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A Provision in an Employee Handbook May Supplant the At-Will Rule in Pennsylvania

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A claim for wrongful discharge in Pennsylvania may only be asserted in very limited circumstances. An at-will employee who is terminated may claim wrongful discharge only when his termination is made with a specific intent to harm or is contrary to public policy. Tourville v. Inter–Ocean Ins. Co., 353 Pa.Super. 53, 55, 508 A.2d 1263, 1265 (1986); Engstrom v. John Nuveen and Company, 668 F.Supp. 953, 958 (E.D.Pa.1987); Geary v. U.S. Steel Corp., 456 Pa. 171, 178–83, 319 A.2d 174, 177–80 (1974).

In Pennsylvania, there is a very strong presumption of at-will employment relationships. The presumption may be overcome by express contract, implied in-fact contract (where the surrounding circumstances of the hiring indicate that the parties did not intend to be at-will), and additional consideration passing from the employer (if the employee bestows a legally sufficient benefit or incurs a sufficient detriment for the benefit of the employer beyond the services for which he was hired, a court may infer that the parties intended to overcome the at-will presumption).Scott v. Extracorporeal, Inc., 376 Pa.Super. 90, 95, 545 A.2d 334, 336 (1988).

Notwithstanding the level of proof required to supplant the at-will presumption, “[a] handbook is enforceable against an employer if a reasonable person in the employee’s position would interpret its provisions as evidencing the employer’s intent to supplant the at-will rule.” Scott v. Extracorporeal, Inc., supra, 376 Pa.Super. at 97, 545 A.2d at 337; DiBonaventura v. Consolidated Rail Corp., 372 Pa.Super. 420, 426, 539 A.2d 865, 868 (1988); Reilly v. Stroehmann Bros. Co., 367 Pa.Super. 411, 419–20, 532 A.2d 1212, 1215–16 (1987). In all of these cases the courts looked to the language of the handbook to determine whether a reasonable employee would understand the provisions to transform his at-will employment into a contractual employment relationship. “A handbook, to be construed as a contract, must contain unequivocal provisions that the employer intended to be bound by it and, in fact, renounced the principle of at-will employment.” Id. at 416, 532 A.2d at 1214.

It is important to keep in mind that there is no presumption that the distribution of a handbook by an employer shows that the employer intends to alter the existing employer-employee relationship.  Mudd v. Hoffman Homes for Youth, Inc., 374 Pa. Super. 522, 543 A.2d 1092 (1988); Martin v. Capital Cities Media, Inc., 354 Pa. Super. 199, 511 A.2d 830 (1986).  As shown above, however, an employee may reasonably regard a handbook as legally binding when the handbook, or an employer’s oral representation about the handbook, unequivocally states that it is to have this effect.

The First Sale Doctrine

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Copyright law provides copyright owners several exclusive rights, including the right to distribute copies of their works. See, 17 U.S.C. §106 (2006) (granting copyright owners the exclusive rights to reproduce their works, prepare derivative works, distribute copies, to perform their works publicly, and to display the copyrighted works publicly). However, a copyright owner’s exclusive right to distribution is limited by a provision that authorizes the owner of a particular copy of a work to sell or otherwise dispose of that copy without having to seek the permission of the copyright owner. 17 U.S.C. § 109(a).  In other words, a copyright holder who sells or gives away a copy of his or her work no longer retains an exclusive right over that particular copy.  The new owner of that copy can then sell it, donate it, rent it or otherwise dispose of it, with certain exceptions for leasing/renting related to software and phonorecords. See, 17 U.S.C. § 109(b).

The statutory provision at hand, Section 109 of the Copyright Act, is a codification of the “first sale doctrine” and an extension of the principle stated in 17 U.S.C.A. § 202 that ownership of the material object is distinct from ownership of the copyright in the material. Columbia Pictures Industries, Inc. v. Redd Horne, Inc., 749 F.2d 154 (3d Cir. 1984). The “first sale doctrine,” which was developed under prior law, provided that the copyright owner’s exclusive right to distribute copies of the copyrighted work extended only to the first sale of that copy. Platt & Munk Co. v. Republic Graphics, Inc., 315 F.2d 847 (2d Cir. 1963); Independent News Co. v. Williams, 293 F.2d 510 (3d Cir. 1961); U.S. v. Powell, 701 F.2d 70 (8th Cir. 1983); U.S. v. Wise, 550 F.2d 1180 (9th Cir. 1977); C. M. Paula Co. v. Logan, 355 F. Supp. 189 (N.D. Tex. 1973). After the first sale of a copy, the copyright owner had no further control over future sales of that copy.

