$4 Million to California Disability Discrimination Plaintiff

McKesson Corporation is a large organization, ranking at the top of the Fortune 500. A jury in Yolo County (near Sacramento) decided the company's treatment of Charlene Roby, an employee with panic attacks, amounted to disability discrimination. So, the jury awarded $15 million in punitive damages against McKesson, on top of a multi-million dollar damages verdict.

The California Court of Appeal Roby v. McKesson HBOC reduced the verdict to about $4 million. An attorneys' fees award of $728,000 was not even challenged. The opinion primarily deals with the adjustment to the punitive damages verdict in light of recent case law setting constitutional boundaries. But if we're arguing about whether $2 million or $15 million is an appropriate punitive damages award, something went wrong from an employment law / HR management standpoint.

The plaintiff's psychological disability resulted in some unpleasant side effects, like body odor resulting from medication. In addition, her absences resulted in discipline and, ultimately, termination under a no-fault attendance policy. The evidence demonstrated that the line supervision was unsympathetic to the employee's issues. In fact, there was evidence of some outright hostility by the employee's direct supervisor. But when the employee complained after her termination, not much was done to assess the situation and ensure consistent and fair treatment. Thus, some employees received much more lenient treatment under the no-fault attendance policy. Additionally, the Company did not exempt from the attendance policy leave that fairly obviously would have qualified as FMLA/CFRA leave. A more detailed review of the application of the "rolling" no-fault attendance policy to this employee might have saved McKesson a few million. Under the disability discrimination laws, mechanical application of attendance policies may be hazardous to the balance sheet.

Silver lining - the court held that there was insufficient evidence of a hostile work environment, resulting in vacatur of about $1.1 million of the award. There was indeed evidence of "hostility" and some mistreatment. However, it was not sufficiently "severe or pervasive" to sustain the jury's verdict. Additionally, the court distinguished between conduct that will support a "harassment" claim, and personnel actions, which do not constitute "harassment" in the legal sense. As a result of the court's findings, Roby's supervisor escaped about $500,000 in personal liability for her mistreatment of Roby.

Arbitration Agreements in California Set to Make a Comeback

In California, agreements to arbitrate employment claims (at least with respect to non-union employees) are not particularly in demand. California courts have removed many of the advantages employers (e.g., simpler discovery, cost-sharing, limitations on damages). Arbitration agreements that contain such provisions are struck down by courts as "unconscionable." So, the primary benefit of arbitration agreements in California is the transfer of a claim from a potentially hostile pool of employee-jurors to an arbitrator, hopefully a fair one with expertise in employment law.

Until now. Of late, courts have wrestled with the issue of whether an arbitration agreement can include a provision (1) requiring arbitration but (2) prohibiting the plaintiff from bringing a "class action." In the Discover Bank v. Superior Court(2005) 36 Cal.4th 148 case, decided last year, the California Supreme Court held that consumer class actions could not be barred by arbitration clauses. However, the High Court left the door open a crack for class action waivers in claims for larger damages - such as employment claims. The Court of Appeal in Gentry v. Superior Court(2006) 135 Cal.App.4th 944, review granted April 26, 2006, S141502 held that Discover Bank did not bar class action waivers in employment claims, but as you can see, the Supremes accepted review of that case in April 2006, rendering it not citable as authority.

Well, in Konig v. U-Haul Company of California, the California Court of Appeal again held that Discover Bank does not bar class action waivers in employment claims. Konig brought a class action against U-Haul for a varieity of alleged wage and hour violations on behalf of himself and a class of U-Haul employees. U-Haul moved the court to compel Konig to arbitrate his claims based on an arbitration agreement he signed, which included the following language: "I understand that final and binding arbitration will be the sole and exclusive remedy for any such claim or dispute against [defendant]... and that, by agreeing to use arbitration to resolve my dispute, both [defendant] and I agree to forego any right we each may have had to a jury trial on issues covered by the [U-Haul Arbitration Policy], and forego any right to bring claims on a representative, class member basis, or as a private attorney general."

The Court of Appeal once again upheld this class action waiver under Discover Bank. Now before you run to your employment lawyer, a couple of caveats. First, the California Supreme Court has taken up this issue in Gentry, mentioned above. So the Supreme Court may well take this case up, too. Second, there was a dissent in this case, which makes it even more likely that the Supreme Court will accept review. So, the Supreme Court may answer the question of class action waivers once and for all within the next year or two.

Happy holidays to our readers and their families.

DGV

Employer Not Liable to Third Party for Employee's Internet Postings

Not news: employees use the Internet at work for personal reasons. News: an employer is not liable when an employee uses the company internet connection to make threats to a third party.
Agilent employed Cameron Moore in Silicon Valley. Moore became upset with a couple of former Varian employees. He signed into an internet bulletin board regarding Varian, where he made some threatening posts against the former Varian employees. He used the handle... "crack_smoking_jesus." (I know. I just had to).

The threats came to the attention of the FBI, who traced them to Agilent. After an investigation, Agilent and the FBI confronted Moore.

The ex-Varian employees sued Moore and Agilent for, among other things, intentional infliction of emotional distress, negligence, and other torts associated with the threatening posts. The plaintiffs claimed Agilent was aware of the postings and did not stop them.

In court, Agilent claimed it was immune from liability under a provision of the Communications Decency Act of 1996. Section 230(c)(1) of that law provides: "[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." The statute goes on to preempt inconsistent state laws: "Nothing in this section shall be construed to prevent any State from enforcing any State law that is consistent with this section. No cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section." The purpose of this section is to protect those who facilitate internet communication from liability when users abuse their communication privileges.

The trial court held Agilent was immune from suit and the Varian ex-employees appealed. The Court of Appeal in Delfino v. Agilent affirmed. This is the first known opinion applying the CDA's immunity to employers. In essence, the court agreed with Agilent that it was a mere passive provider of access to the internet, that the plaintiffs attempted to hold Agilent responsible as if it had published the offending statements itself, and another person actually published them (Moore).

The plaintiffs tried to bring in Agilent under state-law principles of respondeat superior and ratification, but the appellate court was unmoved. While the plaintiffs could seek damages against Moore himself, Agilent could not be held vicariously liable because the acts were performed outside the course and scope of employment. Ratification would not fly given Agilent fired Moore after learning what he did.

To ensure your internet connection does not expose your business to liability it is important to have an internet usage policy that prohibits engaging in misconduct on the internet, and provides for monitoring. The CDA apparently will provide strong protections as well. However, it bears noting that this case involves a lawsuit by third-parties, not current employees of the same company. It is too early to tell what effect the CDA will have on employment claims such as hostile environment harassment alleged to be caused by internet activity.

DGV

Federal DOL Seeks Comments on FMLA Regulations

A regulatory agency usually seeks public comment about draft regulations before they are finalized. However, the U.S. Department of Labor has decided to handle things in reverse. The agency seeks public comment regarding the current FMLA regulations. That's right, you can weigh in on the rather broad "serious health condition" definition, the "ease" of administering "intermittent leave," the medical certification, and other topics covered by the current regulations you have come to love over the past dozen years. Here is a webpage the DOL has created for providing comments. Presumably, the DOL will review the comments to decide whether and to what extent revisions to the regulations are appropriate. (Dare to dream).

DGV

IRS Announces 2007 Mileage Reimbursement Rate

The new IRS mileage reimbursement rate for 2007 will be $0.485 per mile for business, $0.20 for moving or medical purposes, and $0.14 for charitable purposes. The IRS bulletin announcing these changes is here.

California employers must reimburse employees for expenses they incur. The state Division of Labor Standards Enforcement accepts the IRS rate as adequate compensation for employees' use of personal automobiles. Therefore, employers should adjust the reimbursement rate effective January 1, 2007.

