Wisconsin’s “Refusal to Rehire” Statute

In 1975, the Wisconsin legislature enacted section 102.35(3), Wis. Stats, to protected injured employees from the loss of employment following a work injury.  As presently comprised, the statute reads as follows:

Any employer who [1] without reasonable cause [2] refuses to rehire an employee who is injured in the course of employment, [3] when suitable employment is available within the employee’s physical and mental limitations, upon order of the department or the division, [4} has exclusive liability to pay to the employee, in addition to other benefits, the [5] wages lost during the period of such refusal, not exceeding one year’s wages. In determining the availability of suitable employment the continuance in business of the employer shall be considered and any written rules promulgated by the employer with respect to seniority or the provisions of any collective bargaining agreement with respect to seniority shall govern. (numbers in brackets supplied)

Among attorneys, section 102.35(3) is known as the “refusal to rehire” law and, in explaining it to clients, attorneys often describe it as Wisconsin’s wrongful discharge law for injured employees.  The statute protects injured employees against both unreasonable terminations of employment, as well as unreasonable refusals/failures to recall employees to work.

Claims of refusals to rehire are initially litigated before ALJs employed by the Wisconsin Division of Hearings and Appeals, Wisconsin Department of Administration.  Petitions for review from ALJ decisions are decided by the Labor and Industry Review Commission, which are appealable to the Wisconsin courts.

The Statute is to be Liberally Construed to Protect Employees

The Wisconsin courts have held that §102.35(3) “must be liberally construed to effectuate its beneficent purpose of preventing discrimination against employes who have sustained compensable work-related injuries.”  See, e.g., Great Northern Corp. v. LIRC, 189 Wis.2d 313, 317, 525 N.W.2d 361 (Ct. App. 1994). 

Employee’s Prima Facie Case

The initial burden of proof and burden of production lies with the employee, who must prove:

  1. He/she was an employee of the employer from which he or she seeks benefits;
  2. The injury occurred in the scope of employment (see section 102.03, Wis. Stats., for elements of compensable work injury under Wisconsin law); and
  3. subsequent to the injury, the employer failed or refused to rehire the employee. See, e.g., West Bend Co. v. LIRC, 149 Wis. 2d 110, 123, 438 N.W.2d 823 (1989)

When the employee has established this prima facie case, the burden shifts to the employer to prove to establish that its refusal to recall to, or termination of, employment did not violate the statute.

Employer’s Ultimate Burden of Proof

The refusal to rehire statute is rare – and perhaps singular – among Wisconsin statutory protections for employees, in placing on the employer the ultimate burden of proof to establish that its conduct was not wrongful.  As such, if there is no dispute that the employee has suffered an injury compensable under Chapter 102, Wis. Stats., it is the employer who must satisfy the ALJ (and LIRC, if there is an appeal) that its refusal to allow the employee to return to work, or its termination of her following the injury, was reasonable.

Appellate courts have articulated the standard for assessing an employer’s conduct in various ways, examples of which are as follows:

  • The employer must “show reasonable cause for its refusal to rehire the claimant.” deBoer Transp., Inc. v. Swenson, 2011 WI 64, ¶43.
  • “An employer, if there is suitable employment available, can [] refuse to rehire [only] for a cause or reason that is fair, just, or fit under the circumstances.” West Allis Sch. Dist. V. Dep’t of Indus., Labor & Human Relations, 116 Wis. 2d 410, 426, 342 N.W.2d 415 (1984).

Case law also deals with the so-called “mixed motive” situation. Wisconsin courts have stated that an employer is liable for unreasonable refusal to rehire even if it terminates the employee only “in part” because of his or her work injury.  Great Northern Corp., supra,189 Wis.2d at 318-19.

Moreover, the Labor and Industry Review Commission has held that reasonable cause for discharge or failure to rehire must include an absence of motivation related to the fact that the employee sustained a work injury. Sann v. Badger Care-A-Vans Inc., WC Claim No. 1997-028543 (LIRC, 9/13/00). This is widely understood by practitioners to mean that proof of an injury-related animus for the discharge is sufficient, but not necessary, to establish liability.  This is because the statute attaches liability to unreasonable conduct, and makes no mention of any motive or intent related to the employee’s injury.  But see, infra, deBoer Transp., Inc. v. Swenson, 2011 WI 64, ¶42.

