The See’s Candies Decision: Employers May Be Liable for Third-Party COVID-19 Damages Traced Back to Their Employees

I. INTRODUCTION

The COVID-19 pandemic has been very challenging and risky for California employers. They face the difficulties of maintaining a safe work environment while complying with ever-shifting regulatory requirements, as well as a rise in COVID-related workers’ compensation claims, including some presumed compensable claims. Now employers face yet another challenge: the risk of civil liability when third parties are exposed to ill employees, particularly employees’ household members. A new California Court of Appeals decision has opened the door to “take-home liability” for workplace-acquired COVID illnesses and challenged the “exclusive remedy” defense, which has long shielded employers from separate civil court damages that originate from industrial injuries.

Nationally, the exclusive remedy rule generally bars the filing of liability lawsuits against employers by injured employees and their family members. Instead, workers’ compensation benefits are understood to be the exclusive remedy available to an employee and to their family members who claim damages that derive from that on-the-job injury. However, California’s Second District Court of Appeal rejected the exclusive remedy defense in a COVID wrongful death case, Matilde Ek et al. v. See’s, Candies Inc., et al. (2021) 87 Cal.Comp.Cases 21. Instead, employee Matilde Ek was allowed to sue her employer for the alleged COVID-related death of her husband. The case could have significant ramifications in California, if not nationally.

II. THE SEE’S CANDIES DECISION

Plaintiff-employee Matilde Ek claims to have contracted COVID at work due to defendant See’s Candies’ alleged failure to implement adequate safety measures. While convalescing at home, Ms. Ek is alleged to have passed COVID to her nonemployee husband, who died from the disease a month later. Ms. Ek then sued See’s on behalf of herself, their children and her husband’s estate.

See’s filed a motion to dismiss the lawsuit, asserting that plaintiffs’ claims were barred by the “derivative injury doctrine,” which is part of the exclusive remedy rule. The derivative injury doctrine establishes workers’ compensation as the exclusive remedy for claims that derive from an employee’s workplace injury. This means that if See’s had prevailed, plaintiffs would not have been allowed to proceed with a separate wrongful death suit. Instead, the remedy would be limited to the benefits awarded to Ms. Ek in the workers’ compensation system.

At issue was whether Mr. Ek’s COVID illness and death were derivative of his wife’s work injury. Employer See’s Candies argued that any third-party claim is derivative if it is “causally linked” to an employee injury. Specifically, they argued that because Ms. Ek’s COVID workplace injury was the biological cause of her husband’s COVID injury, the derivative injury doctrine should apply. In rejecting this argument, the Court of Appeal relied on Snyder v. Michael’s Stores, Inc. (1997) 16 Cal.4th 991, a case involving exposure to toxic gas at work, which held that “causation is not the sole requirement” for application of the derivative injury doctrine; rather, derivative injuries refer to something much more specific and limiting:

The See’s court opined that:

So, what exactly are derivative claims? Snyder provides:

Thus, while Mr. Ek’s COVID infection may have proximally derived from his wife’s workplace injury, his cause of action did not. Plaintiffs did not seek damages for losses arising from a disabling or lethal injury to Ms. Ek, such as loss of her support or companionship. Instead, plaintiffs sought recompense for Mr. Ek’s own separate physical injury and death as a nonemployee, albeit one that stemmed directly from a workplace injury.

III. UNLIMITED TORT LIABILITY

The See’s Candies holding tells us that COVID sustained by nonemployees allegedly as a result of contact with COVID-infected employees is a separate physical injury that may not be barred by the exclusive remedy doctrine. Nonemployees therefore can sue an employer for alleged negligent handling of COVID safety measures and seek damages for losses arising from a disabling or lethal derivative injury. In other words, while an employee who has contracted COVID in the workplace will be limited to workers’ compensation as their exclusive remedy, nonemployees who later claim to have contracted the virus from that infected employee are not subject to this same exclusive remedy rule and can sue for economic and punitive damages.

