Tennessee Supreme Court holds that businesses may lawfully refuse to hire employees solely because they’ve previously filed for workers’ compensation.

By Daniel A. Horwitz

Can a business refuse to hire you solely because you’ve previously filed a workers’ compensation claim?  According to the Tennessee Supreme Court, the answer is yes.

In Yardley v. Hospital Housekeeping Systems, the Tennessee Supreme Court accepted a certified question of law to determine whether the Tennessee Workers’ Compensation Act prohibits employers from refusing to hire a prospective employee solely because he or she “had filed, or is likely to file, a workers’ compensation claim incurred while working for a previous employer.”  In some states, discrimination of this sort is unlawful and gives rise to a claim for “retaliatory failure to hire.”  In an opinion authored by Chief Justice Sharon Lee, however, the Tennessee Supreme Court held that under Tennessee law, this practice is legal.

In 2010, Kighwaunda Yardley, a hospital housekeeping employee, was hurt on the job and began receiving workers’ compensation benefits.  She received treatment and continued performing “light duty work” for her employer until 2012, with the expectation that when she fully recovered from her injury, she would return to her job as a housekeeping aide.

Unfortunately for Ms. Yardley, in 2012, her job was outsourced to a separate company (“the New Company”).  The New Company re-hired most of the hospital’s housekeeping staff, but it declined to hire Ms. Yardley.  An internal email sent by the New Company’s Vice President revealed that he had written that Ms. Yardley had: “been out on Workers’ Comp with the hospital long before the [New] Company’s arrival,” that her shoulder was hurting her again, and that “bringing her on board with the [New] Company would seem to be a Workers’ Comp claim waiting to happen.”  The New Company’s Vice President also stated internally that he: “would advise against hiring Ms. Yardley IF we have that option.”   After she was not hired, Ms. Yardley sued the New Company for retaliatory failure to hire.

Tennessee adopts a presumption that employees are hired “at will.”[1]  “The doctrine of employment at will . . . allows either party to terminate the relationship with or without cause.”[2]  However, a key exception to the employment-at-will doctrine is that an at-will employee may not be fired for taking an action that is encouraged by public policy.[3]  This concept is premised upon the notion that allowing employers to fire employees for doing things that they have a legal right to do—and that society encourages them to do—would have a “chilling effect” on employees’ decisions, and thus, would undermine public policy.  Consequently, it is illegal for an employer to fire an employee for pursuing any number of legal rights, such as voting or filing a sexual harassment complaint, and doing so  gives rise to a legal claim for “retaliatory discharge.”

Based on this premise, in Tennessee (and in every other state), an employer who fires an employee solely for filing a worker’s compensation claim is liable to be sued for retaliatory discharge.[4]  The question in Ms. Yardley’s case, however, was slightly different.  Specifically, rather than firing a current employee, may a new company refuse to hire someone solely because she had previously filed a worker’s compensation claim?

According to Justice Lee, for purposes of Tennessee law, the answer is yes.  “[F]ailure to hire cannot be equated with termination of employment, as employees and job applicants are on different footing,” her opinion explains.  “The employer-employee relationship involves mutual acquiescence, and certain levels of trust and dependence are created upon its formation.”  According to the Tennessee Supreme Court, these considerations are not involved in forming a new employee-employer relationship, and thus, “retaliatory discharge” claims and “retaliatory failure to hire” claims are not analogous.

The Court’s opinion in Yardley also discusses the “chilling effect” that would be created by allowing companies to discriminate against prospective employees solely because they had previously filed workers’ compensation claims.  Ms. Yardley claimed that “if employers may legally refuse to hire job applicants because they have current or prospective workers’ compensation claims, then employees will be discouraged from filing such claims.”  Rejecting that argument, however, Justice Lee’s opinion explains that “the alleged harm [is] too speculative to justify an exception.”  Thus, under Tennessee law, a company may officially refuse to hire a prospective employee solely because he or she previously filed a workers’ compensation claim while working elsewhere.

Although Yardley has not enjoyed much media attention, the decision may have far-reaching consequences.  By relieving “new” employers of the same obligations of “old” employers, the Court’s opinion in Yardley creates a strong monetary incentive for companies to outsource employees whom they would like to be able to fire, but whom they legally may not fire.  Notably, this appears to be precisely what happened in Ms. Yardley’s case.  Considered from her perspective, she had lawfully applied for and received workers’ compensation benefits, and thus, under Tennessee law, her employer could not fire her on that basis alone.  However, by outsourcing her job to a “new” company that refused to hire her (but did hire most everyone else she worked with), the new company and her former employer were able to circumvent existing law precluding retaliatory discharge, and they succeeded in getting rid of her without incurring any liability.

Based on the Tennessee Supreme Court’s reasoning in Yardley, the decision would appear to extend to any other type of retaliatory failure to hire claim, whether it involves workers’ compensation or not.  Whether other employers will adopt this practice in an effort to accomplish the same end, however—and whether the state legislature will step in and fix this problem by establishing a cause of action for retaliatory failure to hire—only time will tell.

Read the Tennessee Supreme Court’s decision in Yardley v. Hospital Housekeeping Systems, authored by Chief Justice Sharon Lee, here.

Questions about this article?  Email Daniel Horwitz at daniel.a.horwitz@gmail.com.

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[1] Mason v. Seaton, 942 S.W.2d 470, 474 (Tenn. 1997) (“Employment-at-will is the fundamental principle controlling the relationship between employers and employees.”).

[2] Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 899 (Tenn. 1992).

[3] Williams v. City of Burns, No. M-2012-02423-SC-R11-CV, 2015 WL 2265531, at *7 (Tenn. May 4, 2015) (“Tennessee has recognized a common-law claim for retaliatory discharge where an employee is discharged in contravention of public policy.”).

[4] See Tenn. Code Ann. § 50-6-114(a) (“No contract or agreement, written or implied, or rule, regulation or other device, shall in any manner operate to relieve any employer, in whole or in part, of any obligation created by this chapter”).