HODGES v. SWEETWATER UNION HIGH SCHOOL DISTRICT (1986)

Danny John Hodges, a credentialed high school classroom teacher employed since 1974 by the Sweetwater Union High School District, appeals a judgment dismissing his lawsuit against the District after the court sustained demurrers of the defendants without leave to amend.   Because the court abused its discretion in refusing to allow Hodges the opportunity to amend his complaint, we reverse.

I

Standards of appellate review of judgments dismissing an action upon the sustaining of a demurrer without leave to amend are well settled.   The allegations in the complaint are taken as true.   The demurrer admits all material factual allegations pleaded.  (Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496, 86 Cal.Rptr. 88, 468 P.2d 216.)   Matters of which the court properly took judicial notice are also before us.   Based on the standard of review, we recite the complaint's allegations.

II

Hodges in an earlier case sued the District for intentional infliction of emotional distress and for breach of the covenant to act in good faith and fair dealing.   He claimed the District transferred him from a regular teaching assignment to a position without a classroom or a regular class.   April 13, 1984, the jury in that case returned a verdict in his favor for $190,000.   He accepted $150,000 in satisfaction of the judgment in the belief he would be returned to a regular teaching position and the defendants would cease harming him.

The 1984–1985 school year commenced September 6, 1984.   The District did not transfer Hodges to a regular teaching assignment and he returned to a non-classroom assignment.   Until September 20, 1984, the District ignored Hodges' request for a transfer.   Upon his reinstatement as a classroom teacher, he was required to use the cafeteria as a classroom.   October 12, 1984, the District finally offered Hodges a classroom teaching position.

Hodges' complaint attempts to state three causes of action.   The first, intentional infliction of emotional distress, says the District knew Hodges was susceptible to emotional distress and the District's failure to reinstate him in a regular teaching assignment caused him emotional distress and was punitive in nature.   The second cause of action, bad faith breach of contract, pleads the District acted in bad faith in refusing to reinstate him to a regular classroom teaching position as the earlier lawsuit proved his transfer to a non-classroom position was a disciplinary action in violation of the Education Code.   The third cause of action, fraud and deceit, recites testimony by defendant John L. Rindone in the earlier lawsuit the District would reinstate Hodges to a regular teaching assignment upon request and argument by the District to the jury emphasizing that testimony.   Rindone repeated that statement to Hodges outside the courtroom.   The fraud and deceit count also recites Hodges accepted the $150,000 settlement in reliance on the District's promise he would be reinstated to a classroom position in September 1984, the start of the new school year.   Hodges asserts the District's promises were false as he was not reinstated until October 12, 1984, and he claims punitive damages.

III–IV *

V

Hodges contends actions for intentional infliction of emotional distress and actions for fraud and deceit against an employer are beyond the reach of workers' compensation and civil suits to recover damages for these torts are not barred.   The District conversely argues the first cause of action (intentional infliction of emotional distress) and the third (fraud and deceit) arise out of Hodges' employment, and provisions of the Labor Code ² providing for workers' compensation is the exclusive remedy against his employer, the District.

The Workers' Compensation Act was amended in 1982.  (Stats.1982, ch. 922, pp. 3363–3372, eff. Jan. 1, 1983.)   Pre–1983, the statutes provided workers' compensation was the exclusive remedy for accidents and injuries in the workplace.   The courts, however, carved out exceptions and permitted common law tort causes of action in particular circumstances.  (82 Cal.Legislation, Workers' Comp. (1982) 14 Pacific L.J. 357, 763–764;  Johns-Manville Products Corp. v. Superior Court (1980) 27 Cal.3d 465, 165 Cal.Rptr. 858, 612 P.2d 948 [fraudulent concealment of injury and its connection to employment];  Renteria v. County of Orange (1978) 82 Cal.App.3d 833, 147 Cal.Rptr. 447 [employee has cause of action for intentional infliction of emotional distress];  Magliulo v. Superior Court (1975) 47 Cal.App.3d 760, 121 Cal.Rptr. 621 [employer's willful assault on employee].)   Courts also permitted civil actions where the employer stood in a so-called dual capacity role to the employee.  (E.g., Bell v. Industrial Vangas, Inc. (1981) 30 Cal.3d 268, 179 Cal.Rptr. 30, 637 P.2d 266 [employer as manufacturer or distributor of defective product could be held liable by employee];  D'Angona v. County of Los Angeles (1980) 27 Cal.3d 661, 166 Cal.Rptr. 177, 613 P.2d 238 [employee tort action against hospital-employer when doctors-employees of hospital negligently treated employee's work-related disease];  Duprey v. Shane (1952) 39 Cal.2d 781, 249 P.2d 8 [negligent medical treatment by employer-chiropractors].)

