2001-2002 Survey of Developments in Employment Law



INSTITUTE FOR CORPORATE COUNSEL

March 15, 2002

SURVEY OF RECENT DEVELOPMENTS IN

CALIFORNIA EMPLOYMENT LAW

Donna M. Mezias

Preston Gates Ellis LLP

San Francisco, California

TABLE OF CONTENTS

I. CONTINUING VIOLATIONS DOCTRINE UNDER FEHA 1

II. UNLAWFUL HARASSMENT 2

A. Availability of Faragher / Ellerth Defense Under FEHA 2

B. “Staring” as Sexual Harassment 3

C. Same Sex Harassment 3

D. Evidence of Retaliation 4

E. Individual Liability for Harassment 4

III. DISABILITY DISCRIMINATION 4

A. 2001 FEHA Amendments Expanded California Disability Law Beyond ADA Requirements 4

B. Retroactivity of FEHA Amendments to Definition of Disability 6

IV. AWARD OF ATTORNEY’S FEES TO PREVAILING DEFENDANT UNDER FEHA 6

V. CONSTRUCTIVE DISCHARGE 7

VI. AT WILL EMPLOYMENT 7

VII. COVENANTS NOT TO COMPETE 8

A. Termination for Refusal to Sign Illegal Non-Compete Constitutes Tortious Discharge in Violation of Public Policy 8

B. Choice of Law and Severability Clauses Will Not Save Employment Agreements With Illegal Non-Compete Clauses 9

VIII. ARBITRATION 9

A. Minimum Requirements for Mandatory Arbitration of FEHA Claims 10

B. Application of Armendariz to Non-Statutory Claims 10

C. Retroactive Application of Armendariz 10

D. Severability of Unconscionable Arbitration Provisions 10

E. No Agreement to Arbitrate Where Arbitration Agreement in Employee Handbook Not Signed By Employee 11

IX. WAGE AND HOUR ISSUES 11

A. California’s Salary Basis Test 11

B. Stringent Application of Administrative Exemption 11

C. Overtime Claims Under California’s Unfair Business Practices Statute 12

X. WORKERS’ COMPENSATION 12

A. Release Obtained in Workers’ Compensation Proceeding Bars Subsequent Sex Discrimination Claim 12

B. Exception to Exclusivity for Injury Due to Co-Worker’s Aggression Requires Proof of Intent to Injure 12

XI. OTHER LEGISLATIVE DEVELOPMENTS 13

A. Amendments to California Investigative Consumer Reporting Agencies Act 13

B. Domestic Partner Provisions 14

C. Victims of Domestic Violence Employment Leave Act 15

D. Lactation Accommodation 16

E. Confidentiality of Social Security Numbers 16

F. Prohibition of English Only Work Rules 17

G. Applicants’ and Employees’ Off Duty Conduct 17

H. Application of FEHA To Religious Corporations 17

XII. SIGNIFICANT CASES PENDING BEFORE CALIFORNIA SUPREME COURT 18

SURVEY OF RECENT DEVELOPMENTS IN

CALIFORNIA EMPLOYMENT LAW

I. CONTINUING VIOLATIONS DOCTRINE UNDER FEHA

In Richards v. CH2M Hill, Inc., 26 Cal. 4th 798, 823 (August 23, 2001), the California Supreme Court adopted a new standard for determining whether unlawful discriminatory or harassing conduct which occurs outside the normal one-year statute of limitations period may be considered part of a continuing violation of the Fair Employment & Housing Act (“FEHA”). In Richards, a disability discrimination case, the plaintiff, a civil engineer with multiple sclerosis, sued her employer for failing to accommodate her disability and for an allegedly hostile work environment. She presented evidence of her employer’s alleged failure to accommodate her dating back five years and the trial court allowed the jury to consider damages for the entire period.

The Supreme Court rejected the employer’s contention that it could not be held liable for actions occurring more than one year prior to plaintiff’s complaint, holding that an employer may be liable for acts occurring outside the statute of limitations if:

1) the acts are sufficiently similar in nature to those occurring within the limitations period;

2) the acts occurred with reasonable frequency; and

3) the acts have not acquired a “degree of permanence” – that is, it has not become obvious that further informal efforts to resolve the issue would be futile.

The Supreme Court addressed the employer’s concerns of unlimited liability by suggesting that the employer can commence the running of the limitations period by “making clear to the employee in a definitive manner that it will not be granting [the employee’s accommodation] requests.”

One issue left open by the Supreme Court’s opinion is whether and how the Richards test will be applied to cases involving separate decisions that allegedly manifest a pattern of discrimination, e.g., repeated failures to promote or increase salary. In addition, the court declined to address the question of whether an employee may seek damages for back pay when he/she resigns and there has been no constructive discharge. (Richards had dropped her claim for constructive discharge in the trial court but was allowed to seek back pay damages.)