Although Section 109 of the Copyright Act has many clear benefits to the public, including the discounted secondary sales market for products (such as Ebay, Craigslist, yard sales and used book stores), the large shift towards digital consumption of works (via websites such as Itunes and Amazon’s digital store, and for products such as ipods, ipads, kindles and nooks) constrains the benefits of the first sale doctrine.  Since the Copyright Act does not allow consumers to purchase digital products, copy them, and resell them on the secondary market, the applicability of Section 109 to digital purchases would seem extremely limited, if not eliminated.  Accordingly, as consumers move from physical copies to digital works, many of the benefits of first sale doctrine will be lost

The Pennsylvania Commissioned Sales Representative Act

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The Pennsylvania Commissioned Sales Representative Act (“PCSRA”) provides that a “principal shall pay a sales representative all commissions due at the time of termination within 14 days after termination” and “all commissions that become due after termination within 14 days of the date such commissions become due.” 43 Pa. Stat. §§ 1473–74.  If a principal “willfully” violates these provisions, then the sales representative may bring a civil action to collect all unpaid commissions plus exemplary damages in an amount not to exceed two times the commissions due to the sales representative, and costs of suit and attorneys’ fees. Id. § 1475.

Under the PCSRA, a “principal” is defined as any person who does all of the following: (1) engages in the business of manufacturing, producing, importing or distributing a product for sale to customers who purchase such products for resale; (2) (2) Utilizes sales representatives to solicit orders for such product; and (3) Compensates sales representatives, in whole or in part, by commission. Id. § 1471.

Furthermore, the PCRA defines a “sales representative” as “[a] person who contracts with a principal to solicit wholesale orders from retailers rather than consumers and who is compensated, in whole or in part, by commission.” Id.   A sales representative, as that term is defined in the PCRA, explicitly excludes “one who places orders or purchases for his own account for resale or one who is an employee of a principal.” Id.

Although the PCRA is an important and beneficial statute for sales representatives, it is important to keep in mind that it does not provide protection to all sales agents who work on commission. Not only does the precise language of the PCRA limit its coverage to the types of sales representatives described above, but the courts have often strictly construed the terms “retailers” and “consumers” to further limit the applicability of the PCRA, despite the fact that those terms are not defined in the statute. See, Kamco Indus Sales Inc. v. Lovejoy Inc., 779 F. Supp. 2d 416 (E.D.Pa.2011); Total Control, Inc. v. Danaher Corp., No. 02–668, 2004 WL 1878238, *3 (E.D.Pa.2004); United Products Corp. v. Admiral Tool and Manufacturing Co., 122 F.Supp.2d 560, 564 (E.D.Pa.2000).

Philadelphia Business Lawyers: The Doctrine of Equitable Estoppel in Pennsylvania

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Equitable estoppel is thought of as a shield, not a sword.  It does not itself create a cause of action, but is used to prevent an unjust result and to preserve rights that are already acquired.  As defined by the courts in Pennsylvania, the doctrine of equitable estoppel applies when one person, by his or her acts, representations, or admissions or by his or her silence when he or she ought to speak out, intentionally or through culpable negligence induces another person to believe certain facts to exist and such other person rightfully relies and acts on such belief, so that he or she will be prejudiced if the former is permitted to deny the existence of such facts. Price v. Chevrolet Motor Div. of General Motors Corp., 2000 PA Super 410, 765 A.2d 800, 43 U.C.C. Rep. Serv. 2d 593 (2000); Zitelli v. Dermatology Educ. and Research Foundation, 534 Pa. 360, 633 A.2d 134, 87 Ed. Law Rep. 157 (1993).

