California: COVID-19 and the Fraudulent Concealment Exception

When do the exclusivity provisions of Labor Code section 3600 permit an action for law at damages?

By Hon. Susan V. Hamilton, Former Assistant Secretary and Deputy Commissioner, California Workers’ Compensation Appeals Board

Generally, an employee injured in the course and scope of their employment is limited to remedies under California’s Workers’ Compensation Act (act) (Lab. Code, § 3600(a)). One exception to the exclusivity of the act is Labor Code section 3602(b)(2). That exception permits an employee to pursue a civil action when their injury is aggravated by the employer’s fraudulent concealment of the existence of the injury and its connection with the employment. In such a situation, the employer’s civil liability is limited to those damages proximately caused by the aggravation. But can the fraudulent concealment exception apply if the work-related injury is a COVID-19 infection? Yes, said the Court of Appeal when it reversed a trial court’s order sustaining the employer’s demurrer without leave to amend, and directed the trial court to issue a new order overruling the demurrer. The case is Chavez v. Alco Harvesting, LLC (Chavez) (June 17, 2024) 2024 Cal. App. LEXIS 380. The decision has been certified for publication.

The Facts

Leodegario Chavez Alvarado (decedent) was employed by Alco Harvesting, LLC (defendant) as a foreman and bus driver. In 2020 defendant provided decedent and other Alco employees with housing at the Hotel Santa Maria (hotel). Some Alco employees were placed in close living quarters at the hotel that precluded social distancing. Defendant was aware that the living situation at the hotel facilitated the spread of COVID-19.

Indeed, soon after decedent’s placement at the hotel, a COVID-19 outbreak began at the facility. Although defendant was aware of the outbreak, decedent was unaware of it and continued to live at the hotel. Despite its knowledge of the COVID-19 outbreak at the hotel, defendant did not notify its employees, did not notify the local health department, and failed to implement safety measures or take steps to prevent the spread of the outbreak.

Approximately June 26, 2020, decedent became ill with symptoms that were associated with a COVID-19 infection. Decedent promptly reported feeling unwell to his supervisors. Decedent was unaware that he had contracted COVID-19.

On July 2, 2020, a week after he had reported his symptoms to his supervisor, decedent tested positive for a COVID-19 infection. Defendant immediately moved decedent to a Motel 6. Applicant died five days later of COVID-19 complications.

Procedural History

Maria Chavez (plaintiff), decedent’s widow, brought a civil action against defendant, in which she alleged that her husband died of COVID-19 complications after contracting the infection while working for defendant. The civil complaint alleged that defendant fraudulently concealed the COVID-19 outbreak at the hotel from decedent; that defendant was aware of decedent’s COVID-19 infection before decedent was aware that he had contracted COVID-19; and that defendant’s fraudulent concealment of the outbreak and the nature of decedent’s illness aggravated the illness to the point that decedent was unable to recover and died from the infection.

Defendant demurred to the complaint, arguing, among other particulars, that plaintiff had failed to prove it had actual knowledge that decedent had sustained a work-related injury when decedent reported his symptoms to his supervisor. Defendant also disputed it knew the source of the infection prior to decedent, claiming that when decedent reported his illness, he was aware of his own symptoms, and they were associated with a COVID-19 infection. Defendant also claimed the complaint was deficient because it did not provide specific details about decedent’s close contact with or proximity to the outbreak.

The Court’s Analysis

The Court of Appeal begins its analysis by acknowledging the general rule that an employee who sustains a work-related injury is limited to the remedies available under the workers’ compensation act. It then shifts focus to the fraudulent concealment exception in Labor Code section 3602(b)(2). That exception, the court observes, is comprised of three prongs. First, the employer’s knowledge that the employee sustained a work-related injury. Second, the employer concealed that knowledge from the employee. Third, the employee’s injury was aggravated because of the concealment.

