Understanding Good Faith Personnel Action: Meaning And Implications

Good faith personnel action is a term used in the context of employment law, specifically regarding stress claims and workers' compensation. It refers to a situation where an employer takes a regular and routine employment decision that is carried out in a reasonable manner without any improper motive. The concept of acting in good faith implies sincerity and honesty without intending to mislead, deceive, or defraud. In the case of good faith personnel action, it means that the employer's actions were lawful, non-discriminatory, and made without malicious intent towards the employee. This term is particularly relevant in California, where the Labor Code provides employers with a Good Faith Personnel Action defense (GFPA) against certain employee claims.

The Standard of Reasonableness

In the context of good faith personnel action, a regular and routine employment decision must be executed reasonably and without any hint of improper motive to be considered a good faith action. This means that an employer's actions leading to an employee's psychiatric injury must not substantially cause (between 35% and 40%) the injury to be considered a good faith personnel action.

In the case of City of Oakland V. WCAB (Gullet), the court concluded that the employer's demotion of the applicant, though potentially involving mistakes, was still a good faith personnel action. The court found that a regular and routine employment event was carried out reasonably, without any indication of improper motive.

Similarly, in Countrywide Home Loans, Arrowood Indemnity Company v. WCAB, the judge ruled that the defendants' personnel actions did not meet the burden of establishing a substantial cause (35% to 40%) of the applicant's psychiatric injury, and thus did not exceed the threshold for good faith personnel actions.

To successfully defend against a psychiatric claim, employers must provide thorough documentation and strictly adhere to proper personnel procedures. A judge will typically employ a multi-level analysis to determine whether a good faith personnel action occurred, assessing the factual and legal aspects of the case, the predominant cause of the injury, the nature of the personnel actions, and whether these actions substantially caused the injury.

The Standard of Intent

Under the Standard of Intent, an individual or entity may be considered to have not acted in good faith if they did not act reasonably and knew that there was no reasonable basis for their actions. For example, an insurance company misrepresenting the terms of their policy would be acting without good faith with intent.

Additionally, for an act to be considered bad faith, it must be provable and deliberate. This means that the party acted with full knowledge of their actions and the potential consequences, and their intent can be proven in court.

Lawful, non-discriminatory good faith personnel action

The definition of "good faith personnel action" has been the subject of much debate in legal circles, with significant arguments between parties as to whether the standard for its application has been met. However, a "lawful, non-discriminatory, good faith personnel action" can be understood as an honest and routine employment decision, lacking outrageous conduct, carried out in a reasonable manner with no improper motive.

In the context of a psychiatric injury claim, the defence of a "lawful, non-discriminatory, good faith personnel action" is crucial. According to California's Labor Code Section 3208.3(h), employers are protected from compensating employees for psychiatric injuries if these injuries were substantially caused by lawful, non-discriminatory good faith personnel actions. This means that employers can defend themselves against such claims if they can prove that their actions were carried out in good faith and without discriminatory intent.

To determine whether an employer's actions were indeed in good faith, courts will consider various factors, including whether the employer followed their own policies, rules, and procedures, and whether the employee was unfairly singled out for the application of these rules. Another important consideration is whether there was a legitimate business necessity behind the action taken.

It is important to note that not all actions by management may be construed as personnel actions. For example, in the case of Berman v. [Unknown], a corporate reorganization that increased workloads was not considered a "personnel action" under Labor Code section 3208.3(h), as it did not specifically target an individual's employment status. Similarly, in Brodsky v. [Unknown], increasing sales quotas, changing commission structures, and reassigning sales accounts were not deemed "personnel actions."

To successfully defend against a psychiatric claim, an employer must demonstrate that their actions were not only lawful and non-discriminatory but also that they constituted a substantial cause of the injury, typically defined as contributing to 35% to 40% of the harm. This can be a challenging process, and employers are advised to have solid personnel performance documentation and procedures in place to enhance the potential for a positive defence outcome.

Good Faith Personnel Action Defense (GFPAD)

In the US, the GFPAD is detailed in Labor Code §3208.1(h). A good-faith personnel action is defined as a regular and routine employment decision carried out in a reasonable manner without any hint of improper methodology. To prove GFPAD, an employer must demonstrate that the "substantial cause" of the employee's injury was a good-faith personnel action. "Substantial cause" is defined as 35% to 40% of the injury.

To establish GFPAD, several criteria must be met, including timely identification of circumstances, well-documented personnel actions, and strict adherence to proper personnel procedures. It is critical to provide thorough documentation and evidence to support the defense.

When determining whether an employer acted in good faith, courts consider various factors, including the employer's intent, their adherence to policies, rules, and procedures, and whether the employee was unfairly singled out.

It is important to note that not all actions by management may be construed as personnel actions. The distinction lies between the effect on working conditions and the direct impact on an individual's employment status.

GFPAD is a complex legal argument that requires a thorough understanding of the specific circumstances and applicable laws.

Good Faith and Bad Faith

Good faith personnel action is a term that has been defined by the court of appeal in California. It refers to an employer's freedom to make regular and routine personnel decisions, provided they are done in a manner that is lacking outrageous conduct, is honest and with a sincere purpose, and is without intent to mislead, deceive, defraud, collude, or act with unlawful design.

Good faith, in general, is a concept that is often referred to by the courts, and it means being sincere in one's dealings without intending to defraud, deceive, take undue advantage, or act maliciously. This concept is especially important in commercial law, applying to contract negotiations, settlements, mediation, arbitration, and general business dealings.

The opposite of good faith is bad faith, which in a legal context, means acting with reckless, indifferent, arbitrary, or intentional disregard for the well-being of other parties. In other words, an act of bad faith is done with intent and not as a result of ignorance or an error in judgment.

In the context of personnel actions, an employer can defend themselves against employee claims, particularly psychiatric injury claims, by proving that their actions were lawful, non-discriminatory, and done in good faith. This means that the employer must show that their actions were not taken with ill-disposed intent, that they followed their own policies, rules, and procedures, that the employee was not unfairly singled out, and that there was a business necessity for the action.

To successfully defend against a psychiatric injury claim, an employer must also demonstrate that their good faith personnel action was a "substantial cause" (35-40%) of the injury. This can be a challenging process, and employers are advised to have solid personnel performance documentation and procedures in place.

Frequently asked questions