The two essential elements of equitable estoppel are inducement and justifiable reliance on that inducement. The inducement may be words or conduct and the acts that are induced may be by commission or forbearance provided that a change in condition results causing disadvantage to the one induced. Novelty Knitting Mills, Inc. v. Siskind, 500 Pa. 432, 436, 457 A.2d 502, 503-04 (1983) (citing Funds for Business Growth, Inc. v. Woodland Marble and Tile Company, 443 Pa. 281, 278 A.2d 922 (1971); Ham v. Gouge, 214 Pa.Super. 423, 257 A.2d 650 (1969)).  There will be no equitable estoppel where the complainant’s act appears to be the result of his or her own will or judgment rather than the product of what the defendant did or represented.  Some courts view this issue – whether the complainant knew or should have known about the facts (duty of inquiry) – as the third element of equitable estoppel. Chester Extended Care Center v. Com., Dept. of Public Welfare, 526 Pa. 350, 586 A.2d 379 (1991); Appeal of Heim, 151 Pa. Commw. 438, 617 A.2d 74 (1992).

Generally stated, equitable estoppel applies to prevent a party from assuming a position or asserting a right to another’s disadvantage inconsistent with a position previously taken. The person inducing the belief in the existence of a certain state of facts is estopped to deny that the state of facts does in truth exist, over a different or contrary state of facts as existing at the same time, or deny or repudiate his acts, conduct or statements.  Novelty Knitting Mills, Inc. v. Siskind, 500 Pa. 432, 436, 457 A.2d 502, 503-04 (1983). (internal citations omitted).  The burden of proof rests on the party asserting the estoppel to establish such estoppel by clear, precise and unequivocal evidence. Id.

How to determine whether an Unemployment Compensation Claimant is an Independent Contractor in Pennsylvania

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In Pennsylvania, there is a presumption under Unemployment Compensation Law (“Law”) that an individual receiving wages is an employee and not an independent contractor engaged in self-employment. Electrolux Corporation v. Department of Labor and Industry, Bureau of Employer Tax Operations, 705 A.2d 1357, 1359–60 (Pa.Cmwlth.1998).  However, an employer can overcome this presumption by establishing that a claimant is self-employed. Id. at 1360.  If an employer can establish that a claimant is an independent contractor (and thus self-employed), the Law provides that such an individual “shall be ineligible for compensation for any week … [i]n which he is engaged in self-employment.” 43 P.S. § 802(h).

An employer establishes that a claimant is self-employed by proving that the claimant was: (1) free from control and direction in the performance of his service; and (2) customarily engaged in an independent trade or business as to that service. See, 43 P.S. § 753(l)(2)(B); see also, Beacon Flag Car Company, Inc. (Doris Weyant) v. Unemployment Compensation Board of Review, 910 A.2d 103, 107 (Pa.Cmwlth.2006).

As to the first prong of the test , courts consider whether the employer exercised “control” as to the work to be done and the manner in which the work is to be performed.  A number of factors have been identified by the court in determining whether an individual is free of control; they include: “whether there is a fixed rate of remuneration; whether taxes are withheld from the [individual]‘s pay; whether the employer supplies the tools necessary to carry out the services; whether the employer provides on-the-job training; and whether the employer holds regular meetings that the [individual] was expected to attend.” CE Credits OnLine v. Unemployment Comp. Bd. of Review, 946 A.2d 1162, 1168 (Pa.Cmwlth.2008).  No one factor will control the outcome, but the courts will look to the entire relationship to determine whether the requisite control exists to establish an employer-employee relationship.” Tracy v. Unemployment Compensation Board of Review, 23 A.3d 612, 616 (Pa.Cmwlth.2011).

As to the second prong of the test—whether the claimant is customarily engaged in an independently established trade, occupation, profession, or business—courts consider “whether the individual was capable of performing the activities in question [for] anyone who wished to avail themselves of the services and whether the nature of the business compelled the individual to look to only a single employer for the continuation of such services.” Venango Newspapers v. Unemployment Comp. Bd. of Review, 158 Pa.Cmwlth. 379, 631 A.2d 1384, 1388 (1993). Where the employee is free to accept or reject an assignment, the individual generally is not considered to look to a single employer for the continuation of such services. Danielle Viktor, Ltd. v. Dep’t of Labor and Indus., Bureau of Employer Tax Operations, 586 Pa. 196, 229, 892 A.2d 781, 801 (2006).

Corporate Negligence Claims Against Hospitals in Pennsylvania

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In Thompson v. Nason Hospital, 527 Pa. 330, 591 A.2d 703 (1991), the Pennsylvania Supreme Court first held that a hospital can be held directly liable for corporate negligence. The Court reasoned that the concept of corporate negligence should apply to a hospital so that a hospital is liable if it fails to uphold the proper standard of care owed the patient, “which is to ensure the patient’s safety and well-being while at the hospital.” Thompson, 527 Pa. at 339.

