Author: Hamilton

Employment Cause of Action Bills Introduced in Wisconsin Legislature

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This session, Wisconsin lawmakers have introduced several bills that would create new legal causes of action against employers and could be costly to Wisconsin businesses if enacted. Read below for descriptions and the status of each of the bills.

 

SB 40/AB 40 – Wage Claims

Sen. Bob Wirch (D-Somers) and Rep. Tod Ohnstad (D-Kenosha) have introduced legislation changing employee unpaid wage claim procedures. The bill allows employees to file wage claims with the Department of Workforce Development (DWD) or in circuit court not only on their own behalf, but also on behalf of any similarly situated workers. Additionally, the bill increases the statute of limitations for wage claims from two to four years.

The bill would significantly increase the punitive costs for employers who are found to owe employees wages. The bill would double the amount employers could be liable to pay in excess of the unpaid wages, up to 200 percent, plus attorney fees. DWD or a circuit court may also require the employer to pay 2 percent interest per month on the amount of wages due. DWD or a circuit court can also order the employer to pay a surcharge up to $1,000 that would go not to the employee but to DWD.

Also under the bill, employers with outstanding wage claims would not be eligible to renew their licenses.

Finally, the bill would require employers to provide a disclosure statement of terms of employment to all employees. If an employer fails to provide or comply with the written terms of employment, the employer would owe all damages, plus $50 per day, and attorney fees.

The bill has been referred to the Senate Committee on Labor & Regulatory Reform and the Assembly Committee on Labor & Integrated Employment. No public hearings have been held.

 

AB 116 – Abusive Work Environments

Rep. Sondy Pope (D-Mt. Horeb) has introduced legislation that would create a new cause of action outside of worker’s compensation for abusive work environments.

The bill provides an exception to the exclusive remedy of worker’s compensation when employees allege they have been subjected to an abusive work environment. Employees alleging injury from an abusive work environment may file an action in circuit court. Circuit courts may award prevailing employees relief from the employer including medical expenses, back pay, front pay, compensation for pain and suffering, compensation for emotional distress, punitive damages, and attorney fees.

Under the bill, “abusive conduct” means “conduct, including acts or omissions, by an employer or employee, that a reasonable person would find to be abusive based on the severity, nature, and frequency of the conduct.” “Abusive work environment” means “a work environment in which an employer or one or more of its employees, acting with intent to cause pain or distress to an employee, subjects that employee to abusive conduct that causes physical harm or psychological harm to that employee.”

The bill has been referred to the Assembly Committee on Labor & Integrated Employment. No public hearing has been held.

 

AB 265 – Employee Rights

Rep. Gary Hebl (D-Sun Prairie) has introduced legislation giving employees certain rights and causes of action against their employers. The bill includes:

  • Giving employees the right to request and receive work schedule changes. An employer must have a “bona fide reason” to deny requested schedule changes.
  • Requiring employers to notify service industry employees of schedule changes two weeks in advance.
  • If an employer cuts an employee’s shift after they report to work, requiring the employer to still pay some or all of the wages the employee would have earned.
  • Requiring employers to compensate employees one hour’s pay for on-call shifts.
  • Requiring employers to compensate employees one hour’s pay for working a split shift.

Employee complaints about violations of any of these requirements would be handled by DWD as employment discrimination claims. Employees could also bring actions in circuit court, regardless of whether they have filed an action with DWD. Employers would be liable for compensatory damages, attorney fees, liquidated damages up to 100 percent of compensatory damages, and/or forfeitures up to $1,000 per violation.

The bill has been referred to the Assembly Committee on Labor & Integrated Employment. No public hearing has been held.

 

SB 308/AB 319 – Gender-related Discrimination

Sen. Tim Carpenter (D-Milwaukee) and Rep. Mark Spreitzer (D-Beloit) have introduced legislation that would add gender identity or gender expression as a prohibited basis for employment discrimination under Wisconsin’s Fair Employment Law (Wis. Stat. Ch. 111 Subchapter II). Penalties for employment discrimination under current law include, back pay, reinstatement and/or compensation. Under current law, employees may file complaints with DWD, which are subject to judicial review. (LRB 286, discussed below seeks to change this employment discrimination complaint process and allow initial complaints in circuit court.)

