In Tennessee, it is well-settled that an employee has a cause of action for retaliatory discharge when he or she was terminated for filing a workers’ compensation claim.[1] But what if the individual is not an employee at all, but instead, an applicant? Is there a viable cause of action for failure-to-hire an individual because she filed a workers’ compensation claim against her previous employer? When this question was recently presented, pursuant to a certified question from the United States District Court for the Middle District of Tennessee, the Tennessee Supreme Court responded with a resounding “no,” effectively preserving the current status of Tennessee’s employment-at-will doctrine.

In Yardley v. Hospital Housekeeping Systems LLC,[2] Ms. Yardley was originally employed by University Medical Center (the Hospital) as a housekeeper aide. In 2010, Ms. Yardley was injured on the job and began receiving workers’ compensation benefits. Ms. Yardley’s treatment lasted for the better part of two years.

On Jan. 1, 2012, the Hospital entered into a contract with Hospital Housekeeping Systems LLC (HHS), effectively outsourcing its housekeeping duties to HHS. This next part is key to the court’s decision. As a result of the contract with HHS, the housekeepers’ employment with the Hospital was terminated; the housekeepers were required to interview with HHS if they wished to continue in their positions. HHS had complete discretion whether to hire the former Hospital housekeepers.

By July 1, 2012, Ms. Yardley had not been interviewed nor hired by HHS because she was still on a light duty restriction. When she was finally released to full duty, she was referred to HHS to interview for a housekeeping position.

This is where it gets interesting. There was significant evidence to indicate that HHS, particularly its vice president, did not want to hire Ms. Yardley because she had previously filed workers’ compensation claims. The vice president also expressed concern that there was a significant likelihood that she would file a workers’ compensation claim in the future. Indeed, Ms. Yardley alleged that the vice president told her that HHS would not hire anyone receiving workers’ compensation benefits. Moreover, there was an email from the vice president stating that “[b]ringing her on board with [the company] would seem to be a Workers[‘] Comp claim waiting to happen” and that he “would advise against [hiring Ms. Yardley] IF we have that option.”[3] As one might expect, Ms. Yardley was not hired by HHS. She filed suit shortly thereafter in the United States District Court for the Middle District of Tennessee. Ms. Yardley’s theory was that because employers cannot lawfully discharge employees for filing workers’ compensation claims,[4] they should likewise be prohibited from refusing to hire an applicant on that basis as well.

On Sept. 10, 2014, the United States District Court for the Middle District of Tennessee filed a certification order pursuant to Tennessee Supreme Court Rule 23, asking the Tennessee Supreme Court to answer the following questions of law:

1. If a prospective employer refuses to hire a job applicant because that applicant had filed, or is likely to file, a workers’ compensation claim incurred while working for a previous employer, can that applicant maintain a cause of action under the Tennessee Workers’ Compensation Act against the prospective employer for failure to hire?
2. If so, should courts apply the motivating factor standard of causation, as they do with retaliatory discharge claims?[5]

The Tennessee Supreme Court accepted certification of these questions and began by noting the procedural boundaries of a Rule 23 Certification — the court only answers questions of law, and it considers only the facts included in the District Court’s order and assumes them to be true.[6]

This was a case of first impression — there is no statutory or common law cause of action for retaliatory failure to hire. As such, Ms. Yardley was candidly asking the court to create the cause of action she wished to assert.

The court began its substantive analysis by reviewing the terms of the Workers’ Compensation Act, specifically noting that the act only applies to “employers” and “employees.”[7] Ms. Yardley, the court surmised, “was not an employee, but merely a job applicant … [and therefore,] the company had no obligation under the act.”[8]

Ms. Yardley attempted to utilize retaliatory discharge cases from Tennessee and other jurisdictions, including the seminal Clanton v. Cain-Sloan case, in pleading her case to the court. The court quickly dismissed this tactic: “these cases are distinguishable, as they all involve parties who had been in an employer-employee relationship with each other at the time the tort allegedly occurred. Ms. Yardley was never an employee of [HHS], and thus, there was never a relationship.”[9] But are discharge cases and failure-to-hire cases so different that they can’t be used to support one another? The court thinks so:
The employer-employee relationship involves mutual acquiescence, and certain levels of trust and dependence are created upon its formation. Both parties have rights and responsibilities that naturally flow from that relationship and which are not present before the relationship is formed. For this reason, failure to hire cannot be equated with termination of employment, as employees and job applicants are on different footing.[10]