The court also paused to point out the underlying rationale supporting their decision, posing a hypothetical where an infected lab researcher boarded a crowded bus on departing from work. Were the derivative injury rule to apply as argued by See’s Candies, every infected passenger would be barred from asserting civil claims seeking tort remedies against the lab.

As Snyder observes:

The worker’s compensation bargain contemplates suits between employee and employer, the court noted, and was not intended to shield negligent employers from full tort liability against parties that exist outside of that relationship.

IV. IMPLICATIONS FOR CALIFORNIA EMPLOYERS

The See’s Candies decision exposes California employers to an untold number of lawsuits from individuals and estates alleging that their COVID infections were contracted indirectly from workplaces via sick employees, even if those people have never set foot on the employers’ premises. Not only an employee’s family members and housemates, but neighbors, acquaintances or anyone who can claim to trace their COVID infection back to a California employer may be able to sue that employer for damages.

California employers may want to carefully review their workers’ compensation Coverage B policies as well as their business liability insurance for coverage of such claims. Absent insurance coverage, the businesses could be directly liable for the damages. In response to some of the public policy concerns that might favor an application of the exclusive remedy doctrine to encompass limitless third-party injuries, the court punted, commenting that this was a concern “more properly addressed to the Legislature than to this court.”

This decision allows Ms. Ek’s negligence case to proceed. The court expressed no opinion on the question of whether employers owe a duty of care to nonemployees infected with COVID. It is possible that those unlimited liability issues will be addressed when the duty of care is considered in this case at the trial court. For example, how can an employer control every employee’s off-work activities in order to mitigate potential derivative injuries to others? In other words, does an employer’s duty of care to far-removed third parties stop at the workplace threshold? Or does it extend to an employee’s commute home? To the employee’s household? Neighborhood?

V. HIGHER COURTS WEIGH IN

The See’s Candies court claims that their decision comports with those of appellate courts of other jurisdictions on analogous facts. After discussing a number of these other cases, the court remarked in closing:

See’s Candies disagreed and filed a petition for review with the California Supreme Court. The Supreme Court denied review on April 13, 2022. However, days later the Ninth Circuit U.S. Court of Appeals resurrected the issue, asking the California Supreme Court to specifically address exclusive remedy as well as the “duty of care” issue. In Kuciemba v. Victory Woodworks No. 3:20-cv-09355 (N.D.Cal. 2020), the federal district court for Northern California granted a motion to dismiss in a similar “take-home” COVID case, holding the derivative injury doctrine barred an employee’s wife’s COVID injury claims and that, alternatively, the employer didn’t owe her any duty of care.

The plaintiffs appealed to the U.S. Ninth Circuit Court of Appeals. On April 21, 2022, the U.S. Appeals court noted the conflict between the Kuciemda and See’s Candies cases.

The court said if either the derivative injury rule applies or there is no duty of care, the complaint must be dismissed. The questions presented by the Ninth Circuit to the state Supreme Court are:

• If an employee contracts COVID-19 at their workplace and brings the virus home to their spouse, does California’s derivative injury doctrine bar the spouse’s claim against the employer?
• Under California law, does an employee owe a duty to the households of its employees to exercise ordinary care to prevent the spread of COVID-19?

The Supreme Court is expected to now weigh in on the question and may or may not resolve the conflict between the state and federal courts. If it is not overturned, the Second District Court of Appeal holding will stand as legal precedent for a narrowing of the exclusive remedy rule in California, especially as it applies to “take-home” COVID derivative injuries. This could have a far-reaching impact on California employers, creating a situation where every COVID workers’ compensation injury potentially creates multiple derivative COVID tort claims. Where the employer’s liability stops is anyone’s guess.

Thomas Richard leads the employer liability practice at RTGR Law LLP in Oakland, Calif., specializing in Labor Code section 132a discrimination claims and serious and willful misconduct claim defenses. He is an expert in cases where workplace injuries implicate ADA/FEHA, FMLA/CFRA, and other employment issues. Mr. Richard is a Certified Specialist in Workers’ Compensation law.