DGV

Final AB 1825 Sexual Harassment Training Regulations

The California Fair Employment and Housing Commission issued its final AB 1825 regulations. They can be accessed here. They will now be reviewed by the Office of Administrative Law. If they are approved, the will be submitted to the Secretary of State and become effective 30 days later. The FEHC estimates they will be effective around February 1, 2007. The final regulations are essentially the same as the last version submitted for comments in October.
Most employers that completed their initial training in 2005 will be training supervisors again in 2007. So, employers should ensure their training programs comply with the new regulations.

DGV

Get ready for more posts in 2007....

We haven't been posting a lot lately. We're saving our strength.

After years of no major federal employment laws (save last year's Pension Protection Act), Congress is changing hands. And here come the unions, trial lawyers, and politicians with some fresh ideas for employers. Here is an AP article on the subject.

Of course, having carefully studied civics as a child, I know it will take a lot of work to pass even one employee-friendly bill. (I also know that conjunctions' function is to hook up words and phrases and clauses.)

But I think even a divided Congress can pass some new employment mandates, assuming the President is willing to horse-trade a judicial appointment or a military appropriation or two.

DGV

SF Passes Paid Sick Leave Requirement

The SF electorate passed an initiative requiring employers to provide paid sick leave to employees. Although many employers provide paid time off, the measure applies to all employers (no matter how few employees), and it includes some provisions that could affect even large employers' sick time policies. Here are some highlights:

- "Small employers" of under 10 employees (counted as any 10 employees who perform any work in a week, must provide at least 40 hours of paid sick leave; larger employers must provide at least 72 hours. Employers are invited but not required to be more generous.

- Sick leave begins accruing after 90 days of employment. An employee accrues one hour for each 30 hours' worked. The sick leave accrues until it reaches a cap of 40 hours for small businesses or 72 hours for large businesses.

- Employers that provide more PTO or sick leave than stated above under existing policies are deemed in compliance. However, employers will have to adjust policies to comply with the uses of sick leave, attendance policies, and the like.

- Sick leave may be used either for the employee's own illness, OR for the illness of a covered person: "child; parent; legal guardian or ward; sibling; grandparent; grandchild; and spouse, registered domestic partner under any state or local law, or designated person." Employees without covered relations may designate one "designated person" for whom the employee may take paid sick leave to care for.

- The sick leave appears to be available for use for absences of less than one day, including medical appointments.


- Sick leave accrues and "carries over" year to year if not used, but need not be paid out at termination. The accrual stops at the caps above (40 hours for smaller and 72 hours for larger employers).

- Employees must provide "reasonable advance notice" of the need for leave, presumably on occasions when it is used to care for others or for medical treatment. Employers may take "reasonable measures" to verify or document time off.

- Employers must maintain records for four years and make them available to the city for inspection.

- Time taken under this provision may not be counted as an attendance violation under company policy.

- Any adverse action taken within 90 days of an employee's engaging in any of a number of "protected activities" relating to this leave benefit (including filing a complaint or even telling other employees about the availability of paid sick leave) creates a rebuttable presumption of retaliation.

- There is a provision for private civil enforcement, including penalties of up to 3 times the sick pay denied for violations or $250, whichever is greater, liquidated damages of $50, interest, costs and attorneys fees. Class actions are authorized only for equitable relief, costs, and attorneys' fees. And....

- Yes, there will be a new poster required to be posted.

Employers that do business in San Francisco must address the many administrative and payroll issues attendant to this law asap. It goes into effect 90 days from November 7, or about February 5.

California Court of Appeal: Class Action Should Have Been Certified

After the California Supreme Court's decision in Sav-On Drug Stores v. Superior Court, a trial court's decision on class certification should not be disturbed if (1) the trial court applies the correct legal standard and (2) substantial evidence supports the trial court's findings regarding the factors supporting class certification. In Aguiar v. Cintas Corp. No. 2, the Court of Appeal recited this "abuse of discretion" standard of review, and then proceeded to hold the trial court did not decide the certification question correctly.

The plaintiffs accused Cintas of violating Los Angeles County's Living Wage Ordinance by failing to provide the class with the legally mandated pay and benefits. Cintas argued that the case was not amenable to class certification because the plaintiffs were inadequate representatives, common issues did not predominate over individual ones, and class procedures would not be superior to other means of recovering. These are all proper factors for a trial court to consider under the legal framework for deciding class certification issues.

So, was it that substantial evidence did not support the trial court's finding? Hard to say. It appears the Court simply disagreed with the class certification order and decided it the other way. This is precisely what the Court of Appeal did in Sav-On, which is why the Supreme Court imposed the deferential standard of review.

The appellate court in Cintas decided that the trial court should have divided up the putative class into sub-classes, which would have ameliorated the commonality concerns. The court also held that class actions would be superior to individual actions for this type of case.

This case involves an allegation of a failure to apply a relatively simple law properly to a large group. Therefore, the common facts may well be more prevalent than in a more fact-intensive case such as involving exemptions from overtime.

DGV

Statute of Limitations for Vacation Claims

In California, by statute, all accrued, unused, vacation must be paid at the time of termination of employment. Long-term employees may have been accruing vacation for years. What happens when an employer fails to pay out vacation that accrued long ago? Does the statute of limitations bar recovery? The state Division of Labor Standards Enforcement and a court opinion previously answered that question, "yes." But in Church v. Jamison, a different Court of Appeal decided that the statute of limitations for unpaid vacation does not accrue until the termination date, and that all unused vacation pay earned may be the subject of a timely lawsuit.

The court also decided that claims for unpaid wages were subject to the statute of limitations for oral contracts (two years), rather than the three-year statute applicable to statutory claims. This holding likely will not apply to overtime claims, because overtime is a creature of statute. The obligation to pay (base) wages, on the other hand, arises from the "contract" to perform services in exchange for pay.

Finally, the court held that business expense reimbursement claims under Labor Code section 2802 arise as the employee incurs the expense, and that a three-year statute of limitations applies. This means that employees who do not submit expenses for reimbursement within three years of incurring them would be barred from recovery, even if the employees have not yet been terminated. Some of you know people who might wait three years to turn in an expense report.

DGV

Court Cancels "Groundhog Day" for Serial Wage and Hour Class Actions

May Department Stores has been the subject of successive wage and hour class actions. The company defeated class certification in at least two cases and prevailed on appeal as well.

Yet, the plaintiff's lawyer was undeterred and filed yet another class action in Alvarez v. May Department Stores Co., this one venued in L.A. As with the prior cases, Alvarez challenged the exempt status of assistant managers.

The L.A. Superior Court sustained a demurrer to the complaint. The court held that the class action allegations were barred by the doctrines of "collateral estoppel" aka "issue preclusion." Huh?

Collateral estoppel is a doctrine which prevents relitigation of issues
previously argued and resolved in a prior proceeding. . . . In order to apply this principle: (1) the issue must be identical to that decided in the prior proceeding; (2) the issue must have been actually litigated in the prior proceeding; (3) the issue
must have been necessarily decided in the prior proceeding; (4) the decision must have been final and on the merits; and (5) preclusion must be sought against a person who was a party or in privity with a party to the prior
proceeding.

Ohh.

So, Alvarez's lawyer appealed, arguing that collateral estoppel cannot preclude a later class action. Rather, Alvarez said at oral argument that he could continue to litigation class certification in new lawsuits until it was no longer "economically feasible" to do so.

Well, the Court of Appeal in Alvarez v. May Department Stores decided enough was enough and affirmed the trial court, barring re-litigation of the certification question. So, employers who defeat motions for class certification likely will not have to face endless "me-too" lawsuits on the same issue. It is unclear from this opinion whether collateral estoppel would apply no matter how much time has passed between the old lawsuit and the new one. Stay tuned.

DGV

UPS's Safety Standard Violates ADA

UPS operates nearly 6,000 vehicles with a gross vehicle weight of under 10,000 lbs. Those trucks are not subject to US Department of Transportation safety standards. Yet, UPS required drivers of those vehicles to pass the DOT's physical requirements. These include a hearing test. A class of hearing impaired applicants challenged these standards under the ADA.