Examples of Conduct Found to Meet the Reasonable Cause Standard: 

Sandra Krause v. Alwin Mfg. Co., WC Claim No. 1995-053285 (LIRC, 12/29/99):

Employee’s injury resulted in permanent light-duty restrictions. After about a year of providing the employee with modified work, the employer concluded that the situation was no longer feasible. The employer demonstrated that workers generally must be able to perform all jobs in their cell, and that the employer had no history of indefinitely or permanently accommodating workers whose permanent restrictions prevent them from performing all the jobs in a cell. The employee’s restrictions made her unable to perform all of the jobs in any position description or cell, thereby preventing her from being fully employed.

Joshua Baker v. Menard Inc., WC Claim No. 2012-005778 (LIRC, 12/17/13):

Employer had a policy regarding use of time clocks that required punching in and out for all breaks, including non-required breaks, and permitted immediate discharge for a violation of the policy. Prior to injury, the employee had been disciplined for wasting time in the breakroom while on the clock. Post-injury, managers observed and reported the employee sitting in the breakroom while on the clock. General manager investigated and decided to terminate the employee based on the most recent incidents as well as the prior warning. Moreover, the general manager did not know that the employee had a work injury (wound to his thumb) when he was terminated.

Patricia Ashton v. Distribution Servs., WC Claim No. 2001-018971 (LIRC, 01/30/03):

Prior to injury, the employee had disciplinary problems. After the injury, employer demonstrated willingness to work with the employee’s restrictions to put her back to work. However, the employee used abusive and insubordinate language while speaking with the employer’s general manager on the phone. Termination was performance and personality-based.

Examples of Conduct Found not to Meet the Reasonable Cause Standard:

James Stahl v. Light Haus of Madison, WC Claim No. 2012-015008 (LIRC, 03/27/14):

Employee worked as a glazier. Prior to his injury, when the company experienced slow time, they would tell the employee that work was unavailable, with an understanding that he would return once business picked up. After his injury, when the employee informed his employer that he was ready to return to work, the employer discharged the employee, effectively saying the employer could retain him or everybody else. While there may be reasonable cause to refuse to rehire an injured employee because the employee’s position was eliminated to reduce costs, that was not the case here. The employer did not explain why it could not follow the same procedure it had in the past—simply laying off the employee until business increased.

Derwin Hawkins v. City Supply Corp., WC Claim No. 2007-016142 (LIRC, 08/28/08):

Prior to injury, employee received a written warning for delivering an incomplete shipment. His employment file also contained two other unsigned warnings that were never delivered to him, including one only a few days prior to his work injury. The day after the injury, the employee returned to work at the request of his employer to discuss restrictions. A few days later, the employer told the employee it had work for him. Due to a doctor appointment that morning, the employee was instructed to come in around noon. However, after his appointment, the employee took his new medication and fell asleep. While he was asleep, the employer called and requested the employee call back ASAP to get him scheduled. Later that evening, the employee returned the call just to be told that the employer assumed he had quit, and that his services were no longer needed. At hearing, the employer emphasized that the employee’s failure to report for work at noon was the “final straw” resulting in the employee’s discharge. However, the “first straws” (undelivered warnings) were also questionable. Moreover, the employer’s VP testified that he really did not think the employee had quit, and that if the employee had called back by the end of the workday instead of in the evening, the employee would not have been terminated.

Robert Schaefer v. Norco Mfg. Corp., WC Claim No. 2001-050871 (LIRC, 07/14/05):

Employee was discharged after a series of work-related accidents. The employer claimed the decision was based on two factors: the employee’s injury history and the increasing severity of those injuries. Notably, there was no record of the employers “safety concerns” or evidence of the employee deliberately or recklessly ignoring safety instructions. Moreover, when a worker is injured and the employer believes he is likely to reinjure himself, it needs expert medical evidence to justify the discharge. The employer offered no competent proof from a medical or psychological expert that the employee had a condition or impairment that made him mentally or psychologically unfit for his employment; he was simply accident prone.

