Ninth Circuit: Employee Who Threatens to Kill Co-Workers Not "Qualified Individual with Disability"

Timothy Mayo was a welder. He made some specific threats to kill certain supervisors at his employer, PCC Structurals, Inc.  Co-workers complained.  The company sent him home.  The police visited him and he checked into a hospital.  The company terminated his employment.

Mayo sued under Oregon's version of the ADA, which is modeled under the federal statute. The 9th circuit reviewed the employer's successful motion for summary judgment.

The court decided that a person who makes violent threats against co-workers cannot claim protection under disability discrimination laws:

Even if Mayo were disabled (which we assume for this appeal), he cannot show that he was qualified at the time of his discharge. An essential function of almost every job is the ability to appropriately handle stress and interact with others. See Williams v. Motorola, Inc., 303 F.3d 1284, 1290 (11th Cir. 2002). And while an employee can be qualified despite adverse reactions to stress, he is not qualified when that stress leads him to threaten to kill his co-workers in chilling detail and on multiple occasions (here, at least five times). This vastly disproportionate reaction demonstrated that Mayo could not perform an “essential function” of his job, and was not a “qualified individual.” This is true regardless of whether Mayo’s threats stemmed from his major depressive disorder. Cf. Newland v. Dalton, 81 F.3d 904, 906 (9th Cir. 1996) (“Attempting to fire a weapon at individuals is the kind of egregious and criminal conduct which employees are responsible for regardless of any disability.”).

The court was careful to limit its holding to serious threats of violence or harm, in a footnote:

We emphasize that we only address the extreme facts before us in this case: an employee who makes serious and credible threats of violence toward his co-workers. We do not suggest that off-handed expressions of frustration or inappropriate jokes necessarily render an employee not qualified. Nor do we imply that employees who are simply rude, gruff, or unpleasant fall in the same category as Mayo. See U.S. Equal Emp. Opportunity Comm’n, supra, at *15 (advising that an “anti-social” employee with a “psychiatric disability” can be a “qualified individual,” even if he is “abrupt and rude”).

The court also distinguished its line of cases in which it has excused "conduct resulting from a disability":

This ruling is consistent with our cases holding that “conduct resulting from a disability is considered to be part of the disability, rather than a separate basis for termination.” Humphrey v. Mem’l Hosps. Ass’n, 239 F.3d 1128, 1139–40 (9th Cir. 2001); see also Gambini v. Total Renal Care, Inc., 486 F.3d 1087, 1094–95 (9th Cir. 2007); Dark v. Curry County, 451 F.3d 1078, 1084 (9th Cir. 2006). Unlike in Humphrey, Gambini, and Dark, we do not need to consider whether PCC has offered a legitimate, nondiscriminatory reason for terminating Mayo, as he has failed to establish a prima facie case at step one of the McDonnell Douglas framework.

Only Gambini involved hostile action by the employee.  And the court pointed out that the employer in that case did not argue that Gambini was not a "qualified individual" on appeal.

Summing up, after recognizing the serious problems of mental illness in society, the court remarked:

we disagree with Mayo that employers must simply cross their fingers and hope that violent threats ring hollow. All too often Americans suffer the tragic consequences of disgruntled employees targeting and killing their co-workers. While the ADA and Oregon disability law protect important individual rights, they do not require employers to play dice with the lives of their workforce. We thus conclude that PCC’s actions in this case were lawful.

This case is Mayo v. PCC Structurals, Inc. and the opinion is here. 

U.S. DOL Issues Administrator Interpretation Re Independent Contractors

The U.S. Department of Labor issues "Administrator Interpretations" now instead of opinion letters. In the past, the DOL would respond to individual employers' or  other constituents' questions about an FLSA issue.  The DOL would offer its opinion about the specific situation and disclaim that it broadly applied to other factual contexts, etc.

But in 2010, the DOL started issuing "Administrator Interpretations." These are not tied to any particular request for advice.  Rather, the Wage-Hour Administrator would pick a topic and offer an interpretation of an existing regulation.  Courts do not give these interpretations the same deference as actual regulations. But they are considered.  And the U.S. Supreme Court recently upheld the practice, discussed here.

With that background, you are ready to read the DOL's latest "Administrator Interpretation."  The agency has weighed in on the test for whether someone is an independent contractor or employee.  As you will see, in Administrator Interpretation 2015-1, the Administrator makes clear the DOL's enforcement position.  Here is the conclusion, verbatim:

In sum, most workers are employees under the FLSA’s broad definitions. The very broad definition of employment under the FLSA as “to suffer or permit to work” and the Act’s intended expansive coverage for workers must be considered when applying the economic realities factors to determine whether a worker is an employee or an independent contractor. The factors should not be analyzed mechanically or in a vacuum, and no single factor, including control, should be over-emphasized. Instead, each factor should be considered in light of the ultimate determination of whether the worker is really in business for him or herself (and thus is an independent contractor) or is economically dependent on the employer (and thus is its employee). The factors should be used as guides to answer that ultimate question of economic dependence. The correct classification of workers as employees or independent contractors has critical implications for the legal protections that workers receive, particularly when misclassification occurs in industries employing low wage workers.

