Issue: Whether an agreement between an employer and employer disclaiming any tort liability for employer’s clients for injuries sustained in the course and scope of employment is voided by the public policy provision of the Act set forth in section 204(a).
Background: The claimant, an employee of Allied Barton Security Services, sustained an injury in the course and scope of her employment on while working on location a Sunoco refinery, a client of Allied Barton. The employee subsequently filed a negligence action against Sunoco alleging a failure to maintain safe conditions. Because the Claimant entered into an agreement at the time of her hiring disclaiming Allied’s clients of any third party liability with respect to work injuries, Sunoco filed a motion for judgement on the pleadings. Claimant argued that the agreement was not enforceable because it violated section section 204(a) of the Act, which provides that no agreement made before an injury can bar a claim for damages on the basis that such would violate public policy.
Ruling: The trial court granted Sunoco’s motion on the grounds that the disclaimer only waived the Claimant’s right to sue a third party and did not otherwise deprive her of any rights under the Act. The Superior Court affirmed and Claimant appealed to the Supreme Court. Based on the legislative history of the Act and overall scheme of Articles II and III, the Supreme Court held that section 204(a) speaks solely to employees and employers and not the tortious liability of a third parties. In other words, because the agreement did not impact the employee’s rights under the Act, the disclaimer did not violate the public policy provisions of section 204(a).
Practical Significance: This factual scenario is relatively unique; however, employers such as staffing firms could be substantially impacted by the Supreme Court’s holding. Carriers typically welcome third party actions not only for their subrogation interest but also the fact that third party recoveries often help move claims toward resolution. The Supreme Court’s ruling will naturally motivate clients of companies, like staffing firms, to require similar disclaimer clauses for staffed employees. While the legality of such disclaimers will certainly make the services of companies like staffing firms more desirable, their workers’ compensation carriers stand to lose a valuable monetary benefit and important tool for limiting the long-term exposure of a claim.