The bill has been referred to the Senate Committee on Government Operations, Technology & Consumer Protection and the Assembly Committee on State Affairs. No public hearings have been held.

 

LRB 286 – Employment Discrimination

Last week, Sen. Dave Hansen (D-Green Bay) circulated a bill that would allow employees alleging employment discrimination to bring circuit court actions outside of the DWD administrative complaint process. As damages, a court may, like DWD, order back pay, reinstatement, and/or compensation. Additionally under the bill, defendants are required to pay punitive damages – including future economic losses for pain and suffering, emotional distress, mental anguish, loss of enjoyment of life, and other noneconomic damages – up to $300,000 depending on the size of the employer.

The bill is currently circulating for cosponsorship.

 

LRB 2692 – Employee Compensation

Sen. Hansen has also circulated a bill that prohibits employers from asking prospective employees about their prior compensation. Employers would also generally be prohibited from using information about prior compensation in the hiring decision making process. Employees would be able to file complaints about violations to DWD or in circuit court, with penalties identical to those in LRB 286.

The bill is currently circulating for cosponsorship.

 

Outside of the Legislature, Gov. Tony Evers has also created a Joint Enforcement Task Force on Worker Misclassification. Evers announced members of the task force on July 26.

Qui Tam Proposal Circulating in Wisconsin Legislature

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A proposal is currently circulating in the Wisconsin Legislature that would restore a private individual’s ability to bring a qui tam claim on behalf of the government against a person who makes a false claim for Medicaid. WCJC helped repeal Wisconsin’s previous qui tam law in 2015 and will work hard to ensure that it is not enacted back into law.

 

Background on Qui Tam

Qui tam is a Latin term describing a legal action to collect a penalty through supplied information from the public. Under this legal doctrine, a private party called a “relator” may bring a whistleblower lawsuit against a party on the government’s behalf. The relator must first present the information to the government, which can decide to either pursue the case, or deny involvement and allow the plaintiff to bring the case on behalf of the state using a private plaintiff attorney.

In 2007, the Wisconsin Legislature enacted the previous qui tam law. In 2015, the law was repealed by the Legislature during the budget bill process.

 

Legislative Proposal

Rep. Lisa Subeck (D-Madison) is currently circulating a new proposal (LRB 957) to reinstate the previous qui tam law. The bill would allow private individuals to bring claims on their own behalf and on behalf of the state against persons making false claims for Medical Assistance. Under the bill, plaintiffs and their attorneys could seek up to 30 percent of all of the damages, along with attorney’s fees and costs.

There is little evidence qui tam laws accomplish the ostensible goal of detecting and recovering damages for Medicaid fraud. Instead, according to, the U.S. Chamber Institute for Legal Reform, in many instances the states with qui tam statutes may actually recover less from the average Medicaid fraud settlement than those states without, due to the state’s obligation to pay out a share of the settlement to the private party.

Restoring qui tam lawsuits in Wisconsin would simply provide an incentive for plaintiff attorneys to file costly lawsuits against medical providers, pharmaceutical companies, and any other business contracting with the state.

It’s also important to note that Wisconsin already has a law – Wis. Stat. § 49.49 – that grants the attorney general the authority to prosecute Medicaid fraud and recover damages on behalf of the state. All damages recovered under this law go to the State of Wisconsin and need not be paid out to a private party or plaintiff attorneys.

Earlier this session, Gov. Tony Evers proposed in his state budget recommendations reinstating the qui tam law, not just for alleged Medicaid fraud, but for all state agencies. WCJC actively lobbied against the qui tam provision and were successful in convincing the Joint Finance Committee to remove the provision. WCJC met with key committee members and submitted a memo explaining why the law is unnecessary and would only benefit plaintiff attorneys.

WCJC plans to similarly oppose the newly circulated bill.

Justice Brian Hagedorn Sworn Into Wisconsin Supreme Court

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Newly elected Justice Brian Hagedorn was sworn into the Wisconsin Supreme Court on Aug. 1, 2019, with his public investiture and swearing in ceremony held at the state capitol this week. Hagedorn, replacing retired Justice Shirley Abrahamson, will serve a 10 year term on the court.

