none of the workers’ compensation rights would be affected. A request for the worker to sign a consent to this settlement was made, but never returned by the worker.
Thereafter, the employer/carrier dismissed its lawsuit against defendant Otis. Following the employer/carrier’s civil case dismissal, and less than two years from the date of injury, the employee filed a third-party action against Otis. Otis moved for summary judgment based upon the fact that the employer was required under Labor Code § 3850 et seq. to bring her lawsuit together with the employer’s subrogation suit, and that the employee’s lawsuit was now time barred by Labor Code § 3853.
In addressing these issues, the Court noted that the Labor Code contains various notice and consent provisions that must be adhered to by the employer and the employee. The question at issue is whether the lack of adherence to these notice and consent provisions affect the right of an employer or employee to move forward with a third-party suit if they do not participate in the prior lawsuit brought by the other. The Court noted Labor Code § 3853, which requires that whether an action is brought by an employer or employee against the third-party, that party shall give to the other a copy of the complaint, by personal service or certified mail. In the McKinnon matter, this was not done, as only a letter was transmitted.
Secondly, the Court noted that Labor Code § 3859 requires the non-participating party’s consent to the settlement. In the McKinnon matter, the employer/carrier requested consent from the worker, but this consent was never given. The Court noted that the employer/carrier failed to provide the worker notice about its settlement with Otis, which would give the worker the opportunity to recover all the damages she had suffered. The Court found that the employer/carrier did not adhere to the notice and consent provisions of Labor Code § 3853 and 3859.
The Court did not address any ramifications this would have for the employer/carrier with regard to their settlement or the underlying workers’ compensation matter. The Court did address however, the affect upon the worker’s right to pursue a lawsuit against the defendant in light of the employer/carrier’s failure to adhere to the notice and consent requirements of the Labor Code.
In particular, the Court found that in a situation of a “knowing defendant”, that defendant should not be allowed to use the lack of the employer/carrier’s notice and consent requirements to insulate it from the worker’s action. Thus, Ms. McKinnon was allowed to move forward with her civil action.
The relevance of this ruling to employers/carriers is the Court’s language that pursuant to prior case law, “employer and employee third-party actions under the § 3850 et seq. statutory scheme are interchangeable”. County of San Diego v. Sanfax Corp (1977) 19 Cal. 3d 862., and the effect this would have upon potential employer rights. Therefore, an employer/carrier should be aware of their potential rights in a situation where a worker has moved forward with a civil action against a “knowing defendant”, but where that employer/carrier has not been given its proper notice and consent notifications pursuant to the Labor Code.
The Court noted prior cases where they found that the lack of such notice did not bar the employer/carrier from bringing their action. The Court noted in prior cases such as Glover and Pope that “a knowing third-party tortfeasor who proceeded with a settlement and release with an employee – without the employee or the tortfeasor giving notice of the perspective settlement to the employer – entered into the settlement at its peril.”
Therefore, an employer/carrier should note a few things with regard to this matter. One is that although the ramifications were not specifically discussed, the notice and consent requirements of Labor Code § 3853, 3859 and 3860 should be adhered to so that no difficulties with either the underlying civil settlement or any further workers’ compensation credit issues arise. Secondly, in a situation where an employee moves forward with a civil settlement without adequate notice to and consent from the employer, there may be the right to still move forward with an action against that “knowing defendant” under certain circumstances.