(emphasis mine).

The Interpretation reaches that conclusion by analyzing the federal "economic realities" test for whether a worker is economically dependent on the employer (and therefore an employee) or in business for him or herself.  It should be noted that this economic realities test differs from the "right of control" test that California courts use, although there is overlap.  However, the Interpretation opines that the right to control is just one factor and that the economic realities test is actually broader, in that it sweeps more workers into employee status.   That is because, the Interpretation provides, the "economic realities" doctrine explains whom the employer "suffers or permits" to work, which is the definition of "employ" under the Fair Labor Standards Act.

The Administrator goes through familiar economic realities factors such as:
 - Is the work performed an integral part of the business?  (If so, employee)
 - Does the worker's managerial skill affect his / her opportunity for profit / loss (if so, contractor)
 - What is the nature of the worker's "investment" vs. the employer's investment relative to the work?
 - Does the work require special skill or initiative? (If so, contractor)
 - Is the relationship permanent or indefinite (if so, employee)
 - What is the nature of employer control.

As you will see, the Administrator emphasizes that no one factor is determinative.  The overarching issue is whether, based on the totality of the circumstances, the worker is in business for him or herself, or is economically dependent on the employer.  However, if the Administrator's views of the test carry the day in court, there will be far fewer independent contractors out there.

The Administrator Interpretation, No. 2015-1 is here. 

California Governor Signs Bill Making Request for Reasonable Accommodation Grounds for Retaliation Claim Under FEHA

The Courts of Appeal have held that an employee's requesting reasonable accommodation is not a "protected activity" for which a retaliation claim will lie under the Fair Employment and Housing Act. (See, for example, Rope v. Auto-Chlor, discussed here).  That is because protected activity was (previously) defined as "opposing" some unlawful practice, or participation in an investigation or proceeding involving FEHA-based claims.  A request for accommodation is not "opposing" an unlawful practice, so it did not fall within the previous definition.

Not to worry. The Legislature just added to the list of protected activities an employee's request for accommodation, whether or not it is granted.  So, when an employer denies reasonable accommodation, that was and is separately actionable. Now, the employee likely will assert a retaliation claim as well, claiming that the denial was in retaliation for the employee's making the request.  

May the employer lawfully deny an accommodation because it's not "reasonable" or because the employee is not a "qualified individual," but still be liable for retaliation? We'll see how the courts react.

The new law is AB 987, text here.

Court of Appeal: OK for Employers to Withhold Taxes on Lost Wages Verdict / Settlement

When an employee wins a wrongful termination lawsuit, or settles a case, part or all of the recovery usually will be compensation for lost wages.  After a verdict, though, the court enters a judgment.  Usually interest accrues from the date of the judgment, and continues to accrue unless the judgment is "satisfied."  Additionally, employees may enforce the judgment with collection proceedings.

Employers must withhold taxes from wages, even wages recovered during a lawsuit.  If the employer does so an pays the "net" wage loss, after taxes, is that sufficient to satisfy a judgment?  For years, the answer to that question in California was "no."  At least, that's what one court of appeal had held. The employer would have to "gross up" the amount to include the witthholdings, a significant overpayment, or it would have to pay the gross sum and issue a 1099 to the employee, which could result in under-withholding penalties.

Well, another court of appeal has weighed in, and has now held that employers may satisfy a judgment by paying the net sum, after required tax withholding.

In the current case, Cifuentes recovered lost wages against Costco.  Costco withheld taxes from the recovery and sought a "satisfaction of judgment" ruling from the trial court. The court denied the motion, bound by the prior decision I mentioned, which is Lisec v. United Airlines, Inc. (1992) 10 Cal.App.4th 1500.

Costco appealed, and the court of appeal agreed with Costco that Lisec was wrongly decided.

