Thomas Paschos and Assoc
February, 2006

I. Employment Litigation Issues.

Third Circuit Endorses “Retaliatory Harassment” Theory

In the case of Jensen v. Porter, 2006 WL 224002 (3d Cir. January 31, 2006), the Third Circuit Court of Appeals ruled that plaintiffs may sue under a theory of “retaliatory harassment”, and therefore need not show the alleged retaliation they suffered had resulted in a firing or demotion. Judge Samuel A. Alito, Jr. wrote the opinion for the Court which was handed down on his final day as a Third Circuit Judge.

The suit filed by Plaintiff, who was a letter carrier in a Pennsylvania post office, stemmed from an incident in September 2001 when her supervisor allegedly told her that he had just finished an all-night drinking binge and then propositioned her. Plaintiff rejected the proposition and reported it to her branch manager. The supervisor was transferred and subsequently fired. Plaintiff claims co-workers began to harass her for getting the former boss in trouble. The harassment allegedly continued for 19 months despite repeated complaints to Plaintiff’s supervisor. Plaintiff claimed the 19 month harassment campaign took a physical toll, causing her to suffer panic attacks, exacerbating her asthma and forcing her to use up sick time because of work-related stress.

Alito found that Plaintiff’s case presented a “threshold question” of whether a retaliation claim may be predicated on a hostile work environment theory. Following the strong trend in favor of recognizing such claims, Alito said “The statutory basis for these claims is the notion that discriminatory ridicule or abuse can so infect a workplace that it alters the terms or conditions of the Plaintiff’s employment.” Alito further said the Court must avoid viewing each alleged instances of harassment in isolation, but instead must focus on the “overall scenario”.

Finally, Alito concluded that the Plaintiff had met the test for establishing employer liability because she was able to show that management knew or should have known about the harassment, but failed to take “prompt and adequate remedial action.”

Refusal to Comply With Background Check Considered Grounds For Firing

In ATM Corp. of America v. Unemployment Compensation Board of Review, 2006 WL 156976 (Pa. Cmwlth. January 23, 2006), a Commonwealth Court panel ruled that an accounting clerk’s refusal to submit to a company background check amounted to insubordination, despite the fact that the clerk had worked for her employer for several years without incident and had not been informed when hired of the possibility of a future background check. In this case, the panel disagreed with the UCBR’s previous conclusion that the clerk was justified in refusing to sign an authorization for a background check. The Court panel held that the clerk’s actions were grounds for her to be dismissed without the possibility of unemployment compensation.

The clerk had been working for ATM Corp. for four years when she was advised that employees had to fill out forms authorizing the company to perform background checks on them. The clerk testified that she had reservations when first told of the proposal of the proposed background checks. She felt her driving record and personal debts were not relevant to her ability to perform her job, and had heard rumors that a bankruptcy filing would be grounds for dismissal.

ATM Corp. asserted that its decision to do a background check on the clerk was reasonable because of her access to sensitive and confidential information, and because those checks were required by both its customers and its business partners. The Commonwealth Court panel opinion stated, “To follow the UCBR’s conclusion that the authorization form was unreasonably intrusive would require this Court to find that preparation of consumer or investigative reports on employees as unreasonable as a matter of law, even though they are expressly contemplated for employment situations. This we cannot do. …. If a background check of the type identified in Pennsylvania’s Fair Credit Reporting Act was too intrusive in this case, it is difficult to imagine for what employment positions it would ever be appropriate.”

II.Coverage Issues

New Jersey Supreme Court Rules Policy Holders liable If Guarantee Fund Falls Short.

The case of Johnson v. Braddy, 2006 WL 229903 (February 1, 2006 N.J.), involves a trucker who was in an accident and whose insurer became insolvent. In 1999, Braddy drove his truck into a parked car, severely injuring Johnson. At the time of the accident, Braddy’s employer was insured under a $1 million liability policy issued by Reliance Insurance Co. and an umbrella policy issued by National Union, which provided coverage for any judgment in excess of the Reliance Coverage up to $25 million.

After Johnson sued Braddy and his employers, Reliance became insolvent and was liquidated by the Pennsylvania Insurance Commissioner, triggering the New Jersey Property-Liability Insurance Guarantee Act (PLIGA). The plaintiff’s argued the insured was personally liable for any amount above the $ 300,000 PLIGA cap. The defendants argued insureds should not become personally liable for amounts that would have been covered by an insurance policy had the insurer not failed.

The New Jersey Supreme Court ruled that policy holders are liable for any claims beyond the $300,000 maximum liability covered by PLIGA if their insurer has failed. The Court ruled the $300,000 cap is “legally unassailable” and the injured party has the right to recover damages from the policy holder beyond the PLIGA maximum. However, the Supreme Court recognized “the potentially catastrophic effect” the ruling may have on policy holders and recommended the State Legislature Act to remedy the situation. The Court suggested altering the PLIGA cap so it is “co-extensive with the insurance coverage purchased from the insolvent insurer” or to immunize the insureds of an insolvent insurer to “the extent of the coverage purchased from that insurer.”

Copies of the full text of any of the cases discussed in this Newsletter may be obtained by calling our office.  The articles contained in this Newsletter are

for informational purposes only and do not constitute legal advice.

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