Questionable contracts cause difficulty for Acme

Nov. 27, 2005
A questionable contract clause comes into play when Acme fires an injured employee.

When Hurricane Isabel made landfall in North Carolina on September 18, 2003, Bjorn Turun was there and, in the ensuing chaos, lost everything he owned. He availed himself of the kindness of strangers and found himself packed like a sardine in an ignoble string of temporary shelters. By the time he could access his bank balance, he’d been a homeless vagrant for almost two weeks.

With jingles again in his pocket, Bjorn bought some new clothing and packed a decent meal or two under his belt. With so little baggage, Bjorn readily accepted an offer of free room and board at his cousin’s bed and breakfast. Six months of beating the local bushes in search of a suitable engineering engagement proved to be depressingly fruitless and exhausting for someone of his experience and capability. His bank balance was scraping bottom and his cousin was gearing up for the summer tourist season. By means of various cues, subtle and overt, it was made abundantly clear to Bjorn that the time to hit the road was upon him.

Desperate people do desperate things. Bjorn swallowed his pride and followed up on his last viable job lead. Acme Pro-Temps was advertising for a field engineer to be deployed at a client’s plant in the middle of the country. Being an avid reader of this magazine, it was only with a deep sense of foreboding that Bjorn mustered his courage and visited Acme’s home office across town, hat in hand, humbly seeking contract work as an hourly employee, regardless of how highly overqualified he might be.

When Sandy Yeagogh, Acme’s staffing manager, briefly scanned the handwritten job history in Bjorn’s application packet, he started treating our hapless hero like royalty. Sandy launched into a glowing description of the client Beta Corp.’s project, which was far from Hurricane Alley. He asked a few relatively softball questions about Bjorn’s work history, noting that everything Bjorn had done so far seemed like a perfect fit for the opening. Sandy then waxed poetic about the wonderful weather at the job site.

Bjorn was a bit overwhelmed by this most unexpected reception, but he was certainly underwhelmed by the hourly pay rate and the nonexistent benefit package. Plus, Bjorn would need to provide his own transportation to the Beta site. On the plus side, however, Acme would provide a per diem that would provide a rather Spartan lifestyle at the motel where the Acme project crew stayed. Then, Sandy let slip that Acme has been trying unsuccessfully to fill this particular slot for several months. Bjorn realized instantly that he wasn’t the only desperate person in this town.

Sandy placed a work contract on the table in front of Bjorn, telling him that he could sign it now, but he’s also free to take it home to study or review it with his attorney before signing. Bjorn settled in to read the contract and noted that it contained a clause that says he would agree not to bring action or file suit more than six months after a termination and to waive reliance on any contrary statutes. Also, it said that Bjorn agrees to arbitrate any personal injury claim he might have against third-parties.

When Bjorn asked about these features, Sandy told him it was a standard contract that every field engineer must sign before Acme would hire them. Besides, Sandy added, there’s only a vanishingly small probability of either side having to make use of that part of the contract. In any case, Bjorn had to rebuild his life, bank account and sense of self-sufficiency, so he signed the contract.

Armed with Sandy’s letter of introduction and a one-way Greyhound ticket, Bjorn never looked back as he set out for a job on the other side of the country, where the living is easy.

During his first day on the Beta job site, Bjorn realized that this project was a disaster. His coworkers were in the same position as he was, but Acme’s on-site management was disorganized. He found the working conditions in this chemical plant untenable, the environment inherently unsafe. He needed the money and there was nothing and no one back home awaiting his return. He realized that he was merely a journeyman, in the classical sense of the word. But the paychecks never bounced and he eked out a survival of sorts on the daily stipend.

Bjorn settled in and did what he was being paid to do. What else could he do? He’d either accept his fate gracefully or go find work elsewhere.

Which is something he should have done in the first place. One dark night shift, while he was walking through the plant in a feeling-sorry-for-himself blue funk, Bjorn stepped on a nail-studded piece of scrap lumber some day-shift Beta operator left in the pathway. A rusty nail penetrated the sole of his shoe and Bjorn found himself in the plant dispensary for treatment under the care of an inept nurse. The badly-treated wound and consequent infection carried a 100% copay and put him in a wheelchair. Because his time was no longer billable, Acme summarily terminated him.

Now, with enough free time to find a mouthpiece to take the case on a contingency basis, Bjorn filed suit against both Acme Pro-Temps and Beta Corp. seeking compensation for his out-of-pocket medical expenses and wages lost as a result of the injury. Bjorn knew this was truly the worst trip he’d ever been on.

Beta argued that this entire matter should be arbitrated in accordance with the terms of the contract between Acme and Bjorn. Acme argued that Bjorn was terminated for cause as he could no longer perform the required duties.