Especially relevant here, in 1978 the court in Renteria v. County of Orange, supra, 82 Cal.App.3d 833, 147 Cal.Rptr. 447, held, in a case of first impression, an implied exception to the exclusive remedy provisions in the Labor Code existed (id. at p. 835, 147 Cal.Rptr. 447;  then § 3600 et seq.) and permitted plaintiff to state a cause of action for intentional infliction of emotional distress.   The court said:

“While it is possible to believe that the Legislature intended that employees lose their right to compensation for certain forms of negligently or accidentally inflicted physical injuries in exchange for a system of workers' compensation featuring liability without fault, compulsory insurance, and prompt medical care, it is much more difficult to believe that the Legislature intended the employee to surrender all right to any form of compensation for mental suffering caused by extreme and outrageous misconduct by an employer.   It would indeed be ironic if the Workers' Compensation Act, created to benefit employees, were to be interpreted to shield the employer from all liability for such conduct.   We decline to interpret it in this fashion.”  (Id. at p. 841, fn. omitted, 147 Cal.Rptr. 447.)

(See also for similar later holdings based on pre–1983 law:  Young v. Libbey-Owens Ford Co. (1985) 168 Cal.App.3d 1037, 214 Cal.Rptr. 400;  Iverson v. Atlas Pacific Engineering (1983) 143 Cal.App.3d 219, 191 Cal.Rptr. 696;  McGee v. McNally (1981) 119 Cal.App.3d 891, 174 Cal.Rptr. 253;  Lagies v. Copley (1980) 110 Cal.App.3d 958, 168 Cal.Rptr. 368;  compare Hollywood Refrigeration Sales Co. v. Superior Court (1985) 164 Cal.App.3d 754, 210 Cal.Rptr. 619.)   Some courts rejected damage claims for intentional infliction of emotional distress when plaintiffs concentrated on and pleaded injuries which are primarily physical.  (Gates v. Trans Video Corp. (1979) 93 Cal.App.3d 196, 155 Cal.Rptr. 486;  Ankeny v. Lockheed Missiles & Space Co. (1979) 88 Cal.App.3d 531, 151 Cal.Rptr. 828;  see McGee v. McNally, supra, 119 Cal.App.3d 891 at pp. 895–896, 174 Cal.Rptr. 253.)   In this regard, the cases are not in accord.  (Renteria v. County of Orange, supra, 82 Cal.App.3d 833 at pp. 840–841, 147 Cal.Rptr. 447;  Iverson v. Atlas Pacific Engineering, supra, 143 Cal.App.3d 219 at p. 230, 191 Cal.Rptr. 696;  Young v. Libbey-Owens Ford Co., supra, 168 Cal.App.3d 1037 at p. 1042, fn. 4, 214 Cal.Rptr. 400.) ³

Since the activities of which Hodges complains happened in 1984, we must determine whether Renteria v. County of Orange, supra, 82 Cal.App.3d 833, 147 Cal.Rptr. 447 and the line of cases following it survive the 1982 amendments to the workers' compensation law.  (Stats.1982, ch. 922, pp. 3363–3372, eff. Jan. 1, 1983.)   We hold they do.

Section 3600 as amended in 1982 provides as to the circumstances here presented:

“(a) Liability for the compensation provided by this division, in lieu of any other liability whatsoever to any person except as otherwise specifically provided in Sections 3602, 3706, and 4558, shall, without regard to negligence, exist against an employer for any injury sustained by his or her employees arising out of and in the course of the employment and for the death of any employee if the injury proximately causes death, in those cases where the following conditions of compensation concur:

“(1) Where, at the time of the injury, both the employer and the employee are subject to the compensation provisions of this division.

“(2) Where, at the time of the injury, the employee is performing service growing out of and incidental to his or her employment and is acting within the course of his or her employment.

“(3) Where the injury is proximately caused by the employment, either with or without negligence.