Next, the court expounds on its own role when reviewing an order sustaining a demurrer. It must examine the complaint de novo to ascertain whether it alleges sufficient facts to state a cause of action under any legal theory. It also gives the complaint a reasonable interpretation and reads it as a whole and its parts in their context.

It then addresses defendant’s claim that the trial court properly sustained the demurrer because the allegations in the complaint were deficient and/or lacking in specificity. In response, the court reviews precedential authority, specifically a Supreme Court case that analyzed the pleading requirements for the fraudulent concealment exception in Labor Code section 3602(b)(2). That case, Foster v. Xerox Corp. (1985) 40 Cal. 3d 306 (Foster), involved a civil action brought by a former employee against his employer in which it was alleged that the employee had unknowingly been exposed to arsenic during his 11 years of employment with the employer, and that even when the employee informed his employer of his symptoms, the employer did not warn the employee of the presence of arsenic at the workplace, nor take any precautionary measures to safeguard him from its effects. As a result, it was alleged that the employee suffered symptoms of arsenic poising even years after his employment had ended. The employer challenged the adequacy of the complaint’s contentions and argued that they failed to allege that the employer made material misrepresentations designed to conceal from the employee the fact that he suffered from arsenic poising caused by his employment.

Finding no case law defining the phrase “fraudulent concealment” as used in Labor Code section 3602(b)(2), the Foster Court looked to the general meaning of that term as used in statute and case law. It observed that the failure to disclose facts may constitute fraud if the party with knowledge has a duty to make disclosure, and references Civil Code sections 1709 and 1710 and Goodman v. Kennedy (1976) 18 Cal. 3d 335. Civil Code section 1709 states, “[O]ne who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers.” Civil Code section 1710 defines deceit. Goodman, supra, involved a civil suit for damages in which plaintiff claimed that defendant failed to disclose facts regarding stock that plaintiff purchased causing plaintiff to sustain losses. The Goodman Court affirmed dismissal of the complaint, finding no duty on the part of defendant to make disclosure to plaintiff. The Foster Court then concluded that the phrase “fraudulent concealment” as used in Labor Code section 3602(b)(2) means a failure to disclose by one who has a duty to disclose, noting that if the legislature had intended an affirmative misrepresentation as the basis for a cause of action under this exception, it would have provided for the same rather than using a term commonly used to mean non-disclosure. It goes on to state, “[i]t is unassailable that an employer who knows that an employee has contracted a disease in the course of his employment has a duty to advise the employee of that fact. The subdivision provides for an action at law for aggravation of a disease resulting from such concealment.” (Foster, supra, at p. 310)

Foster also addressed the specificity required regarding allegations of the employer’s knowledge that the employee sustained a work-related injury. In Foster, the employer argued that the complaint did not allege that the supervisors to whom the employee reported his symptoms were aware of their significance or that they reported them to an official employed by defendant who recognized that the employee was suffering from arsenic poisoning caused by his employment. While the Supreme Court agreed with the employer’s assertion, it observed that the complaint did allege in general terms that the employer knew that the employee’s physical problems were caused by arsenic, that his injury was reported to the employer, and that the employee’s physical condition was aggravated by continued exposure to arsenic at the workplace. These general allegations were, the Court concluded, sufficient to fairly apprise the employer of the basis of the employee’s civil action against it. (Foster, supra, at p. 312).

In this matter the court followed the holding in Foster, construed plaintiff’s pleadings liberally, and analyzed the three prongs of the fraudulent concealment exception to determine whether the allegations in the complaint fairly put defendant on notice of the basis of the complaint against it.

