Employer Waived the Exclusive Remedy Protection of Worker’s Compensation

By
May 11, 2015

The important protection that employers have under Wisconsin’s Worker’s Compensation Act is the exclusive remedy against employees for work-related accidents, conditions, or illnesses. While the employer enjoys near immunity from a civil suit, that protection can be waived. The Wisconsin Court of Appeals recently held that an employer had waived its exclusive remedy protection through broad language in a service contract in Zenoni v. Discover Property & Casualty Insurance Company, 2015 WL 1824381 (April 23, 2015).

The employer, a restaurant, contracted with a supplier of uniforms and floor mats. The employee tripped on a floor mat in the restaurant’s kitchen. She had a worker’s compensation claim. She also brought a civil suit against the owner of the building where the restaurant was located and against the floor mat supplier. There is nothing out of the ordinary about this scenario so far. Ordinarily, the employer would be fully protected by the exclusive remedy of worker’s compensation from liability in the civil suit against third parties, i.e. the floor mat supplier and the building owner.

The restaurant’s problem was that it had signed a service contract containing a broad indemnification clause in favor of the floor mat supplier. The contract obligated the restaurant to “defend, indemnify, and hold harmless” the floor mat supplier “from any claims and damages arising out of or associated with this agreement, including any claims arising from defective products.” When the restaurant worker sued the mat supplier, the mat supplier sued the restaurant under the service contract.

Interpreting and applying established Wisconsin case law, the Court of Appeals ruled that this broad language operated as a waiver of immunity from suit that the restaurant would otherwise have enjoyed. As a result, the suit was remanded to the circuit court for trial. Depending upon how causal negligence is assessed and allocated, the restaurant could be held liable to the floor mat supplier for the restaurant’s share of the employee’s damages. Alternatively, the restaurant might be found not liable under Wisconsin’s law of comparative negligence. In any event, however, the restaurant must pay for the floor mat supplier’s defense to the employee’s civil suit.

Many service providers and suppliers propose contracts that require indemnification and defense from lawsuits. Employers should carefully review those contracts. If indemnification provisions cannot be excluded entirely, their scope should be reduced by carving out liability that arises out of the employer-employee relationship or in which there is entitlement to worker’s compensation benefits.

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