$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