Justice Hagedorn’s swearing in shifts the court from a 4-3 to 5-2 conservative majority. The next Supreme Court election will occur in April 2020, with current Justice Daniel Kelly running for reelection. (Read more about the 2020 candidates.)

 

Convenience Store Leasing & Management v. Annapurna Marketing (Frustration of Purpose)

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In Convenience Store Leasing & Management v. Annapurna Marketing (2017AP1505), the Court of Appeals District II held defendants could not prove frustration of purpose excused breach of their fuel supply agreement with the plaintiff.

After purchasing a gas station, plaintiff Bulk Petroleum Corp. entered into a fuel supply agreement with defendants Annapurna (AP) Marketing. The agreement required AP Marketing to purchase a certain amount of fuel from Bulk. Bulk was required to select a “Branded Supplier,” in this case major brand fuel marketer U.S. Oil/Exxon Mobil, to supply fuel to the station. U.S. Oil required AP Marketing to make several cosmetic changes to the building.

AP Marketing ultimately decided that U.S. Oil’s branding requirements were too costly and walked away from the fuel supply agreement. Bulk filed the instant action for breach of contract. AP Marketing argued its breach of the contract was excused by frustration of purpose.

The appeals court held that Bulk’s claim that AP Marketing did not comply with the fuel supply agreement was not excused by frustration of purpose.  U.S. Oil’s costly branding requirements did not frustrate the principal purpose of the contract. The principal purpose of the contract was to supply fuel, and lower profits due to branding requirements do not frustrate that purpose. Furthermore, there was no basic assumption under the fuel supply agreement that such branding upgrades would not be required. In fact, the contract specifically referenced that AP Marketing may have to make cosmetic changes as required by the selected Branded Supplier. Because AP Marketing could not meet the principal purpose and basic assumption elements of the frustration of purpose doctrine, the court reinstated Bulk’s claim that AP Marketing breached the fuel supply agreement.  

Eco-Site, LLC v. Town of Cedarburg (Conditional Use Permit for Cell Tower)

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In Eco-Site, LLC v. Town of Cedarburg (2018AP580), the Court of Appeals District II upheld a town’s denial of a conditional use permit for a cell tower.

Eco-Site and T-Mobile applied to the Town of Cedarburg for a conditional use permit to place a cell tower on a horse farm in the town. The desired location for the tower was zoned as agricultural, and the surrounding area was zoned as residential. The town board denied the conditional use permit for reasons including: the tower would reduce value of the surrounding properties, was incompatible with the “rural and rustic” adjacent land, and would be detrimental to public welfare because of its effect on the “beautiful and scenic area.”

Eco-Site sought judicial review of the permit denial, arguing that the town’s decision was not in accordance with its zoning ordinances and violated statutory requirements that towns not prohibit cell towers solely because of aesthetic concerns.

The court found that the town properly applied its zoning ordinances. Cedarburg’s conditional use ordinances require that the use will not be detrimental to public welfare and will be compatible with adjacent land. The court agreed with the town that the cell tower would be incompatible with the agricultural and residential uses of the adjacent land. The tower would be detrimental to public welfare because it would diminish property values.

The court also found that the town did not violate state law prohibiting towns from denying cell towers solely for aesthetic reasons. Though the board’s comments on the application contained many aesthetic complaints, the court held that the aesthetic impact was distinct from the economic impact of lower property values from the cell tower. The law (Wis. Stat. 66.0404(5)(g)) only prohibits denial based solely on aesthetic concerns. Because the town based its decision on the economic impact and incompatibility with the town’s ordinances, the town’s decision was valid.

In a concurring opinion, Judge Reilly agreed with the town’s permit denial but with different reasoning than the court. The concurring opinion argues that Eco-Site lacked evidence it needed a new tower at that specific site. Eco-Site explained that the new tower would accommodate more carriers. However, the concurring opinion found no evidence the town needed a new tower and additional carriers to meet its communications needs.

Garfield Baptist Church v. City of Pewaukee (Municipal Fees)

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In Garfield Baptist Church v. City of Pewaukee (2018AP673), the Court of Appeals District II held that entities must challenge municipal sewerage and storm water fees with the Public Service Commission (PSC), not in circuit court. Furthermore, the burden of proving that municipal fees do not bear a “reasonable relationship” to the services provided should be on the challenger, not the defendant municipality.