The Ninth Circuit, in Bates v. UPS, held that UPS's job requirement violated the ADA. UPS' primary argument was that the employees were not "qualified" because they could not perform the essential functions of the job (including hearing at the level mandated by the DOT) "safely" with or without accommodation.

The court rejected the normal "McDonnell Douglas" burden-shifting analysis, saying that when an employer takes disability into account when making a decision, it is unnecessary to use that analysis. The court analyzed whether UPS engaged in "discrimination" under the ADA by using a qualification standard that screens out people with disabilities - here, the hearing impaired. The hearing test of course did screen out the hearing impaired. UPS argued that the plaintiffs could proceed only if the proved that the hearing test screened out applicants who could drive "safely," an essential job function. But the court said that the burden was on UPS to show the contrary.

That left UPS with the burden of proving "business necessity" and "job-relatedness" as an affirmative defense. On that point, the court decided UPS had to prove one of two things to uphold UPS's blanket exclusion: (1) "all" deaf drivers would drive substantially less safely than the "hearing" drivers or (2) it would be impossible to prove whether that was true. The court analyzed the extensive expert evidence submitted and agreed with the district court that the findings were inconclusive. Thus, UPS would have to exclude drivers on a case by case basis rather than categorically reject all drivers having a certain level of hearing impairment or greater.

This case will affect employers who use medical examinations to screen out groups of employees who do not meet the given criteria. The employer will be foreclosed from arguing the employee is not "qualified." Instead, the employer will have the burden of proving the exclusion was "job-related and based on business necessity," a high burden.

Still More Amendments to AB 1825 Regulations

On October 2, the Fair Employment and Housing Commission further revised the proposed harassment training regulations. In this round of revisions, the Commission primarily addressed "duplicate" training - e.g., when a supervisor is hired from another company and had AB 1825-compliant training at the former employer within two years. In such cases, the supervisor must receive, read, and acknowledge having read the new employer's anti-harassment policy. That supervisor must be trained again within two years of the prior training. The Commission also continues to wrestle with the interval between training, attempting to balance administrative convenience with the statutory mandate of training every two years.

DGV

Commission Plans - Chargebacks and Forfeitures

As shown in Koehl v. Verio, the courts in recent times are more likely to enforce clear provisions in commission plans permitting employers to recover advanced commissions and bonuses. The language must be clear, and there must be a rationale for the advances and chargebacks. The key is to define when commissions are "earned," e.g., when payment is received, after a certain stage of the installation / serving process etc. The Court in Koehl relied in part on recent court decisions upholding such arrangements, as well as the California Division of Labor Standards Enforcement's "Enforcement and Interpretations Manual."

This opinion is thoroughly reasoned, including a comprehensive discussion of related case law. It can help employers and their lawyers draft lawful commission plans that permit sales employees to benefit from early cash flow without receiving windfalls from overpaid commissions. Yes, even in California.

DGV

Video Monitoring of Employees at the Workplace

Surveillance technology continues to collide with employees' privacy interests. Telephone monitoring and recording, email and web use monitoring, GPS tracking, and video camera surveillance all present potential employment law problems. The law is struggling to keep up, and employers must be careful to anticipate how courts will react to new technology.

The newest California decision is Hernandez v. Hillsides, Inc. An employer set up a motion-activated video camera in an office to determine who was accessing a computer at night to view porn. The manager who installed the camera disconnected it each day and re-connected it only at night. Two employees who used the office during the day discovered the camera one day when it had not been disconnected. They sued for invasion of privacy.

The employer argued the camera was not even activated during the day (except for the one day it was mistakenly left on). But the California Court of Appeal held "a plaintiff need not establish that he or she was actually viewed or recorded in order to succeed on a cause of action for invasion of privacy." Employers can monitor employees' work areas by ensuring the employees do not have an "expectation of privacy." The way to do this is by giving notice of the monitoring. Notice may take away the element of surprise, but it also deters the conduct sought to be monitored.

Unintended consequences department: What effect will this decision would have on "nanny cams?" A nanny or babysitter is an employee. The workplace is the parents' home. Under this decision, a nanny may be able to argue a privacy invasion if the parents set up hidden cameras. However, the court pointed out that the employer failed to establish a sufficient justification for the monitoring, nor did the employer sufficiently establish the employees had a diminished expectation of privacy. Perhaps homeowners may argue that nannies do not have privacy expectations while working in a private home. Stay tuned (so to speak).

DGV

OFCCP Says, "Never Mind" Those Surveys

Contractors with the federal government may have completed an "Equal Opportunity Survey" (EOS) from the OFCCP, the federal agency that enforces affirmative action plan requirements. The OFCCP began the EOS program in 2000, and had issued some 80,000 of them to date. The EOS was intended to determine which contractors were most likely to be violating EEO obligations imposed on federal contractors, triggering audits.

Anyway, the OFCCP apparently determined the EO Surveys were not a necessary enforcement tool and eliminated the requirement. They initially proposed to do this in January.

One less paperwork obligation!

DGV

Another Non-Compete Provision Struck Down

We know California law is tough on "non-compete" agreements. However, the law (Bus. and Prof. Code section 16601) does allow non-competes in the context of the sale of a business. So, if a doctor sells her practice to another doctor, the patient list and the ongoing "goodwill" will be a significant value. A transaction like that can include a non-compete, so the seller does not open a new practice across the street. But even those lawful non-competes have to be drafted correctly. The Court of Appeal held in Strategix, Inc. v. Infocrossing West, Inc., that a non-compete precluding the seller from soliciting the buyer's employees and customers (even those who were not the seller's former customers and employees) was too broad. The Court also refused to "blue pencil" or modify the agreement to apply only to seller's former customers. Ouch.

Non-competes, non-solicits, and trade secrets agreements are tricky (obviously). So, if they are important to you, ensure they are drafted to survive at least four judges' scrutiny (one trial judge and three at the court of appeal).

DGV

Independent Contractors in California

The characterization of workers as "independent contractors" can be tempting for employers: no workers' compensation coverage, no benefit plans, etc. Some workers may like being independent contractors too because they receive payment withhout tax withholdings. The government, on the other hand, is not a fan.

The California Court of Appeal in JKH Enterprises, Inc. v. Department of Indus. Relations decided that a group of delivery messengers were wrongly classified as independent contractors rather than employees. The court brushed aside evidence that the employer, JKH, did not control the messengers' means or methods of performing the work. The court noted that when the job does not require specialized skills, the employee's autonomy is not as important. Rather, the court focused on the messengers' hourly rate of pay (rather than payment by the job), and the fact that the alleged contractors were performing the job essential to the business' purpose. (That is, JKH was a delivery service, and it classified those responsible for accomplishing that business purpose as contractors).

Interestingly, the court also decided that when independent contractor status is evaluated in the context of whether the employer should have provided workers' compensation insurance, the court must evaluate the case differently than when the case is brought in another context.

DGV

Even "Limited" Non-Competes Illegal in CA

Employers in many states implement "non-compete" agreements. The employer seeks to preclude employees from leaving going to work for the competition, typically to protect the employer's customer list or other proprietary information. Most states limit these agreements to one extent or another. However, in California, with just a couple of exceptions, agreements not to compete are per se illegal.

Employers and their lawyers, fonts of ingenuity that they are, have come up with a variety of end-runs around California's prohibition on non-competes. Non-solicitation agreements, for example, have been held lawful to the extent necessary to protect a valid, protectable interest, such as a trade secrets.

Another example is an agreement not to compete with the employer's primary competitors - a "limited" non-compete. So, hypothetically, McPotroast might implement an agreement restricting employees from going to work for King Carnivorous, but the employee can work for anyone else.

Is that sort of arrangement illegal in California? The U.S. Court of Appeals for the Ninth Circuit has ruled said "no," predicting how the California Supreme Court would rule on the issue.