“(4) Where the injury is not caused by the intoxication of the injured employee.

“(5) Where the injury is not intentionally self-inflicted.”

Section 3602 was rewritten in its entirety in 1982.⁴  It now reads:

“(a) Where the conditions of compensation set forth in Section 3600 concur, the right to recover such compensation is, except as specifically provided in this section and Sections 3706 and 4558, the sole and exclusive remedy of the employee or his or her dependents against the employer, and the fact that either the employee or the employer also occupied another or dual capacity prior to, or at the time of, the employee's industrial injury shall not permit the employee or his or her dependents to bring an action at law for damages against the employer.

“(b) An employee, or his or her dependents in the event of his or her death, may bring an action at law for damages against the employer, as if this division did not apply, in the following instances:

“(1) Where the employee's injury or death is proximately caused by a willful physical assault by the employer.

“(2) Where the employee's injury is aggravated by the employer's fraudulent concealment of the existence of the injury and its connection with the employment, in which case the employer's liability shall be limited to those damages proximately caused by the aggravation.   The burden of proof respecting apportionment of damages between the injury and any subsequent aggravation thereof is upon the employer.

“(3) Where the employee's injury or death is proximately caused by a defective product manufactured by the employer and sold, leased, or otherwise transferred for valuable consideration to an independent third person, and that product is thereafter provided for the employee's use by a third person.

“(c) In all cases where the conditions of compensation set forth in Section 3600 do not concur, the liability of the employer shall be the same as if this division had not been enacted.”

Section 3600, as amended, except for the exceptions set out in sections 3602, 3706 and 4558, restates pre-1983 workers' compensation exclusivity.   We turn to the codified exceptions.

VI

New section 3602 provides workers' compensation is the exclusive remedy, except for those exceptions set out in the section and those found in section 4558 (damages for removing or not installing power press guards), and section 3706 (damages when employer does not secure payment for compensation).   Common law liability under the dual capacity doctrine is precluded (§ 3602, subd. (a)), but the statute codifies three exceptions to the exclusive remedy provisions (§ 3602, subd. (b)(1), (2) and (3)).   Two exceptions can be characterized as intentional torts (§ 3602, subd. (b)(1) and (2)).   Section 3602, subdivision (b)(1), corresponds to Magliulo v. Superior Court, supra, 47 Cal.App.3d 760, 121 Cal.Rptr. 621;  section 3602, subdivision (b)(2), corresponds to Johns-Manville Products Corp. v. Superior Court, supra, 27 Cal.3d 465, 165 Cal.Rptr. 858, 612 P.2d 948, and finally, section 3602, subdivision (b)(3), provides a civil product liability claim if the employer has manufactured a product, and an employee is injured by it after a third party has bought or leased it for consideration and provided it to the employee to use (a limited exception to the dual capacity doctrine).

Workers' compensation laws were enacted to compensate workers for losses “resulting from the risks to which the fact of employment in [a particular workplace] exposes the employee.”  (Bell v. Industrial Vangas, Inc., supra, 30 Cal.3d 268 at p. 277, 179 Cal.Rptr. 30, 637 P.2d 266.)   At the time these laws were enacted, the common law did not generally provide damages for intentional infliction of emotional distress without an attendant claim for personal injury.  (See, e.g., State Rubbish etc. Assn. v. Siliznoff (1952) 38 Cal.2d 330, 240 P.2d 282;  4 Witkin, Summary of Cal.Law (8th ed. 1974) Torts, § 233, p. 2514;  Mathews v. Workmen's Comp. Appeals Bd. (1972) 6 Cal.3d 719, 731, fn. 8, 100 Cal.Rptr. 301, 493 P.2d 1165;  stats. 1917, ch. 586, § 1, pp. 832–833.)

Therefore, such injury was not the type of injury within the contemplation of the Legislature when it enacted the compensation laws originally.  (Mathews v. Workmen's Comp. Appeals Bd., supra, 6 Cal.3d 719 at pp. 728–734, esp. fn. 8 at p. 731, 100 Cal.Rptr. 301, 493 P.2d 1165;  Larson, Nonphysical Torts and Workmen's Compensation (1975) 12 Cal.Western L.Rev. 1;  see Comment, Intentional Employer Torts and Workers' Compensation:  A Legal Morass (1979) 11 Pacific L.J. 187, 210.)   Although we assume the Legislature is aware of common law rules (Keeler v. Superior Court (1970) 2 Cal.3d 619, 625, 87 Cal.Rptr. 481, 470 P.2d 617) and of relevant judicial decisions when it considers a particular subject (Bishop v. City of San Jose (1969) 1 Cal.3d 56, 65, 81 Cal.Rptr. 465, 460 P.2d 137), the 1982 amendments set out three exceptions and allow actions at law for physical injuries sustained in the workplace in three specified circumstances, although the courts had previously sanctioned additional exceptions to the rule of exclusivity.