Who Has the Duty to Initiate Discussions about a Return to Work?

If the employee has not already been terminated, it is the employee’s obligation to advise the employer that he/she is ready to return to work, as one of the elements of a prima facie case for unreasonable refusal to rehire. West Bend Co. v. Labor & Indus. Review Comm’n, 149 Wis. 2d 110, 126, 438 N.W.2d 823 (1989). If the employee is unable to perform the duties of his time-of-injury job, but is willing to work for the employer in a different capacity, the employee must first inform the employer (whether formally or informally) that she is willing to take a different job before bringing an unreasonable refusal to rehire claim. Hill v. Labor & Indus. Review Comm’n, 184 Wis. 2d 101, 112, 516 N.W.2d 441 (Ct. App. 1994).

However, an already terminated employee need not report to work as a precondition to recovery in an unreasonable refusal to rehire claim. See L & H Wrecking Co. v. Labor & Indus. Review Comm’n, 114 Wis. 2d 504, 339 N.W.2d 344 (Ct. App. 1983).

deBoer Transp., Inc. v. Swenson:  The Supreme Court Addresses but does not Decide the Whether Proof of Motive is Required in Refusal to Rehire Claims

As noted above, Wisconsin courts and LIRC have consistently held the proof of motive is not required to establish a violation of section 102.35(3), Wis. Stats.  However, in deBoer v. Swenson, 2011 WI 64, the Wisconsin Supreme Court nonetheless concluded, in dicta, that there is mixed precedent regarding whether motive must be established in order to prove such a violation. Citing Ray Hutson Chevrolet v. LIRC, 186 Wis. 2d 118, 122, 519 N.W.2d 713 (Ct. App. 1994) and Hill v. LIRC, 184 Wis. 2d 101, 111, 516 N.W.2d 441 (Ct. App. 1994), the court stated some cases require a showing that the employer refused to rehire because of the work-related injury. However, referring to West Allis, supra, 116 Wis. 2d at 424-25 and Dielectric Corp. v. LIRC, 111 Wis. 2d 270, 278, 330 N.W.2d 606 (Ct. App. 1983), the court observed the other courts have not required proof of motivation. 

Finding that the employer had not acted unreasonably, the court state, “While we take the opportunity to underscore this potential inconsistency in the case law, we save its resolution for another day.” deBoer Transp., Inc. v. Swenson, 2011 WI 64, ¶42.

The two cases that do not require proof of motivation as part of the prima facie case are pre-West Bend. The two that appear to require proof of such motivation are post-West Bend. In deBoer, the court observed that this potential inconsistency could be a result of its own inconsistent statement of the law in West Bend. For example, Hutson quotes an excerpt from West Bend that seems to require proof of motivation as part of the prima facie case. But other language in West Bend supports the argument that proof of such motivation is not required.[1]

The stronger argument here is that a claimant does not need to prove, as part of his prima facie case, that the discharge or refusal to rehire was motivated by the injury.  First, the language of the statute itself speaks only of proof of “reasonable cause,” and does not state or even imply that intent or motive needs to be  considered. Second, because Dielectric, which is the first temporally in these series of cases, clearly interprets § 102.35(3) as establishing a new public policy that it is the burden of the employer to show that it did not act in bad faith. The court acknowledges that in most employment-at-will situations the burden is on the employee to show bad faith, but determines that the opposite should apply in § 102.35(3) claims. See Dielectric, 111 Wis. 2d at 278.[2] A review of subsequent cases reveals no negative treatment of Dielectric. If West Bend intended to overrule Dielectric, the court presumably would have said so. Indeed, West Bend cites the highlighted portion of the footnoted excerpt from Dielectric with approval—calling it a “very correct” statement. 149 Wis. 2d at 121.Third, even the post-West Bend cases acknowledge that “reasonable cause” is a question of fact and law. See, e.g., Huston, 186 Wis. 2d at 122 (citing United States v. Boyle, 469 U.S. 241, 249 n.8 (1985)). There is a strong implication that the prima facie case is a question of fact, and that “reasonable cause” is a question of law after the initial showing. See id. (“Once the facts are established, whether they give rise to reasonable cause is a question of law.”).