The Ninth Circuit's interpretation of California was wrong, says the Court of Appeal in the August 30, 2006 decision in Edwards v. Arthur Andersen.

The opinion surveys California non-competition law in some detail and the court then concludes even a limited non-compete is illegal unless necessary to protect trade secrets or unless one of the narrow statutory exceptions to the general rule applies:

In sum, we conclude the "narrow restraint" doctrine is a misapplication of California law. Noncompetition agreements are invalid under section 16600 even if narrowly drawn, unless they fall within the statutory or trade secret exceptions. Thus, the noncompetition agreement at issue here was invalid and violated California's public policy, unless, on remand, Andersen proves the trade secret exception applies.

The Court then held that requiring Edwards to sign the agreement established a required element of the tort of "interference with prospective economic advantage" (the "independently wrongful act" element.). As such, Edwards was permitted to proceed on this theory, exposing Andersen to the a panoply of tort damages, including punitive damages.

Sexual Harassment Training and Prevention Reducing Claims?

Clients who invest in sexual harassment prevention may be reaping a benefit, according to this article in the SF Chronicle. The number of EEOC filings claiming sexual harassment has decreased about 20% between 1997 and 2005. The average verdict in sexual harassment cases has increased tenfold. So, giving short-shrift to prevention is more risky than in the past.

The article tries to link the decrease in EEOC filings with AB 1825, California's mandatory training law. But that law took effect just last year, so it can't be responsible for the decrease in charges between 1995-2005. AB 1825 may further reduce harassment claims in the future, but employers' voluntary prevention efforts deserve at least some of the credit for the decrease in claims.

Since Clarence Thomas' confirmation hearings, companies even of modest size increasingly have implemented comprehensive prevention programs. More than just a zero tolerance policy - these include routine training, open door policies, "grievance" or in-house resolution programs, anonymous tip lines, and skilled investigators.

Harassment prevention really came of age as a result of the Faragher / Ellerth line of Supreme Court cases, where the U.S. Supremes provided employers with a defense to harassment claims when they take preventive measures. California employers also took notice after Weeks v. Baker & McKenzie, where a jury socked the big firm for millions in punitive damages on actual damages of $50,000 as I recall. Finally, the U.S. Supremes' decision in Kolstad v. ADA (why yes I did write an amicus curiae brief, thank you for remembering), provides a defense to punitive damages claims in federal discrimination cases, when an employer demonstrates its good faith efforts to comply with anti-discrimination laws. "good faith efforts" include training and other prevention efforts.

*** Warning: Only slightly tongue-in-cheek marketing ploy follows****

So, you ask, where does one find a great trainer - one who will motivate people to pay attention and take the training seriously, while covering all the legal bases? Hmm. (Yes, you're supposed to click the link!).

DGV

California Still Revising Harassment Training Regulations

The California Fair Employment and Housing Commission met on August 29 and revised the sexual harassment training regulations further. My previous post summarizing the regs is here. If you would like a redline copy of the current revision, please email Jennifer or me.

The most significant modification is that employers may elect to use a "training year" for all supervisors, such that each supervisor is trained once at some point in every other calendar year. For example, the employer could pick 2007 as a training year for all supervisors, thereby requiring all supervisors to be trained again by the end of 2009. (New supervisors and new hires still would have receive initial training within six months of hire or promotion). The regs' other alternative is to track each supervisor's training individually, ensuring that supervisor is trained on a bi-annual schedule. This change should help employers who would not be able to keep up with each supervisor's "anniversary" date for training purposes.

The final regulations should be out by the end of this year.

DGV

Bad ADEA Release Held Invalid

I previously have posted on well-intentioned releases gone wrong. Here's another installment.

Separation agreements and releases of claims under the Age Discrimination in Employment Act are not valid unless they comply with the technical requirements of the Older Workers' Benefits Protection Act of 1989. These agreements must, among other things, be written in clear language, advise the employee to seek an attorney, provide up to 21 days (45 in case of a layoff of two or more employees) for the employee to consider the release, and a 7-day revocation period. When a release does not follow the OWBPA requirements, the employee may keep the severance and sue under the ADEA.

In Syverson v. IBM Corp., the Ninth Circuit held IBM's release was insufficiently clear, thereby invalidating the age discrimination release and allowing a class of laid-off employees to sue for age discrimination. Unfortunately for IBM, the Eighth Circuit already held that the release was invalid. The Ninth Circuit, however, performed its own analysis, and reached a similar conclusion.

The main problem with this release was that it contained a release of all claims (including ADEA claims), but also contained a "covenant not to sue," exempting ADEA claims. A release extinguishes a claim; a covenant not to sue is a promise not to assert a right in court.

The employees argued the release was unclear because it left the reader with the impression that he/she could bring a lawsuit under ADEA even after signing the release. IBM argued (reasonably) that the covenant not to sue was significant because it provided IBM protection from employees who released claims but then filed lawsuits anyway. IBM explained the release invalidated the claim, but the covenant not to sue would permit IBM to recover its defense costs. Why carve out the ADEA claim from the covenant not to sue? IBM said it intended to comply with the EEOC rule that a covenant not to sue cannot be used to preclude employees from challenging the validity of the ADEA release in court.

The Ninth Circuit said that the IBM covenant not to sue was ambiguous and hard to understand. The tension between the covenant and release was sufficient to invalidate the ADEA release.

So, if you use a "standard" release for employees 40 and over, you may wish to obtain a tune-up in light of this decision. Additionally, federal courts have been scrutinizing the validity of "birthday lists" required for effective ADEA releases in the context of layoffs. So, be careful out there!

DGV

California Appeals Court Interprets Bounty Hunter Amendments

The Private Attorneys General Act of 2004 is more commonly known as the "Bounty Hunter law" or "PAGA" - depending on whom you ask. This is the law that authorized employees to sue in court for "civil penalties," previously recoverable only by the state Labor Commissioner. PAGA also includes a "catch all" penalty to make sure most every provision of the Labor Code is associated with a penalty for non-compliance. One important catch is that employees suing under PAGA must share penalties recovered with the state.

Shortly after its passage, employees and their lawyers brought countless class actions for every conceivable violation of the Labor Code. In one of the more frequently cited examples, an employee sought tens of millions in penalties under PAGA because a poster was printed in the wrong font size.

The abuse of this law was so rampant, the Legislature amended the law just a few months after it became effective. The amendments were passed as "urgency" legislation that took effect immediately upon its passage. The amendments created a "safe harbor," requiring employees to notify the Division of Labor Standards Enforcement and the employer of perceived violations, so they might be corrected before a lawsuit was filed.

So much for the safe harbor. In Dunlap v. Superior Court (Bank of Am.), the Court of Appeal decided that a plaintiff may seek "statutory penalties" that were available under the Labor Code pre-PAGA, without complying with PAGA's notice requirement. Dunlap brought a class action for a pu-pu platter of Labor Code violations, including failure to pay overtime, failure to keep payroll records, meal and break violations, and failure to pay wages timely. Bank of America moved to strike, alleging Dunlap did not follow PAGA's notification prerequisites. Dunlap argued that he was suing for "statutory penalties," authorized by Lab. Code section 218, which existed long before the passage of PAGA.

The Court of Appeal decided Dunlap was correct. Even though PAGA specifically requires employees to follow its notice requirements for violations of the substantive laws Dunlap included in his Complaint, the Court of Appeal decided Lab. Code section 218 permitted a separate civil action without following PAGA. The Court distinguished between "statutory penalties" available to employees before PAGA and "civil penalties" recoverable only after meeting PAGA's exhaustion requirements.

This case cuts a huge loophole into PAGA. Why would an employee take the time to follow PAGA's exhaustion requirements and then divvy penalties with the state when the employee can bring his or her own action under section 218? (Yes, Virginia, that's a rhetorical question). PAGA will be used only for the obscure violations subject to penalties that previously could be recovered only by the Labor Commissioner, or the new catch-all penalty.