First, as to the knowledge prong, plaintiff alleged that decedent contracted COVID-19 because of the outbreak at the hotel, and further alleged that defendant was aware of the outbreak and knew even before decedent that decedent had contracted COVID-19 because of the outbreak at the hotel. Defendant took issue with this point, contending it lacked actual knowledge of the cause of decedent’s illness, and, further, since decedent was aware of his own symptoms when he reported them, the complaint must fail. The court rejected defendant’s assertions. It points out that awareness of symptoms cannot be conflated with knowledge of their cause. The complaint did not allege that decedent knew the cause of his symptoms was COVID-19, but it did allege that defendant knew of the COVID-19 outbreak at the hotel and, further, when decedent reported his symptoms, defendant knew (even before decedent knew) that decedent had contracted COVID-19. This general allegation of knowledge on the part of defendant, the court finds, is sufficient to apprise defendant of the knowledge prong of the claim against it.

Next, the court similarly concludes that the allegations sufficiently put defendant on notice of the second prong of the exception—fraudulent concealment. The complaint alleges that defendant failed to report the COVID-19 outbreak among its employees at the hotel to the health department, failed to notify its employees of the outbreak, and failed to take preventative measures to curb the outbreak. Moreover, the complaint alleges that defendant’s failure to notify decedent of the outbreak or that the symptoms he had reported were associated with COVID-19 concealed the very nature of his illness from him.

Defendant argued these allegations fell short of fraudulent concealment. Once again, the court rejects that assertion and points out that Foster refutes that argument. Quoting Foster, it states, “[t]he failure to disclose facts may constitute fraud if the party with knowledge has a duty to make a disclosure …. It is unassailable that an employer who knows that an employee has contracted a disease in the course of his employment has a duty to advise the employee of that fact. [Section 3602, subdivision (b)(2)] provides for an action at law for aggravation of a disease resulting from such concealment.” (Foster, supra at pp. 309-310)

The court summarily rejects defendant’s claim that plaintiff’s allegations as to fraudulent concealment are also inadequate because they do not allege that concealment of the COVID-19 outbreak was intended to induce decedent to continue working for it. As the court notes, any intent to extract more labor by concealing the disease is irrelevant because such an intent is not a requirement of the fraudulent concealment prong of the exception.

Finally, the court also finds the complaint sufficiently plead the final prong of the exception—aggravation of the injury. In this regard, the complaint averred that one week elapsed between decedent’s reporting of his symptoms to defendant and a positive COVID-19 test. Decedent succumbed to the infection five days later while sequestered in a Motel 6. In keeping with the liberal construction of pleadings and the Foster guidance that a pleading’s allegations can be set forth in general terms, the court concludes that the complaint fairly put defendant on notice that plaintiff was contending that its deliberate concealment of the COVID-19 outbreak and the nature of decedent’s infection aggravated that injury to the point that decedent could not recover and died as a result.

The Significance of Chavez

While at first glance the notion that an employer could have civil liability for aggravation of an employee’s COVID-19 infection under Labor Code section 3602(b)(2)’s fraudulent concealment exception might seem far-fetched, it makes perfect sense based on the underlying facts presented in Chavez. Just substitute a different infectious disease—e.g., tuberculosis, hepatitis B, or measles for COVID-19. If the facts were identical to those in Chavez except the infection was one of the three suggested above or some other, the employer could similarly face a civil suit for damages under the fraudulent concealment exception. It is not the mechanism of the work-related injury or, in the case of an infection, the specific pathogen involved, but the employer’s knowledge of the injury and concealment (failure to disclose) which causes an aggravation of the injury that gives rise to the employer’s potential liability.

Chavez provides invaluable instruction as to the three prongs that must be plead in the complaint for damages under the fraudulent concealment exception. First, the employer must have knowledge that the employee sustained a work-related injury. Second, the employer must have concealed knowledge of the injury from the employee, notwithstanding its general obligation to disclose such information to the employee. Third, the employee’s injury was aggravated because of the concealment. And equally significant, Chavez reminds us that the allegations underlying an action based on the fraudulent concealment exception can be plead in general terms so long as they are sufficient to fairly apprise the defendant of the claim(s) against it. Keep this straightforward decision handy for future reference.

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