Medical Residents Have Employee Rights Under Recent California Court of Appeal Decision

Key Considerations for Residency Programs

• Residency programs have traditionally argued that because they provide hands-on education to medical school graduates, they are equivalent to academic institutions. Therefore, they have claimed, their termination and other disciplinary decisions should be evaluated by courts with special deference not usually afforded to other types of employers.
• Under the Court’s decision, residency programs are “employment programs with an educational component” and thus deserve no special deference.
• Residency programs in California should evaluate and, if necessary, adjust their internal policies to be consistent with the Court’s holding that residents are employees.

Resident Sues Program After Dismissal

In 2014, Dr. Noushin Khoiny was dismissed from a three-year residency program in internal medicine at St. Mary Medical Center (“St. Mary”) after completing her second year. The following year, she filed a lawsuit against the Dignity Health hospital alleging gender discrimination and retaliation in violation of the California Fair Employment and Housing Act (FEHA), California Health & Safety Code Section 1278.5, and California Labor Code Section 6310. After the first trial ended in a mistrial, the second trial began in 2019.

The Trial Court Gives Jury an “Academic Deference” Instruction

During both trials, the court gave the juries a special instruction on academic deference. This long-standing legal doctrine provides that in lawsuits challenging an academic institution’s decision about a student’s qualifications for a degree, courts should defer to the institution’s decision except in limited circumstances (such as where discrimination occurs). The trial court decided that the doctrine applied in this case because St. Mary’s residency program was primarily “academic in nature.”
 
The trial court’s instruction, which the Court of Appeal eventually found erroneous, was that the jury should defer to St. Mary’s “academic judgment” in dismissing Dr. Khoiny. The only proper basis for overturning the dismissal, the trial court instructed, was if “it is found to have been arbitrary and capricious, not based on academic criteria, or motivated by bad faith, or ill will, or motivated by retaliation or discriminatory reasons unrelated to her academic performance.” Furthermore, the jury was instructed that it must uphold St. Mary’s decision unless it was “a substantial departure from accepted academic norms as to demonstrate that the person or committee did not actually exercise professional judgment.” The trial court also gave the jury a special verdict form with similar language to the instruction.
 
In the second trial, the jury found for the hospital. Dr. Khoiny appealed, arguing that the trial court erred in giving this special instruction.

Court of Appeal Reverses After Finding That Residents Are Primarily Employees

In Khoiny v. Dignity Health, the Second District Court of Appeal reversed and remanded. The Court held that the trial court was wrong to give the special jury instruction: The doctrine of academic deference did not apply to Dr. Khoiny’s claims because the relationship between a medical resident and a hospital residency program is primarily an employee-employer relationship.
 
Citing to other cases, the Court noted that residents already have their medical degrees, are paid ordinary taxable income, and spend most of their time providing patient care, rather than doing “traditional student activities” such as studying or deliberating. This reasoning relied on a sharp distinction between time spent on direct patient care and time spent on “didactic” activities. The Court concluded that residents are primarily employees, not students, and residency programs are “employment programs with an educational component,” not academic programs.
 
As a result of finding residents to be employees in an employment program, the Court held that Dr. Khoiny’s discrimination and retaliation claims should be treated as a standard FEHA case: She thus may prevail by proving that gender or retaliation was a substantial motivating factor for her termination. The Court explained that Dr. Khoiny need not disprove that her academic performance was a factor, and St. Mary’s decision to dismiss Dr. Khoiny should not be presumed valid or correct. The Court also found that, in reviewing the evidence in a light most favorable to Dr. Khoiny (as required by the standard of review on appeal of a FEHA matter), it was reasonably probable that a jury would have decided differently if it had not received the erroneous academic deference instruction. Given these findings, the Court remanded the case for a new trial.

Residency Programs Should Evaluate Their Disciplinary Policies Affecting Residents

Residency programs in California should evaluate and, if necessary, revise their governing documents, manuals, and policies to be consistent with the Court’s holding that residents have the rights of employees. Special attention should be given to policies and procedures on resident evaluations, corrective actions, due process, and harassment reporting. Also, programs should evaluate their template contracts with residents to ensure that all provisions, including those regarding reappointment and termination, are legal and enforceable under state and federal employment laws.