The Court of Appeal invited the Legislature to clarify PAGA again if its interpretation was incorrect. The PAGA"s notice provisions give employers a chance to comply with the many Labor Code mandates before facing huge liabilities for penalties. If the Labor Code is meant to protect employees, rather than create hundreds of opportunities for "gotcha" lawsuits, the Legislature should make whatever clarification is necessary to overturn Dunlap.

DGV

Employers Who Hire Illegals Sued by Other Employers

California employers may wish to review their I-9 compliance policies and procedures. According to this article, an employment agency has accused a grower in California of hiring illegal aliens as an "unfair business practice." According to the article, the lawsuit was brought under Californians broad unfair competition law, Bus. and Prof. Code section 17200. The theory is that hiring illegal aliens is an unlawful business practice under the UCL, because the lower wages unlawful workers will accept results in an unfair competitive advantage for the employers who hire them.

Under Prop. 64, which narrowed the UCL's applicability, the plaintiff will have to establish "standing," or actual injury in fact in order to maintain the lawsuit. For example, an employer would have to establish that it lost business to a competitor that hires illegal aliens and could set prices lower as a result.

"Illegalemployers.org" a group that seems to have been formed specifically to target employers that hire undocumented workers, is referenced in the article.

It seems that the marketplace is going to implement its own immigration reform since the government's efforts to enact immigration reform legislation stalled back in April.

DGV

California Minimum Wage Update

The L.A. Times reports Governor Arnold Schwarzenegger and the legislature compromised on a minimum wage increase from $6.75 to $8.00. Under the current version of the bill, the increase will be phased in over two years. The first increase, which will take effect on 1/1/07, will be $0.75 (to $7.50 / hour). The second increase, from $7.50 to $8.00, will take effect on 1/1/08.
Under the compromise, the minimum wage will not be indexed to inflation.

If passed, the minimum wage increase will affect California's executive, administrative, and professional exemptions from overtime, which require a minimum salary of twice the minimum wage. So, the new minimum salary requirements will be $31,200.00 on 1/1/2007 and $33,280 on 1/1/2008.

The bill has not yet been signed, so it is possible additional changes will be made. We will keep you posted.

DGV

"Pretext" standard concisely explained

Jottings by an Employer's Lawyer reports on the Seventh Circuit's recent articulation of what constitutes "pretext" in discrimination cases. Judge Frank Easterbrook, writing for a panel in Yindee v. CCH, Inc.:

once a non-retaliatory explanation has been articulated, [*7] the plaintiff must show that this explanation is a pretext for discrimination. To do this the employee must establish that the explanation is a lie, which permits a jury to infer that the tale has been concocted to conceal an unlawful truth. See St. Mary's Honor Center v. Hicks, 509 U.S. 502, 113 S. Ct. 2742, 125 L. Ed. 2d 407 (1993).It is not enough to demonstrate that the employer was mistaken, inconsiderate, short-fused, or otherwise benighted; none of those possibilities violates federal law. See Forrester v. Rauland-Borg Corp., No. 05-4650 (7th Cir. June 29, 2006) (collecting authority); Pollard v. Rea Magnet Wire Corp., 824 F.2d 557 (7th Cir. 1987). Poor personnel management receives its comeuppance in the market rather than the courts.

Gee, I wish I had written that.

Closer to home, the California Supreme Court has articulated a similar standard:

On the other hand, if nondiscriminatory, Bechtel's true reasons need not necessarily have been wise or correct. While the objective soundness of an employer's proffered reasons supports their credibility . . . the ultimate issue is simply whether the employer acted with a motive to discriminate illegally. Thus, "legitimate" reasons . . . in this context are reasons that are facially unrelated to prohibited bias, and which, if true, would thus preclude a finding of discrimination. . . . "

Guz v. Bechtel Nat., Inc., 24 Cal. 4th 317, 358 (Cal. 2000).

DGV

Yes, you have no class action

After the California Supreme Court's decision in Sav-On Drug Stores, Inc. v. Superior Court (Rocher), some optimistic plaintiffs' lawyers opined virtually all overtime class actions (those where the plaintiff challenged companies' classification of managers as "exempt" from overtime) automatically would be certified.

Au contraire. In this post-Sav-on decision, Dunbar v. Albertson's, the First District Court of Appeal held the trial court was within its discretion to deny class certification in an overtime case.

DGV

Employer's Policy Defeats Employee's Claim Computer Was Private

The 9th Circuit U.S. Court of Appeals rejected an employee's argument that a search of his work computer violated the 4th Amendment. In U.S. v. Ziegler, an employee of a private corporation was caught downloading child pornography. The FBI investigated, arrested him and he was prosecuted. He challenged the search of his computer under the 4th Amendment of the U.S. Constitution, which guarantees protection from warrantless intrusions by the government.

The 9th Circuit held the search did not violate the 4th Amendment because the employee had no reasonable expectation of privacy in his work computer. The most significant fact in the Court's view was that the employer had a policy permitting random monitoring and searching of the computer.

The Court of Appeals in part relied on a California court's decision, TBG Ins. Services Corp. v. Superior Court (Zieminski) (2002) 96 Cal.App.4th 443 , 117 Cal.Rptr.2d 155. In that case, the California Court of Appeal held that an employee had no expectation of privacy in a company-owned computer that the employee used at his home for work and personal mixed use:

As can be seen, Zieminski knew that TBG would monitor the files and messages stored on the computers he used at the office and at home. He had the opportunity to consent to TBG's policy or not, and had the opportunity to limit his use of his home computer to purely business matters. To state the obvious, no one compelled Zieminski or his wife or children to use the home computer for personal matters, and no one prevented him from purchasing his own computer for his personal use. With all the information he needed to make an intelligent decision, Zieminski agreed to the Company's policy and chose to use his computer for personal matters. By any reasonable standard, Zieminski fully and voluntarily relinquished his privacy rights in the information he stored on his home computer, and he will not now be heard to say that he nevertheless had a reasonable expectation of privacy.

The 4th Amendment applies only to the government. But California's constitutional right to privacy can be asserted against private employers. Therefore, employers that do not have electronic monitoring policies risk claims that email / internet monitoring is an invasion of California workers' privacy. It seems to me that a company employing California workers would be vulnerable to such a claim even if the corporation is located out of state.

DGV

San Francisco Employers - Wallet alert

The SF Chronicle reports San Francisco Mayor Gavin Newsom just signed a new law guaranteeing health insurance for San Francisco residents. The SF Health Access Program or SF HAP appears to have been developed by the "Universal Healthcare Council," a group comprised of business and labor leaders in and out of healthcare. Here is a whitepaper on their recommendations.

The cost is estimated at $200 million (about $2400 per uninsured resident), which means it will be much higher. The white paper says the program will be financed by a "combination of sources, including tax dollars, local business contributions and individual premiums," according to the report.

According to FAQ's developed by SF's health care agency, non-profits with under 50 workers and small employers with under 20 workers will be exempt initially. Employers with less than 100 employees will have to contribute up to $1.06 per employee hour on some form of health insurance, reimbursement of medical costs, or contribution to the new "SF HAP." That number increases to $1.60 per hour for employers of over 100 workers.

DGV

California minimum wage update

The Sacramento Bee reported on 8/5/06 that the California Industrial Welfare Commission deadlocked on a proposal to raise the California minimum wage - to $9.78(!). There are a number of proposed bills to raise the minimum wage, as this 8/4 Sacramento Bee article reports. I would think there will be some kind of minimum wage increase. The last one was in 2002.

DGV

California Supreme Court Says: "At Will" Means "At Will"

Sometimes a cigar is only a cigar. But an offer letter that says "your employment may be terminated 'at-will'" always is an unambiguous statement that employment is "at will." The California Supreme Court unambiguously so held in Dore v. Arnold Worldwide, Inc.