Penalties for Unreasonable Refusals to Rehire

Upon a finding of an unreasonable refusal to rehire, the ALJ will assess a penalty against the employer, requiring payment to the employee of one year’s wages.  The penalty amount is determined by performing a one-year lookback from the date of injury. So, if the employee were injured on June 1, 2019, the penalty would amount equivalent to what he earned between June 2, 2018, and June 1, 2019.

ALJs and LIRC have consistently held that section 102.35(3) imposes on the employee no duty to mitigate following an unreasonable termination. See, e.g., Muhbash-Shir Muhammed II v. Maple Leaf Farms Inc., WC Claim No. 1995-002415 (LIRC, 05/08/97). However, if the employee has earned money following the termination, the penalty amount is offset by post-termination earnings as of the date of hearing. See, e.g., Robin Koneck v. Aetna Moving & Storage Inc., WC Claim No1990-073112 (LIRC, 05/14/92).Nonetheless, because the employee is entitled to recover an entire year’s wages following an unreasonable termination of employment, he may return to the ALJ to recover further losses in subsequent hearings until the entire penalty amount is recovered. See, e.g., Gregory Bailey v. Michaels Furniture & Design, WC Claim No. 1990-049029 (LIRC, 11/07/95). 

Federal Preemption of Certain Claims

In cases where the discharged employee was a member of a private sector bargaining unit, federal labor law may preempt Wisconsin’s refusal to rehire statute, requiring that adjudication of whether the termination was legal or proper is for an arbitrator, under the parties’ collective bargaining agreement.  “Federal preemption applies when an employee’s claim against a private employer is substantially dependent on analysis of the relevant collective bargaining agreement, because in such cases Section 301 of the Labor Management Relations Act (29 U.S.C. § 186) applies.” Lingle v. Norge, 486 U.S. 399, 413, 108 S.Ct. 1877 (1988) (emphasis added).

In John Johnson v. UPS, Claim No. 2008-029400 (LIRC, 05/24/2011), LIRC rejected the employer’s preemption argument, stating that because the collective bargaining agreement’s phrase “gross negligence” had not been invoked when UPS fired the claimant, one of its drivers, federal law did not preempt LIRC’s jurisdiction. Likewise, in Windus v. ADS Waste Holdings Inc., Claim No. 2017-004763 (12/14/2018), LIRC held that its jurisdiction under section 102.35(3) was not preempted simply because the parties’ collective bargaining agreement did not permit a probationary employee to grieve his termination.

[1] As recently as 2015, the Labor and Industry Review Commission has referred to the “very correct standard” articulated in Dialectric. See Aaron Vukovic v. Airoldi Bros., Inc. (LIRC, 8/30/2011). In addition, as recently as 2015, the Commission affirmed an ALJ decision in which the ALJ specifically stated that the employee need not prove that the discharge from employment was because of the injury.  Patricia Novak v. Papa Murphys Take N Bake of MN (LIRC, 6/25/2015).

[2] “We interpret sec. 102.35(3), Stats., as creating a new public policy. The practical effect of this statute is that the employment at will doctrine has been modified by this statute. Normally, in an employment at will situation, the burden is on the employee to show bad faith on the part of the employer; under sec. 102.35(3), the burden is shifted to the employer. Under this new statute, once the employee has suffered a worker’s compensation injury, the question initially becomes: does the employer have good cause not to rehire. If the employee is rehired, the rehiring cannot be a pro forma rehiring. Therefore, if there is an eventual discharge, the employer must show that there is no bad faith on its part to evade this statute and that the rehired employee was discharged with good cause.” (emphasis added).

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