When Costco paid the judgment, it had two alternatives. It could follow Lisec and risk liability to the IRS and other taxing authorities for the amount of tax it failed to withhold plus penalties. Or it could follow the prevailing federal view and risk a judicial declaration that the judgment is not satisfied. We conclude it chose correctly. Costco's potential exposure for failing to withhold the payroll taxes outweighed the inconvenience to Cifuentes of seeking a refund for the excess withholding.
* * * 
The IRC requires that taxes be withheld from wages because it is the most reliable means of assuring that they are paid. (See Baral v. United States (2000) 528 U.S. 431, 436-437.) By adopting the prevailing federal view, we ensure that California employers who withhold taxes from awards of lost wages are not penalized "for fulfilling [their] legal duty." (Noel, supra, 697 F.3d at p. 212.) Moreover, our decision does not leave plaintiff employees without an adequate remedy. They may seek a refund from the taxing authorities for any amounts withheld in excess of their tax obligation. (Rivera, supra, 430 F.3d at p. 1260.) As observed in Thomas v. County of Fairfax (E.D. Va. 1991) 758 F.Supp. 353, 367, footnote 26, "[c]ourts do not disagree . . . that tax authorities must receive their due, and that neither plaintiffs nor defendants should receive windfalls." 

So, this decision creates a split in the courts of appeal, which could result in California Supreme Court review.  Or the Sixth District could re-examine Lisec.  We will have to see.

In the meantime, this is a good case for justifying withholding taxes whether after trial or as a result of settlement. 

The case is Cifuentes v. Costco Corporation and the opinion is here. 

California Legislature Changes Paid Sick Leave Law, Effective Immediately

Governor Brown signed AB 304 - Here, which amends California's paid sick leave law effective immediately.  Here are the highlights:

Change to Labor Code section 246(a) - clarifies that an eligible employee is one who has worked for the same employer within California for at least 30 days.  The new provision also excludes "retired annuitants" (certain public sector retirees) from the definition of employee.

Change to section 246(b) accrual options. This amendment allows the employer greater flexibility regarding how employees earn the minimum paid sick leave:

(3) An employer may use a different accrual method, other than providing one hour per every 30 hours worked, provided that the accrual is on a regular basis so that an employee has no less than 24 hours of accrued sick leave or paid time off by the 120th calendar day of employment or each calendar year, or in each 12-month period.

(4) An employer may satisfy the accrual requirements of this section by providing not less than 24 hours or three days of paid sick leave that is available to the employee to use by the completion of his or her 120th calendar day of employment.

Change to section 246(e), which allows for PTO or sick policies in effect before January 1, 2015, or other equivalent policies that satisfy the law's requirements.  A grandfathered policy has to have provided at least one day/8 hours of sick leave by the 90th day of employment ad 3 days/24 hours by the ninth month.

But if employers changed their existing policy after January 1, 2015, the grandfathering provision does not apply. Instead, the employer has to comply with the accrual method in section 246(b) or "front load" 3 days of paid sick leave at the beginning of each 12 month period.

(e) An employer is not required to provide additional paid sick days pursuant to this section if the employer has a paid leave policy or paid time off policy, the employer makes available an amount of leave applicable to employees that may be used for the same purposes and under the same conditions as specified in this section, and the policy satisfies one of the following:

(1) Satisfies the accrual, carry over, and use requirements of this section.

(2) Provided paid sick leave or paid time off to a class of employees before January 1, 2015, pursuant to a sick leave policy or paid time off policy that used an accrual method different than providing one hour per 30 hours worked, provided that the accrual is on a regular basis so that an employee, including an employee hired into that class after January 1, 2015, has no less than one day or eight hours of accrued sick leave or paid time off within three months of employment of each calendar year, or each 12-month period, and the employee was eligible to earn at least three days or 24 hours of sick leave or paid time off within nine months of employment. If an employer modifies the accrual method used in the policy it had in place prior to January 1, 2015, the employer shall comply with any accrual method set forth in subdivision (b) or provide the full amount of leave at the beginning of each year of employment, calendar year, or 12-month period. This section does not prohibit the employer from increasing the accrual amount or rate for a class of employees covered by this subdivision.

Section 246(h) allows for employers that grant unlimited vacation / sick leave to include the words "unlimited" on the pay stub to satisfy the wage statement requirement.

Section 246(k) prescribes options for employers to calculate the "pay" for sick leave under this law:

(k) For the purposes of this section, an employer shall calculate paid sick leave using any of the following calculations:

(1) Paid sick time for nonexempt employees shall be calculated in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that workweek.

(2) Paid sick time for nonexempt employees shall be calculated by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.

(3) Paid sick time for exempt employees shall be calculated in the same manner as the employer calculates wages for other forms of paid leave time.

Section 247.5 clarifies that, although employers must keep records of sick leave taken, the employer does not have to inquire why someone took paid time off.   As such, the employer is not liable for failure to accurately keep records when, for example,  it has a PTO policy and the employee does not announce the purpose of the PTO.

Those are the big amendments to the law.  They take effect immediately.  Employers that change their sick leave rules / policies as a result of these amendments should ensure they comply with the appropriate notice requirements!

Be careful out there.