Here's the offer letter:

Brook, please know that as with all of our company employees, your employment with Arnold Communications, Inc. is at will. This simply means that Arnold Communications has the right to terminate your employment at any time just as you have the right to terminate your employment with Arnold Communications, Inc. at any time.

The lower court apparently decided that because the offer explained "at will" meant that employment could be terminated "at any time," it left open the possibility that the grounds for termination somehow were other than "at will."

In a refreshingly brief opinion based on logic and common sense, the Supremes unanimously decided that the agreement contained no ambiguity whatsoever:

The language of the parties' written agreement is unambiguous. AWI's letter plainly states that Dore's employment with AWI was at will. Indeed, as the trial court observed, Dore admitted as much and further admitted that he "read, signed, understood and did not disagree with the terms of the letter." Even the Court of Appeal acknowledged that the term "at will" when used in an employment contract normally conveys an intent employment may be ended by either party "at any time without cause." Although AWI's letter also states that AWI would provide Dore a "90 day assessment" and "annual review," these provisions, in describing AWI's employee evaluation schedule, neither expressly nor impliedly conferred on Dore the right to be terminated only for cause.

The Supreme Court also held that the 90-day probationary period and the promise of an annual review did not create any expectation of continued employment contrary to employment at will:

Although AWI's letter also states that AWI would provide Dore a "90 day assessment" and "annual review," these provisions, in describing AWI's employee evaluation schedule, neither expressly nor impliedly conferred on Dore the right to be terminated only for cause.

Right. Introductory periods are not inconsistent with at-will employment, contrary to what some have said. Of course, where employment is "at will" an introductory period is not legally required. But they do serve a purpose, in that they manage employees' expectations and provide management with a safe harbor for making an initial assessment regarding whether a hire is going to work out.

****Shameless self-promotion follows********

When you read the opinion, don't stop before you get to the page listing the attorneys! That's right, your humble correspondent helped write an amicus brief supporting the employer (surprise). Would it have been nice if the opinion had included a cite to our brief? Natch.

DGV

Proposed California Employment Laws Still Pending

Back in the days of the Gray Davis administration, you could count on 15-20 new employment laws every year. The Legislature would pass them en masse, and then the Governor would veto one or two to show how pro-business he was, and then sign the rest. For some reason, the number of new employment law proposals has dropped to a handful in more recent times. This year, the Legislature seems intent on passing a select few bills the California Chamber of Commerce affectionately refers to as "job killers." Courtesy of the Chamber, see the list of pending bills here.

The pending bills include a couple of health care measures. One of them, SB 840, again attempts to impose a "single payer" healthcare system. According to the Healthcare for All blog, the voters rejected single payer back in 1994 with Prop. 186. I guess it's time for another run? Another bill requires large employers to provide a certain level of health insurance or pay a tax to the state. I think the voters rejected a "pay or play" system a couple of years ago with Prop. 72. I also think a court just invalidated a similar effort in Maryland. Stay tuned....

DGV

Jennifer's Recent Columns

Jennifer writes a bi-weekly column published in the Sacramento Daily Recorder legal newspaper. Recent topics include:

- CALIFORNIA SUPREME COURT EMPLOYMENT LAW DECISIONS 2005 - 2006

- THE U.S. SUPREME COURT EXPANDS TITLE VII RETALIATION CLAIMS

- ONE OPTION FOR REDUCING OVERTIME LIABILITY: THE ADOPTION OF ALTERNATIVE WORKWEEK SCHEDULES

In the off chance you don't subscribe to the Daily Recorder, you can sign up on Shaw Valenza LLP's website to receive copies of Jennifer's articles via email.

DGV

Prop. 64 Restrictions on Unfair Competition Cases Apply to Pending Cases

The California Supreme Court held that Prop. 64, the voters' 2004 amendments to California's Unfair Competition Law, apply to cases that were pending when the initiative was passed. That means a bunch of pending cases under Bus. and Prof. Code section 17200 must be re-examined to ensure the plaintiffs have standing and that the action otherwise complies with the revised statute. Californians for Disability Rights v. Mervyn's. The opinion is as dry as dirt, but trust me, this is good news for employers.

WARN Act doesn't apply when the government orders a layoff

When the federal TSA assumed the security screening operations at San Jose, California airport, Globe Aviation Security Services laid off a number of employees previously performing security checks there. Employees brought a class action claiming the federal WARN Act required Globe to provide 60 days' notice of the layoff. Not so, says the Ninth Circuit, in Deveraturda v. Globe Aviation Security Services. The court held that the WARN Act applies only when the "employer" orders the layoff. In this case, the federal government's legislation federalizing airport security mandated Globe's activities.

Four rules of employment litigation

Sonoma County Superior Court was the venue for one of the largest single-plaintiff employment law verdicts in California history. The bloggers from Suits in the Workplace infer from this case 4 important rules of employment litigation, by way of of Ross' Employment Law Blog.
What are their rules?

1. No good deed goes unpunished.
2. California's just different.
3. The plaintiff's lawyer knows no shame.
4. It's not about justice, it's about the money.

Again, these are their rules, not mine. Yeah, ok, they're usually true. Read the post - the facts of the case will make you smack your forehead. Everyone chuckles when you do that.

Have a nice weekend.

DGV

Employees' Lawyers Can Swear to Employee's Discrimination Charge

When employees file discrimination charges at the Department of Fair Employment and Housing, they often do not have a lawyer. They must sign the charge for it to be valid, and the signature is "verified," meaning it signifies the charge is signed under penalty of perjury. In Blum v. Superior Court, Blum filed a discrimination charge against his employer, Copley Press and some employees too. But Blum's lawyer signed the administrative charge on his behalf. Copley claimed that Blum's failure to "verify" or swear to his own charge was a defect which invalidated the discrimination complaint and rendered his civil lawsuit fatally defective.

The Court of Appeal started off by saying that a "verified" or sworn charge is a jurisdictional requirement. So far so good. But then the Court said that the Fair Employment and Housing Act does not specifically require the employee alleging discrimination him or herself to provide the verification. So, because the law did not expressly say that the charging party - the person with knowledge of the facts - has to sign his or her own charge, the Legislature did not care who actually swears to the allegations. Stop rolling your eyes, they could get stuck that way.

At the end of the opinion, the Court includes a couple of admonitions for the plaintiff's bar:

We hold an attorney may verify a DFEH complaint for his or her client by subscribing his or her own name to the complaint. The attorney may not verify by signing the client's name. We would, however, caution attorneys about verifying such complaints unless they believe the allegations made therein to be true and they are acting in good faith as they are subject to penalties for perjury if they sign their name to DFEH complaints.

**** Caution: Private musings follow *******

So, let's review. Before a lawyer swears to facts under penalty of perjury in lieu of the client who has personal knowledge of the facts, the lawyer at least should believe the facts are true, and the lawyer should not sign the client's own name. And there I was about to say the Court's decision turned the signature on the charge into something essentially meaningless. Hmmm....I wonder if defense lawyers will start taking depositions of plaintiff's attorneys who sign these charges.

DGV

Cal. DFEH Revises Anti-Discrimination Poster

The California Department of Fair Employment and Housing updated the poster that employers must maintain. The California Chamber of Commerce advises the DFEH has said employers are not responsible for posting the new poster until the new Spanish version becomes available "sometime later this year." We looked, but saw nothing on the DFEH's website announcing the new poster or the implementation date. In other, possibly related, news, vendors of those handy "combo" posters heartily rejoiced upon reading Shaw Valenza LLP's blog today....

DGV

The NLRB Hurts a Handbook

The National Labor Relations Board held in Long's Drugs that a handbook's confidential information policy violated the National Labor Relations Act. As a result, the employer was required to rescind the policy and post a notice. However, the Board did not require a new union election, which the employer had won the first time around.