Corporate negligence is based on the negligent acts of the institution. Welsh v. Bulger, 548 Pa. 504, 513 (1997) (internal citations omitted). A cause of action for corporate negligence arises from the policies, actions or inaction of the institution itself rather than the specific acts of individual hospital employees. Id.  Thus, under this theory, a corporation is held directly liable, as opposed to vicariously liable, for its own negligent acts. Id.

The court in Thompson held that a hospital has the following corporate duties: (1) a duty to use reasonable care in the maintenance of safe and adequate facilities and equipment; (2) a duty to select and retain only competent physicians; (3) a duty to oversee all persons who practice medicine within its walls as to patient care; and (4) a duty to formulate, adopt and enforce adequate rules and policies to ensure quality care for the patients. Thompson, 527 Pa. at 339-40.

“Because the duty to uphold the proper standard of care runs directly from the hospital to the patient, an injured party need not rely on the negligence of a third-party, such as a doctor or nurse, to establish a cause of action in corporate negligence.” Moser v. Heistand, 545 Pa. 554, 558, 681 A.2d 1322, 1325 (1996). To establish a claim for corporate negligence against a hospital, a plaintiff must show that the hospital had actual or constructive knowledge of the defect or procedures that created the harm. Welsh, 548 Pa. at 514 (internal citations omitted). The plaintiff also must establish that the hospital’s negligence was a substantial factor in causing the harm to the injured party. Id. In terms of evidence, a plaintiff must produce expert testimony to establish that the hospital deviated from an accepted standard of care and that the deviation was a substantial factor in causing the harm to the plaintiff, unless a hospital’s negligence is obvious. Id.

Hostile Work Environment Claims under Title VII and the Pennsylvania Human Rights Act

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Title VII of the Civil Rights Act of 1964 “makes it unlawful for an employer ‘to discriminate against any individual with respect to his [or her] compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.’ ” Kunin v. Sears Roebuck and Co., 175 F.3d 289, 293 (3d Cir.1999), citing 42 U.S.C. § 2000e-2(a)(1). The scope of protection provided by Title VII includes protection against a hostile work environment.

There are five elements that a plaintiff must prove to establish a claim for hostile work environment under Title VII -1) the employee suffered intentional discrimination because of his or her protected class; (2) the discrimination was pervasive or regular; (3) the discrimination detrimentally affected the employee; (4) the discrimination would detrimentally affect a reasonable person of the same race in that position; and (5) the existence of respondeat superior liability. Clark County School Dist. v. Breeden, 532 U.S. 268, 270, 121 S.Ct. 1508, 149 L.Ed.2d 509 (2001); Andrews v. City of Philadelphia, 895 F.2d 1469, 1472 (3d Cir.1990). The same standards apply to the claims raised under the Pennsylvania Human Rights Act(“PHRA”). Jones v. School Dist. of Philadelphia, 198 F.3d 403, 410 (3d Cir.1999).

With respect to the second element, the Supreme Court has made clear that Title VII is not a “general civility code,” Faragher v. City of Boca Raton, 524 U.S. 775, 788, 118 S.Ct. 2275, 141 L.Ed.2d 662 (1998). The Court has also observed that “hostile work environment” harassment must be pervasive or severe enough “to alter the conditions of … employment and create an abusive working environment.” Meritor Sav. Bank. FSB v. Vinson, 477 U.S. 57, 67, 106 S.Ct. 2399, 91 L.Ed.2d 49 (1986), quoting Henson v. City of Dundee, 682 F.2d 897, 904 (11th Cir.1982). The test looks to the totality of the circumstances, including the frequency of the discriminatory conduct, its severity, whether it is physically threatening or humiliating or a mere offensive utterance, and whether it interferes with an employee’s work performance. Harris v. Forklift Systems, Inc., 510 U.S. 17, 21, 114 S.Ct. 367, 126 L.Ed.2d 295 (1993)

The standards governing employer liability for a hostile work environment differ depending on the source of the hostility. Imputing liability for co-worker harassment is grounded in the employer’s direct negligence. Ocheltree v. Scollon Productions, Inc., 335 F.3d 325, 333-34 (4th Cir.2003). Where a co-worker is the source of the hostile environment, “liability exists where the defendant knew or should of known of the harassment and failed to take prompt remedial action.” Kunin, 175 F.3d at 293 (internal citations omitted).