Independent Contractor Prevented from Suing Job Site Owner (2009)
By: Darren A. Feider
In Jolley v. Regence Blue Shield, 153 Wn. App. 434 (2009), the Washington Court of Appeals found that a physician, who had been dropped as a provider by a health care insurer, could not assert a claim for breach of contract that the insurer had made a specific promise for specific treatment in its employment policies because the physician was an independent contractor, and not an employee of the insurer.
In Jolley, the physician entered into a practitioner agreement with Regence Blue Shield regarding the payment of health care services. After the physician had been charged with having sexual relationships with his patient’s mother, the physician was investigated by the state and his license was suspended for five years. After challenging his suspension, the physician was placed on ten years probation with specific conditions. Various health care plans, including Medicare and Medicaid, terminated their provider agreements with the physician. On the other hand, other health care plans renewed their provider agreements with him after the investigation and hearings on his alleged conduct and his placement on probation. Regence, however, refused to reinstate the physician even after he was placed on probation. Its provider agreement had an at-will provision that permitted it to terminate any physician for any reason at any time and Regence was sticking with its decision to terminate him due to his conduct.
On appeal, the Jolley court first noted that although Regence had gone through a formalized process to review and analyze its reasons for terminating the physician, that process did not convert the termination into one for cause. The physician was not entitled to an opportunity to be heard and present his side of the story before terminating the provider agreement because “at-will” status means that an employer can terminate for “no cause, good cause or even a cause morally wrong.” The fact that Regence may have had a valid reason for terminating the physician did not convert the termination to one that required notice and opportunity to be heard.
The physician also argued that Regence had violated its own employment policies when it did not follow its specific internal procedures for terminating employees when it terminated his provider agreement. Regence had employment policies that involve progressive discipline for its employees, and the physician argued that he should receive the specific treatment found in those employment policies. The Jolley court recognized well established Washington law that there could be an equitable contract claim arising under a handbook or policy where (1) there is a specific promise for specific treatment which is contained in a company policy, (2) the employee justifiably relied on that promise, and (3) the company breached the promise. However, such promises of specific treatment apply to employees, and not to independent contractors like the physician. Thus, the physician could not assert an equitable claim arising from Regence’s employment policies.
There are several take aways from Jolley. First, the independent contractor status will not be lost and the relationship recharacterized as employer-employee merely because the employer had a good reason to terminate the contractual relationship (such as having a sexual relationship with a patient’s mother). Second, the Jolley decision emphasized the importance of a written contract with an independent contractor. It should provide for at-will or discretionary termination of the independent contractor agreement at any time for any reason. The Jolley court focused on that language in the physician provider agreement. Third, Washington courts still honor the doctrine of at-will employment as long as the company does not provide a specific promise for specific treatment in its written policies or procedures. The Jolley court noted that a company may terminate an employee “for no cause, good cause or even cause morally wrong.” The fact that the company had a valid reason to terminate does not, by itself, convert the termination into a cause proceeding, requiring notice and reason and an opportunity to be heard.
The Jolley court highlighted a common but often unanticipated risk faced by employers–their own written policies being used against them as a litigation weapon. If the company has a handbook or policy that provides for specific treatment in specific situations (e.g., progressive discipline policies providing for mandatory counseling, write-up and review before termination), Washington courts will recognize an equitable breach of contract claim. Thus, if handbooks or manuals promise progressive discipline or other types of specific treatment in specific situations, the company will be held to those policies as if it were a contract. However, these policies or procedures apply to employees and not to independent contractors.