The court recognized that some states have enacted statutes that specifically allow for retaliatory failure-to-hire claims.[11] However, importantly, there has not been a single decision, in Tennessee or elsewhere, which has recognized a retaliatory failure-to-hire claim based upon the common law or public policy — which is exactly what Ms. Yardley was asking the court to do.[12]

Ms. Yardley also argued that without her proposed cause of action employees will be discouraged from filing workers’ compensation claims. The court found this too speculative to create an exception to the employment-at-will rule. The court balanced a citizen’s access to employment and ability to earn a livelihood with an employer’s freedom to select its workforce, and in this case, the employer’s freedom won out.[13]

Ms. Yardley’s final argument was that the establishment of the Second Injury Fund[14] supports the creation of a cause of action for retaliatory failure-to-hire. The Second Injury Fund is intended to encourage hiring workers who have suffered previous injuries by relieving employers of part of their workers’ compensation liability. The court saw this differently, holding that “the establishment of the Second Injury Fund evidences the Legislature’s recognition that the hiring of persons who have suffered a prior work-related injury is encouraged, but not required by state law.”[15]

In the end, the Tennessee Supreme Court refused to further expand the exceptions to the employment-at-will doctrine. The court clarified that there is no cause of action under the act against a prospective employer for failure-to-hire if the prospective employer refuses to hire the applicant because she had filed, or is likely to file, a workers’ compensation claim against a previous employer.

Even in light of this opinion, we do not recommend asking all job applicants whether they have filed a workers’ compensation claim. Doing so could bring to light a disability that an employer would otherwise not know about, opening it up to potential liability for an Americans with Disabilities Act (ADA) claim.

Consider an employee who requires hospitalization because of an on-the-job injury, which would fall under the workers’ compensation scheme. If the injury causes a permanent impairment that substantially limits a major life activity, the employee may be a qualified individual under ADA. Employers should take solace in the fact that the exceptions to the employment-at-will doctrine were not further expanded in this decision; but they should not inquire into an applicant’s workers’ compensation claims history because it could come back to haunt them … albeit under a different statute.

Notes

1. Clanton v. Cain-Sloan Co., 677 S.W.2d 441 (Tenn. 1984).
2. No. M2014-01723-SC-R23-CV, 2015 Tenn. LEXIS 630 (Tenn. Aug. 21, 2015).
3. Id **3-4.
4. See, e.g., Clanton, 677 S.W.2d at 445.
5. Yardley v. Hosp. Housekeeping Sys. LLC, 2014 Tenn. LEXIS 936 (Tenn. Nov. 19, 2014) (granting certification).
6. 2015 Tenn. LEXIS 630, *2 n. 2.
7. 2015 Tenn. LEXIS 630, at *10.
8. Id.
9. Id. at *11.
10. Id.
11. Id. at **11-12 (citing Fla. Stat. § 440.105(2)(a)(2); 775 Ill. Comp. Stat. Ann. 5/6-101; La. Rev. Stat. Ann. 23:1361; Me. Rev. Stat. tit. 5, § 4572; Mass. Gen. Laws Ann. ch. 152, § 75B).
12. Id. at *12.
13. Id. at *13.
14. Tenn. Code Ann. 50-6-208.
15. 2015 Tenn. LEXIS 630, **13-14.

Edward G. Phillips is a lawyer with Kramer Rayson LLP in Knoxville, where his primary areas of practice are labor and employment law. He graduated with honors from East Tennessee State University and received his law degree from the University of Tennessee College of Law in 1978 with honors, and as a member of The Order of the Coif. He is a former chair of the Tennessee Bar Association’s Labor and Employment Law Section.

BRANDON L. MORROW is an associate with Kramer Rayson LLP in Knoxville where his primary areas of practice are labor and employment, and litigation. He earned a bachelor’s degree from the University of Tennessee and a law degree from UT College of Law in 2012.