Here is the Board's discussion of the policy language that the Board held violated the NLRA:

The Respondent’s 2000 handbook, under the heading “Corrective Action/ Employee Conduct,” states that “Unauthorized disclosure of confidential information regarding customers, employees, or the business of the company” is conduct subject to discipline, including discharge. A provision directly following this general confidentiality provision, under the heading “Privileges of a Team Member,” states, “Your pay is confidential company information and should not be discussed with fellow employees.” Neither of the aforementioned provisions appears in the 2003 handbook, which at relevant times was distributed to only five unit employees. However, the 2003 handbook, under the heading “Professional Behavior,” states that the Respondent “expects compliance with the following behaviors . . . Maintain confidentiality, including but not limited to, information regarding customers, employees and the company.” The handbook further states that employees are “expected to adhere to the policies and procedures that protect customer and employee confidential information, and thereby, comply with federal and state privacy laws,” and that the Respondent trusts employees not to disclose “such information to unauthorized persons, or organizations, or using it for personal gain.”

Sounds like a lot of handbooks, right? Well, here's what the NLRB said about the confidentiality language:

As noted, the 2000 handbook contains a general confidentiality provision and a
particular confidentiality provision prohibiting the discussion of wages. The 2003 handbook contains a general confidentiality provision. . . . . With respect to the general provisions, which are alleged to be unlawful, we believe that they must be read in the context of the particular provision and Gilbert’s specific affirmation that the Respondent considered employee wage rates to be confidential information. So read, we conclude that the general provisions of the 2000 and 2003 handbooks, which prohibit the disclosure of confidential information, are unlawful.

Does the confidentiality language above seem similar to the one in your handbook? Are employees prohibited from discussing working conditions including their wages? There are a number of provisions in an employee handbook that may implicate the National Labor Relations Act, including solicitation, bulletin boards, prohibitions on discussing wages, promises to abide by all policies, and even "insubordination" prohibitions. The NLRB may take jurisdiction of a claim even when the employer is "non-union." So, be careful out there....

Secret Recording of Interstate Phone Calls May Violate California Privacy Law

One reason employment law so interesting and challenging is that many not-so-obvious areas of the law affect the advice employment practitioners give their clients. The UCL standing case blogged yesterday was a good example. The California Supreme Court gave us another one today.
In most states, one party to a conversation lawfully may record it without letting the other party know. But, along with several other states, California is a "two party" state - both parties must consent to the recording. So ,what happens when one party to a call is in California, and the other party is recording in a "one-party" state?
The California Supreme Court said today in Kearney v. Salomon Smith Barney, that a business located outside California may violate California law by recording a phone call with a California-based person. However, the Court emphasized that the law does not apply when the business announces that calls are recorded:

California law does not totally prohibit a party to a telephone call from recording the call, but rather prohibits only the secret or undisclosed recording of telephone conversations, that is, the recording of such calls without the knowledge of all parties to the call. Thus, if a Georgia business discloses at the outset of a call made to or received from a California customer that the call is being recorded, the parties to the call will not have a reasonable expectation that the call is not being recorded and the recording would not violate section 632.

Now you know why you hear "calls may be monitored or recorded for quality assurance purposes" at the beginning of a call. You also now know why employers who record California employees' conversations cannot do so without their consent.*

* As the Court noted, there are narrow circumstances under which secret recording is permitted:

Other provisions of the statutory scheme identify a number of limited circumstances in which secret recording by one party to a communication is permissible, such as when the recording is made “for the purpose of obtaining evidence reasonably believed to relate to the commission by another party to the communication of the crime of extortion, kidnapping, bribery, any felony involving violence against the person, or a violation of Section 653m [making obscene phone calls with the intent to annoy]” (§ 633.5), or when a victim of domestic violence, acting pursuant to court authorization, records “any prohibited communication made to him or her by the perpetrator” of domestic violence (§ 633.6, subd. (a)).

UCL Class Actions Just Got Tougher to Plead

California's Unfair Competition Law, Bus. and Prof. Code section 17200, gets used against employers in wage and hour and other cases. Sometimes, plaintiffs try to use the UCL to extend the statute of limitations, because the UCL's statute of limitations is four years.

The voters of California pared back the UCL in November 2004 with the passage of Proposition 64. Among the initiative's most important components - a requirement that a plaintiff have "standing" - actual injury in fact - in order to assert the claim.

In this non-employment law case, Pfizer v. Superior Court, a plaintiff tried a UCL class action alleging that Pfizer falsely advertised Listerine as a substitute for dental floss. The plaintiff tried to define the class as anyone who bought Listerine during the class period.

The Court of Appeal held that Prop. 64 requires each member of a purported class to have suffered actual injury. Thus, it is not enough that a class member merely purchased Listerine during the class period.

This case will help employment practitioners in cases where the plaintiff cannot say that each putative class member actually suffered injury as a result of a practice. Thus, for example, in an overtime case, the employer can argue a UCL claim should not include class members who did not actually work overtime because those putative class members did not suffer "actual injury" as a result of alleged mis-classification.

A day's work and a day's pay - are due the same day

The California Supreme Court in Smith v. Superior Court (L'Oreal U.S.A.), decided that an employee who is hired for one day is due his or her wages on the day of termination of employment under Lab. Code section 201. The decision makes it tough on the relatively small group of employers who routinely employ workers for just one day. But that's pretty much what the statute says:

[Labor Code section]201. (a) If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately.

Unfortunately, L'Oreal is 0-2 in employment law cases before the California Supreme Court this Term.

- DGV

Ninth Circuit Gives Employers a Dark Day

Robert Dark, a truck driver for Curry County, Oregon, typically would receive a physical warning from his body (an "Aura") in advance of having an epileptic seizure. One day, Dark ignored his body's pre-seizure warning. He had a seizure at work, and passed out behind the wheel of a pickup truck. Curry County discharged him for misconduct. Dark sued under the Americans with Disabilities Act of 1990, claiming not only that the County failed to accommodate him, but also that the County fired him for discriminatory reasons. The Oregon district court granted summary judgment. The U.S. Court of Appeals for the Ninth Circuit reversed and sent the case back to court for trial.

Apparently, the employer did not litigate whether Dark had a disability under the ADA standard, which is tough on employees. The opinion is silent on this point. The court moved on to the County's legitimate business reason for termination, holding it was insufficient for summary judgment. Dark's supervisor stated Dark was fired because he could not safely perform his essential job functions and was a direct threat to himself or others. But when Dark appealed to the Curry County Board of Commissioners, the Board found that Dark engaged in misconduct by reporting to work despite the Aura and not telling his co-workers of the possibility of a seizure. On appeal, the County insisted on the latter explanation (probably because there were no efforts to reasonably accommodate Dark, putting the county into a difficult legal position).

The Court held the County was not permitted to argue Dark's falling unconscious behind the wheel is "misconduct," because it arose from the disability itself. The Court distinguished cases (e.g., Collings v. Longview Fibre), in which an employee was fired after engaging in misconduct arising from drug or alcohol use, and where the employee engaged in egregious criminal conduct (e.g., Newland v. Dalton). The Court also noted Dark provided evidence of six employees' accidents where the employees escaped discipline. Apparently, even Dark himself previously had been involved in accidents but was not disciplined at all.

The other significant issue addressed is the employer's obligation to accommodate. The County made no effort to engage Dark in an "interactive process" and offered him no accommodation in light of the misconduct conclusion. The Ninth Circuit reiterated that employers have an affirmative duty to engage in the interactive process to determine whether accommodation is possible. In this case, temporary reassignment to a non-hazardous was a possible accommodation. The court held that the employer must consider reassignment to a vacant position that is either vacant now OR is likely to become vacant in the reasonably near future. This is a mushy standard will create much uncertainty for employers seeking a workable standard for evaluating temporary transfer as a form of accommodation.