How could this situation have been prevented? Is it ethical or legal for an employer to avoid offering group medical coverage and then penalizing an employee for health-related reasons? Should Acme be using a labor contract to protect its client?

An academician says:
This case involves an entanglement of legal questions that I quite frankly can’t address. So, I won’t bore you with my speculations about things I don’t know.

However, what I do know is that the Acme business strategy is pretty lousy. I am not just speaking from an ethical viewpoint, but also from the viewpoint of making money. The research suggests rather clearly that those companies that spend a lot of effort trying to screw their employees usually screw themselves in the long run. Acme’s business is contingent on hiring and retaining people who are both skilled and motivated. It doesn’t take too long before the word gets out that this is a rotten company to work for, and consequently it’s tough to get good employees. And the ones you get don’t stay with the company very long.

A service model based on questionable contracting practices, poor pay, marginal employees and high turnover isn’t going to make anybody any money. Acme’s problem is bigger than Bjorn, or their contracting. Their problem is their overall business strategy -– they need to adopt a model based on sound HR practices and ethics. And they should start by getting rid of Beta as a client. Sleazy clients suck you down to their level -- if you want to be a classy, profitable company, start by picking classy, profitable clients.

Professor Homer H. Johnson, Ph.D.
Loyola University Chicago
(312) 915-6682
[email protected]

An attorney says:
This is a most curious assemblage of facts. Neither Acme nor Beta should have any interest in forcing Bjorn to arbitrate his claim for medical expenses and lost wages. Bjorn injured his foot while at work and performing his duties. This means, as a matter of law, that his medical expenses and lost time from work are covered by the workers’ compensation law of the state where he worked. Employers either have workers’ compensation insurance, are self insured or pay into a state fund to cover their liability for workers’ compensation.

In some states, the loaning employer, Acme, is required to cover the workers. In other states, the borrowing employer, Beta, is required to do so. Some states allow the loaning and borrowing employer to determine between them who will bear the responsibility for work related injuries. But as a matter of law, one of these employers must do so. Why either of them would prefer to arbitrate the claim as an uninsured liability is unfathomable.

Apart from employee benefits that are required by a statute, primarily workers’ compensation and unemployment insurance, no law requires an employer to provide benefits to its workers. That includes medical insurance, vacation, sick days and every other benefit that most of America’s current workers enjoy. As a result, Acme was within its rights in having a non-existent benefit package.

Beta also was free to terminate Bjorn when he could no longer work due to the injury. A temporary injury, such as an infection, generally is not considered a disability under the Americans With Disabilities Act. So the ADA likely would not protect Bjorn from discharge. While the Family and Medical Leave Act protects workers for up to 12 weeks while they are off work due to a serious health condition, that law only applies to employees who have been employed for a year. That law also provided Bjorn with no job protection.

The issue of whether an employee is bound by an agreement to arbitrate his statutory claims, such as discrimination claims, against an employer has been the subject of much litigation in recent years. Most courts now hold that agreements to arbitrate claims are enforceable as long as the employee voluntarily agrees to the arbitration clause, the arbitration process itself allows the employee the same remedies as he would have in a court of law and the process incorporates procedural fairness, such as the selection of a neutral arbitrator, pre-hearing discovery and the right to be represented by counsel.

If Bjorn could manage to get his claim into the proper forum -- the agency that administers the state’s workers’ compensation law -- he should recover his medical costs and some payment for time lost from work. Apart from that, neither Acme nor Beta should have any liability to him.

Julie Badel, partner
Epstein Becker & Green, P.C.
(312) 499-1418
[email protected]

A corporate consultant says:
I have two completely different perspectives on this case.

First, if Bjorn's medical situation is due to incompetence on the part of Beta's nurse, then Beta should never have terminated Bjorn. Implicit in the provision of an on-site nurse is the competence of that nurse. If her error incapacitated Bjorn, it seems to me that he'll have legal recourse, regardless of the contract.
Absent this one condition, assuming the parties haven't contracted for something that is illegal [i]per se[i], when adults sign contracts, they're bound. If the contract doesn't end up serving one party's needs, that's just too bad.

Of course, what happened to Bjorn is awful -- and of course, it's true that both Beta and Acme should have cared enough to help him. However, in a capitalist economy, market conditions prevail, and Bjorn was expendable. As detestable as that may be from a humanitarian perspective, it's a fact. When Bjorn signed the contract, he made a choice and he is accountable for that choice.

Naturally, my hope would be that the business reputations of both Acme and Beta go down in flames -- but as reprehensible as their behavior is -- they didn't force Bjorn to sign the contract.

Francie Dalton
Dalton Alliances Inc.
(410) 715-0484
[email protected]

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