Garfield Baptist Church alleged that the City of Pewaukee’s storm water management fees were unreasonable and inequitable. The court of appeals rejected the church’s means of challenging the city fees. Wis. Stat. § 66.0821(5) allows users to file complaints regarding unreasonable and unjust sewerage and storm water rates with PSC. PSC decisions, like other agency decisions, are then subject to judicial review under Wis. Stat. Ch. 227. The appeals court found that under that statute the church should have first filed a complaint with PSC about the city’s imposed fees.

The court of appeals also determined that the circuit court erred in imposing the burden of proof on the city to establish that its fees bore a “reasonable relationship” to the service provided, as required under Wis. Stat. § 66.0628(2). According to the court, common law generally places the burden of proof in municipal fee cases on the party challenging the fee (in this case the church). Additionally, § 66.0628(4) allows parties challenging municipal fees to appeal to the tax appeals commission and places the burden of proof of “reasonable relationship” on the city. The court found that by stating that the burden of proof is on the city in tax appeals commission cases, the law implies that the burden of proof is on the challenger in cases not before the tax appeals commission. Therefore, the burden of proof should be on the church to establish that the fees imposed by the city did not bear a reasonable relationship to the sewerage and storm water services provided.

In a concurring opinion, Judge Reilly agreed that the church did not properly challenge the city fees. However, the concurring opinion would have required the church to appeal to the tax appeals commission under § 66.0628(4), not PSC. According to the concurring opinion, PSC should handle challenges to rates, whereas the tax appeals commission should handle challenges to fees.

Papa v. DHS (Administrative Rules)

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In Papa v. DHS (2016AP2082/2017AP634), the court held that a challenge to a Wisconsin Department of Health Services (DHS) policy failed because the policy was not an administrative rule with the force of law.

Medicaid-certified nurse Kathleen Papa and Professional Homecare Providers, Inc. (PHP) filed the instant claim against DHS regarding Topic #66 in DHS’s Medicaid Provider Handbook. Topic #66 states that Medicaid providers must “meet all applicable program requirements” for reimbursement. If providers fail to meet all requirements, DHS can recoup payments from the providers.

Papa and PHP argued that Topic #66 was an illegal unpromulgated administrative rule and that the policy exceeded DHS’s explicit statutory authority under Wis. Stat. Ch. 227. The court held that Topic #66 is not an unpromulgated administrative rule because it does not have the “force of law” (Wis. Stat. § 227.01(13)). According to the court, Topic #66 simply summarizes existing law found elsewhere. Furthermore, PHP failed to show that DHS was enforcing Topic #66 like a rule. In recouping payments, DHS was not enforcing Topic #66 but was enforcing other statutes and rules referred to in the Topic.

Because the court found Topic #66 was not an administrative rule, Papa and PHP could not obtain a declaratory judgement via Wis. Stat. Ch. 227 judicial review of administrative rule proceedings.

In a dissent, Judge Reilly agreed that Topic #66 is not an administrative rule. However, the dissent argued Papa and PHP should be entitled to relief based on that fact. Under Topic #66, DHS was enforcing a requirement and recouped payments without legal right by statutes or properly promulgated administrative rules, in violation of 2011 Act 21 requirements in Wis. Stat. Ch. 227.

Tarrant v. DHS (Medicaid Eligibility)

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In Tarrant v. DHS (2018AP1299), the Court of Appeals District II held that testamentary trusts are countable unearned income for determining Medicaid eligibility.

The state Department of Health Services (DHS) denied Christine Tarrant’s application to renew medical assistance because her monthly payments from a testamentary trust combined with other income exceeded Medicaid eligibility limits. Tarrant appealed DHS’s decision, arguing that testamentary trusts are not “unearned income” countable toward determining Medicaid eligibility.

The court agreed with DHS and ruled against Tarrant. Federal law and state guidance in the Medicaid Eligibility Handbook do not specifically include testamentary trusts as countable unearned income, but the lists of countable unearned income sources are not exclusive. The regulations do include trusts as sources of unearned income, and the court rejected Tarrant’s argument that testamentary trusts should not be included because this particular type of trust is not specifically named. Under the court’s decision testamentary trusts are countable unearned income for DHS in determining Medicaid eligibility.

