In City of Oakland v. Workers’ Compensation Appeals Board and David Gullet, (2002) 99 Cal.App.4th 261, the California Court of Appeal considered whether the demotion of an employee amounted to a good faith personnel action so that the employee was precluded from receiving workers’ compensation for psychiatric injury suffered as a result of the demotion.
Facts
David Gullet, who was employed as a Parks Supervisor II by the City of Oakland, began to suffer from fatigue, headaches, anxiety, and hypertension because of job stress in 1997. In 1998, the director of Gullet’s department informed him that the Parks Supervisor II position would probably be eliminated in 1999 due to budgetary concerns and advised him to begin work as a Management Assistant, a position not targeted for elimination. With the director’s help, Gullet began working as a Management Assistant, but was not officially given the position.
After Gullet had been working as a Management Assistant for over five months, he received a demotion letter stating he was being demoted to Parks Supervisor I. Gullet considered this the “last straw,” left work and filed a workers’ compensation claim alleging psychiatric injury caused by stress from the demotion.
The workers’ compensation system awarded compensation, finding that Gullet’s injury was caused by the demotion after Gullet’s supervisor represented to him that he had been promoted to a safe position. The City appealed.
Court of Appeal’s Decision
California Labor Code § 3208.3(h) provides that workers’ compensation benefits should not be paid for psychiatric injury if it “was substantially caused by a lawful, nondiscriminatory, good faith personnel action.” The Court noted that the legislature enacted § 3208.3(h) because of public concern over the increase in the number of workers’ compensation claims for psychiatric injury. The legislature’s goal was to establish a “higher threshold of compensability in cases involving psychiatric injury.”
The appeals court determined that, in creating the good faith personnel action exemption, the legislature intended to give employers freedom to make routine personnel decisions such as discipline, evaluation, demotion, layoff, and termination. In analyzing the good faith personnel action exemption, the Court stated, “If a regular and routine personnel decision is made and carried out with subjective good faith and the employer’s conduct meets the objective reasonableness standard, section 3208.3’s exemption applies.” The Court concluded that Gullet was not entitled to compensation, since, although mistakes were made in attempting to protect Gullet from demotion, the City acted in good faith in making the personnel decision.