The Carrot and the Stick, So to Speak

Employers seeking to control health care costs increasingly have become more aggressive in efforts to influence employees' non-working behavior. Employers have subsidized health club memberships for years. Newer programs are more aggressive, with some employers now refusing to hire smokers in states that don't have smoker protection laws. (In a recent report, The ACLU's National Work Rights Institute estimates 6,000 employers have such policies). Forbes reports some employers use the "carrot," passing healthcare cost savings on to employees who enroll in weight-loss programs or refrain from smoking. This USA Today article discusses a new twist- employers are replacing vending machine candy with healthier snacks, and subsidizing healthful cafeteria items. What's next, excluding motorcycle riders from insurance coverage for motorcycle-related injuries? (Oh, your slippery slope arguments are wasted on me). Yep. Employers tempted to institute such programs should research whether state "lawful activity" statutes will protect employees' otherwise lawful, off-premises activity.

- DGV

Subscribe to email updates

Happy Sunday! Who knew one could open a new law firm and then spend all his time learning HTML? Right, I guess I know. Anyway, now you can subscribe to updates via email by entering your email address in the right margin. Directions to the right margin: this way: ----------->. With this handy addition to our user-friendly blog, updates will be delivered via email and you won't have to check this space. Next, I'm going to try to find HTML code that will automatically prepare veal cordon bleu and other gourmet items. NOW, you'll sign up.

Revised California Sexual Harassment Training Regulations

AB 1825, passed in September 2004, is the law requiring California employers to train "supervisors" for two hours every two years regarding sexual harassment. The California Fair Employment and Housing Commission has promised regulations to help employers implement some of the vague aspects of the law. The FEHC issued revised AB 1825 regulations today. The first draft was issued in December 2005. The new version shows the changes to the December draft via redline and strikeout.

Some of the highlights of the revised regulations -
- e-learning (web-based) training now must include the ability to contact a live trainer with questions
- a "webinar" or seminar broadcast over the internet must include the ability to track remote supervisors' participation in the interactive training, ensure they attended the full training, and permit quetions to be asked and answered.
- the "two year" training frequency is measured each supervisor's training obligation is measured separately for each supervisor based on the last date the supervisor completed the trainning. So, each supervisor's training period is measured separately.
- new supervisors who were trained by former employers need only read and acknowledge the new epmloyer's anti-harassment policy within six months of becoming a supervisor for the new epmloyer.
- the obligation to train on discrimination and retaliation issues in addition to harassment is clarified.
- training on most topics is expressly limited to "sexual" harassment, rather than harassment generally, discrimination or retaliatoin. However, the practical examples and interactive teaching must include anti-discrimination and retaliation.
- The regulations list specific requirements for instructors, but removes some of the earlier requirements and no longer expressly says that lawyers and psychologists may qualify as trainers.

Have a great 4th of July weekend!

- DGV

Bad releases make bad case law

The court of appeal held that a release between employer and employee did not necessarily apply to discrimination claims even though contained a waiver of California Civil code section 1542. Butler v. The Vons Companies involved an employee who provided a release of claims in connection with an altercation. He later sued Vons for discrimination. Vons set up the release as a defense, but the Court of Appeal reversed summary judgment in Vons's favor.

Many employers like to re-use or adapt releases used in other matters, rather than submit each one for legal review. The problem is that word processing, editing errors, and specific facts that may require customized language can create issues with the release. I have seen releases that do not cite section 1542 properly, that omit key language, that do not contain proper general release language, etc.

A poorly drafted release may be ineffective, as it was in the Vons case, which is bad news for employers who pay severance or other consideration in exchange for the expectation of peace.

Supreme Court Expands Retaliation Claims

In Burlington Northern Santa Fe Railway v. White, the U.S. Supreme Court expanded the anti-retaliation provisions of Title VII of the Civil Rights Act of 1964. Here is the Court's definition of what constitutes an "adverse employment action" necessary to make out a retaliation claim:

We conclude that the anti-retaliation provision does not confine the actions and harms it forbids to those that are related to employment or occur at the workplace. We also conclude that the provision covers those (and only those) employer actions that would have been materially adverse to a reasonable employee or job applicant. In the present context that means that the employer's actions must be harmful to the point that they could well dissuade a reasonable worker from making or supporting a charge of discrimination.

Sheila White was a railroad employee. She complained about sexist comments a manager allegedly made and filed a charge with the EEOC. Shortly thereafter, she was suspended without pay, allegedly for incidents of "insubordination." When White grieved the suspension internally, the company determined she was not insubordinate, and reinstated her with back pay. The employer also allegedly assigned White undesirable job duties, moving her from forklift duty to other duties within her track laborer job description.

The Supreme Court was asked to resolve a dispute among the courts of appeals regarding the standards applied in retaliation cases. Some courts held that actionable retaliation should involve an "ultimate" employment action, such as firing, demotion, etc. Others held that nearly any negative experience motivated by retaliation for engaging in protected activity would be actionable.

The Supremes took a middle ground, but one which will result in an increase in retaliation claims, which already have been on the rise. Here are the main points -

a. Whether an employee experienced a material adverse action must be measured "objectively" - from the standpoint of a "reasonable" employee subjected to retaliation;
b. The types of conduct amounting to retaliation must be measured in context. Seemingly trivial slights (ostracism) can become retaliatory when there is harm to the employee's career (e.g., a retaliatory failure to invite an employee to a weekly staff lunch meeting.);
c. Not every kind of retaliatory act is actionable; only ones that cause actual harm; and
d. Employers may be liable for non-work related retaliation if proven that the employer committed some action or omission away from the workplace that was related to the employee's exercise of protected activity.

The case applies only to federal claims, not to those brought under California's FEHA. The California Supreme Court's decision in Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028 addressed the same issue in the context of the Fair Employment and Housing Act. The California Supreme Court's holding is similar to the SCOTUS decision in White:

we conclude that the proper standard for defining an adverse employment action is the "materiality" test, a standard that requires an employer's adverse action to materially affect the terms and conditions of employment . . . .rather than the arguably broader "deterrence" test adopted by the Court of Appeal in the present case. We further conclude that in determining whether an employee has been subjected to treatment that materially affects the terms and conditions of employment, it is appropriate to consider the totality of the circumstances and to apply the "continuing violation" doctrine that we recently adopted in Richards v. CH2M Hill, Inc. 26 Cal.4th 798.

So, California's Supreme Court's definition of adverse action arguably is more narrow than the U.S. Supreme Court's decision in White. For example, the adverse action in Yanowitz must be work-related; under federal law, it does not.

Perhaps the California Supreme Court will take up the issue anew to address White.

Happy Birthday to Shaw Valenza LLP!

Shaw Valenza LLP begins its second week of operation today. The Firm's birthday is 6/19/06. For those of you who cannot resist showering the Firm with gifts, it is a demure size 3, it likes dark blue, Guz v. Bechtel and walks on the beach.

Have you seen our new website? The URL is www.shawvalenza.com. If you ever forget, there is a handy link on the right side of the page that will pester you until you click it. Go over there to sign up for one of our public seminars. Jennifer is planning on selling out Arco Arena this year for our annual legal update. OK, coincidentally, the Kings will be playing the Lakers at the same time, but that's just a coincidence. Lucky Kings riding Jennifer's coattails.

So far, we have a beautiful office in Sacramento (520 Capitol Mall, Ste. 630), a phone system, Lexis, books, a digital copier, servers, website, etc. I still need a stapler, but all in good time.
Part of the reason we left Jackson Lewis is to have more contact with our own clients. This blog is one of the ways we intend to do that. If you think there's something interesting we should cover, email us! If you disagree with our interpretation of a new development, please leave comments here. To those of you who just want to make fun of me, please be civil if possible. You know who you are.

Anyway, you've been a lovely audience, but now we must go to work. We will post here employment law items we think are interesting, scary, etc. (Most of the scary ones concern California employment law issues.) Stay tuned, and please leave comments.

- DGV