Secura Insurance v. Super Products, LLC (Economic Loss Doctrine)

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In Secura Insurance v. Super Products, LLC (2018AP1600), the Court of Appeals District II held that the economic loss doctrine bars recovery for damage to contracted property, even if there was injury to other property.

Wisconsin Utility Exposure purchased an excavator from Super Products. The excavator caused a fire that damaged the excavator itself and a variety of other items. Secura, Wisconsin Utility Exposure’s insurer, paid for the damages to its insured then filed the instant negligence lawsuit against Super Products. Super Products sought to dismiss the claims under the economic loss doctrine.

The economic loss doctrine typically bars lawsuits seeking to recover solely economic losses arising from the nonperformance of a contract, in this case the defective purchased product. Damages to “other property,” in this case the variety of other items damaged in the fire, are exempt from the economic loss doctrine and can be recovered. Secura argued the economic loss doctrine did not apply because the damage to the other property allows for recovery for the defective product.

The court rejected Secura’s reading of previous case law and held that the economic loss doctrine barred Secura’s claims for recovery of damages to the excavator. Secura could recover damages for injury to the other property, but that exempt claim did not open damages to the contracted property for recovery.

WCJC and Industry Partners Submit Comments on DHS PFAS Standards

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Wisconsin Civil Justice Council, as part of the Water Quality Coalition, recently submitted a letter and comments to the Wisconsin Department of Health Services (DHS) regarding their strict recommended groundwater standards for two PFAS chemicals, PFOA and PFOS. If promulgated as an enforceable rule, the standards would be costly to Wisconsin industry and would open up the state for frivolous lawsuits.

PFOA and PFOS are the most extensively produced and studied of a class of chemicals referred to as PFAS (per- and polyfluoroalkyl substance), which are found in many everyday products, including nonstick pans, cleaning products, paints, and firefighting foam. Existing best available science does not establish adverse health effects to humans from PFOA and PFOS exposure at current levels.

DHS, along with the Department of Natural Resources (DNR) and Department of Trade, Agriculture & Consumer Protection, announced in June a recommended groundwater standard of 20 parts per trillion (ppt) combined for PFOA and PFOS. The recommendation of 20 ppt is significantly below the federal Environmental Protection Agency’s (EPA) health advisory standard of 70 ppt. EPA also recently released a draft interim guideline for groundwater standards of 70 ppt.

Wisconsin law requires DHS to use EPA values for health standards if they are available, unless there is scientifically valid technical information that was not considered when the federal value was established (Wis. Stat. § 160.13(2)(b)). However, other studies show little effect on human health from PFOA and PFOS, even at much higher exposure levels than 20 ppt. Out of 19 other states regulating PFAS, only Vermont has set a standard as strict as the one proposed by Wisconsin’s DHS. New Jersey has an interim recommendation of 10 ppt.

DHS also recommends that the preventive action limit for PFOA and PFOS be set at 10 percent of the enforcement standard in accordance with Wis. Stat. § 160.15(1)(c). At 2 ppt, the preventive action limit would be the most strict regulation on PFOA and PFOS in the world. Preventive action limits are initial regulatory limits used to inform DNR about potential groundwater contamination and minimize the level of substances “to the extent technically and economically feasible” to prevent further contamination.

Costs imposed on the regulated community by these recommended standards could be significant. With no evidence of adverse human health effects resulting from PFOA and PFOS exposure, the recommended standards would not provide public health protections and instead would impose significant, unnecessary costs on Wisconsin businesses.

DHS held a comment period on the guidance documents related to these recommendations for just one day earlier this month. Under the Ch. 227.112 guidance documents requirements created in the 2018 extraordinary session legislation, comment periods must be 21 days, unless the governor approves a shorter period. In this case, the governor approved just a one day comment period on the PFOA and PFOS standards.

The DHS recommendations now must go through the DNR rulemaking process, with more opportunities for public input, before they are enforceable. DNR has not yet released a scope statement to begin promulgating the rules.