VII

At first glance, the 1982 amendments seem to suppress all causes of action not specifically listed as exceptions to exclusivity in sections 3600 and 3602.   Upon closer examination, we are persuaded the amendments were not designed to eliminate every cause of action at law not so listed.   The language as used refers to causes of action involving injuries of a physical nature.   Section 3602, subdivision (a), eliminates the dual capacity causes of action with one exception, section 3602, subdivision (b)(3), which in a certain circumstance provides product liability if an employer is also a manufacturer of a defective product.   The other exceptions likewise contemplate physical injury, i.e., damages for willful physical assault (§ 3602, subd. (b)(1)) and damages for fraudulent concealment of an injury in connection with employment which causes aggravation of that injury (§ 3602, subd. (b)(2)).   Moreover, injury from failure to install power press safety guards contemplates physical injury (§ 4558) and section 3706 is simply a catchall for an employer's failure to secure payment for workers' compensation.   Nonphysical injury caused by intentional infliction of emotional distress does not fit within this framework.⁵

We also find agreement in Howland v. Balma (1983) 143 Cal.App.3d 899, 192 Cal.Rptr. 286, decided pursuant to and after the 1982 amendments took effect (id. at p. 903, 192 Cal.Rptr. 286) which found an employee had a cause of action in slander, a nonphysical injury, despite a settlement based on workers' compensation and despite the exclusive remedy provisions of the Labor Code.   The court, without extensive discussion, simply finds slander was not considered by the Legislature.⁶

This appeal further illustrates our point.   In the previous lawsuit, Hodges received a judgment after a jury verdict;  the dollar amount was reduced because the defendants promised to reinstate Hodges to a classroom teaching assignment;  in effect, there was a settlement.   A breach of that settlement and the attendant stress and emotional injury this caused Hodges is at issue here.  “Employers should not be allowed to use the public policy behind workers' compensation as a shield against tort liability for outrageous, nonwork-related conduct.”  (Young v. Libbey-Owens Ford Co., supra, 168 Cal.App.3d 1037 at p. 1044, 214 Cal.Rptr. 400.)

 If we hold the Workers' Compensation Act is the sole remedy for actions as described here, an employer could vex, harass, annoy or hound an employee with impunity, as emotional distress so inflicted unrelated to a physical injury is not compensable within the limited remedies under the act.   While Renteria v. County of Orange, supra, 82 Cal.App.3d 833, 147 Cal.Rptr. 447, characterized the intentional infliction of emotional distress cause of action as an implied exception to the Labor Code (id. at p. 842, 147 Cal.Rptr. 447), we simply think that tort is not compensable under workers' compensation laws.   Application of the exclusive remedy rule here would immunize employers from conduct which causes an employee emotional distress, apart from physical harm.   Thus, conduct allegedly designed to force a plaintiff from the job and to replace him or her with another person, with resultant emotional distress to the displaced employee, constitutes harm without a remedy.  (See McGee v. McNally, supra, 119 Cal.App.3d 891, 174 Cal.Rptr. 253;  see also Agarwal v. Johnson (1979) 25 Cal.3d 932, 160 Cal.Rptr. 141, 603 P.2d 58, Alcorn v. Anbro Engineering, Inc., supra, 2 Cal.3d 493, 86 Cal.Rptr. 88, 468 P.2d 216, and Toney v. State of California (1976) 54 Cal.App.3d 779, 126 Cal.Rptr. 869, where employees brought causes of action for intentional infliction of emotional distress in similar situations, although arguably workers' compensation as a remedy was not raised in them.)   We hold an employee's action for intentional infliction of emotional distress against an employer is not contemplated as an injury under workers' compensation laws and therefore is not precluded by the exclusive remedy provisions of the amended statutes.

VIII **

IX

 Hodges pleaded some physical injuries in addition to the emotional distress.   The District insists no amendment could cure any and all of the defects complained of.   We disagree.   The physical damage is “only lightly traced in the pleadings” and we see no reason Hodges cannot amend or delete facts in his complaint and thereby make it consistent with this opinion.  (McGee v. McNally, supra, 119 Cal.App.3d 891 at p. 897, 174 Cal.Rptr. 253.)

Neither party specifically argues whether the third cause of action, fraud and deceit, is also barred by the exclusive remedy provision of the Labor Code.   For the same reasons set forth above, we find it is not.  (Ramey v. General Petroleum Corp. (1959) 173 Cal.App.2d 386, 343 P.2d 787.)   The second cause of action, bad faith breach of contract, pleads requisite elements.   The demurrer should have been overruled.

The judgment is reversed and the court is instructed to permit Hodges to amend his complaint to delete the allegations with respect to physical injury.

FOOTNOTES

FOOTNOTE.   See footnote  1, ante.

2.   All statutory references are to the Labor Code unless otherwise specified.

3.   Likewise, there has been disagreement whether recovery is possible along with workers' compensation benefits or only if no benefits have been sought or received.  (Hollywood Refrigeration Sales Co. v. Superior Court, supra, 164 Cal.App.3d 754 at pp. 757–759, 210 Cal.Rptr. 619;  see also Love, Actions for Nonphysical Harm:  The Relationship Between the Tort System and No-Fault Compensation (With an Emphasis on Workers' Compensation) (1985) 73 Cal.L.Rev. 857.)

4.   As enacted in 1937, the section read:  “In all cases where the conditions of compensation do not concur, the liability of the employer is the same as if this division had not been enacted.”To clarify the thrust of the amended statutes, we note section 3601 now reads:  “(a) Where the conditions of compensation set forth in Section 3600 concur, the right to recover such compensation, pursuant to the provisions of this division is, except as specifically provided in this section, the exclusive remedy for injury or death of an employee against any other employee of the employer acting within the scope of his or her employment, except that an employee, or his or her dependents in the event of his or her death, shall, in addition to the right to compensation against the employer, have a right to bring an action at law for damages against the other employee, as if this division did not apply, in either of the following cases:  [¶] (1) When the injury or death is proximately caused by the willful and unprovoked physical act of aggression of the other employee.  [¶] (2) When the injury or death is proximately caused by the intoxication of the other employee.  [¶] (b) In no event, either by legal action or by agreement whether entered into by the other employee or on his or her behalf, shall the employer be held liable, directly or indirectly, for damages awarded against, or for a liability incurred by the other employee under paragraph (1) or (2) of subdivision (a).  [¶] (c) No employee shall be held liable, directly or indirectly, to his or her employer, for injury or death of a coemployee except where the injured employee or his or her dependents obtain a recovery under subdivision (a).”

5.   We are bolstered by section 3208's definition of injury:  “ ‘Injury’ includes any injury or disease arising out of the employment, including injuries to artificial members, dentures, hearing aids, eyeglasses and medical braces of all types;  provided, however, that eyeglasses and hearing aids will not be replaced, repaired, or otherwise compensated for, unless injury to them is incident to an injury causing disability.”   See Renteria v. County of Orange, supra, 82 Cal.App.3d 833 at p. 839, 147 Cal.Rptr. 447, and 2A Larson, Workmen's Compensation Law, § 68.34(a), pp. 13–62—13–63, where this noted commentator says:  “If the essence of the tort, in law, is non-physical, and if the injuries are of the usual non-physical sort, with physical injury being at most added to the list of injuries as a makeweight, the suit should not be barred.   But if the essence of the action is recovery for physical injury or death, the action should be barred even if it can be cast in the form of a normally non-physical tort.”

6.   The court said:  “We think the question, however, is appropriate for legislative consideration.   The Legislature has recently addressed issues of dual capacity and the exclusiveness of the workers' compensation laws (see Lab.Code, § 3602), and the question of slander in a work-related context appears ripe for consideration.”  (Howland v. Balma, supra, 143 Cal.App.3d at p. 906, 192 Cal.Rptr. 286.)

FOOTNOTE.   See footnote  1, ante.

BUTLER, Associate Justice.

STANIFORTH, Acting P.J., concurs. LEWIS, J., concurs in the result.