In Birschtein v. New United Motor Mfg., Inc., 92 Cal. App. 4th 994 (October 9, 2001), the California Court of Appeal applied the Richards continuing violations test to a sexual harassment case and determined that the acts of harassment occurring outside the limitations period were tolled since they were part of an ongoing or continuous course of harassment.

II. UNLAWFUL HARASSMENT

A. Availability of Faragher / Ellerth Defense Under FEHA

In Department of Health Services v. Superior Court, 113 Cal. Rptr. 2d 878, (November 19, 2001), review granted, (February 13, 2002),[1] the California Court of Appeal (Third District) held that employers will be strictly liable for harassing conduct by supervisors, even where the employer did not know, and did not have reason to know, of the supervisor's harassing conduct. Under federal law, employers may defend supervisor harassment claims by demonstrating that the employer exercised reasonable care to prevent and promptly correct the harassing behavior, and that the plaintiff employee unreasonably failed to take advantage of the corrective or preventive opportunities provided by the employer, or otherwise failed to avoid the harm. See Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998); Faragher v. City of Boca Raton, 524 U.S. 775 (1998).

In a significant departure from the U.S. Supreme Court’s reasoning in the Faragher and Ellerth cases, the California Court of Appeal held that this affirmative defense is not available to employers for claims brought under FEHA. The case was recently accepted for review by the California Supreme Court.

The plaintiff in the case alleged that she had suffered ongoing sexual harassment by her supervisor though she did not report this conduct to management for over two years. The employer presented evidence that it had circulated an employee manual describing its policy against sexual harassment and its complaint procedures, and provided sexual harassment training for its employees. When management finally became aware of the situation, it properly investigated the conduct and disciplined the supervisor. The court held, however, that the employer's lack of knowledge regarding the harassment, its attempts to prevent such conduct, and its corrective actions after learning of the harassing conduct did not constitute an affirmative defense to the employer's liability for the harassment.

B. “Staring” as Sexual Harassment

In Birschtein v. New United Motor Mfg., Inc., 92 Cal. App. 4th 994 (October 9, 2001), the California Court of Appeal ruled that an employee who alleged that a co-worker began a campaign of “staring” at her after she complained to management about his unwelcome sexual advances may proceed with a claim for sexual harassment under FEHA. The plaintiff worked on an assembly line at the defendant’s automotive manufacturing plant. Forklift drivers delivered parts to the assembly line several times a day. One of the drivers asked the plaintiff out on dates several times, which she declined, and made sexual comments to her. After the plaintiff complained to management, the forklift driver stopped speaking to her, but would drive by her work area very slowly several times a day and stare at her. Sometimes he sat in his forklift behind a pillar and stared at her for five to ten minutes at a time. The plaintiff complained again, but management concluded that the forklift driver’s “staring” did not warrant discipline.

Reversing summary judgment in favor of the employer, the Court of Appeal held that the forklift driver’s conduct could constitute actionable sexual harassment. Citing Accardi v. Superior Court, 17 Cal. App. 4th 341 (1993), the court emphasized that sexual harassment need not involve sexual conduct; intimidation and hostility based on gender may constitute sexual harassment. Since the “staring” allegedly began in response to the plaintiff’s complaints of unwelcome sexual comments and requests for dates, there was sufficient evidence that the conduct was retaliatory and part of an overall pattern of harassment for the plaintiff to proceed to trial.

C. Same Sex Harassment

In Valdez v. Clayton Industries, Inc., 107 Cal. Rptr. 2d 15 (May 8, 2001), review granted (August 8, 2001), the California Court of Appeal reversed summary judgment for the employer where the plaintiff, a male employee, alleged that a male co-worker had made repeated sexual comments to him, that management did nothing about his complaints, and that his subsequent termination was retaliatory.

The court cited Mogilefsky v. Superior Court, 20 Cal. App. 4th 1409 (2001), in holding that FEHA prohibits same sex harassment without an inquiry into the harasser’s sexual orientation since the claim focuses on whether the victim has been the subject of harassment, not the motivation of the harasser. The Valdez case has been accepted for review by the California Supreme Court.

D. Evidence of Retaliation

In Valdez v. Clayton Industries, Inc., supra, the court rejected the employer’s argument that the plaintiff employee could not establish that his termination was in retaliation for his complaints about alleged harassment. The court reasoned that the evidence that the plaintiff had complained to his supervisor and other management about the harassment and requested a transfer, that his complaints and request were ignored, and that his supervisor had selected him for termination despite a competent performance record was sufficient circumstantial evidence of retaliatory intent to overcome summary judgment. As noted above, this case has been accepted for review by the California Supreme Court.

E. Individual Liability for Harassment

Effective January 2001, A.B. 1856 amended the Fair Employment & Housing Act adding a new provision regarding individual liability for unlawful harassment. Section 12940(j)(3) provides that employees who engage in unlawful harassment may be personally liable regardless of whether the company is liable. This includes non-supervisory co-workers and overrules the California Supreme Court’s 1999 decision in Carrisales v. Dept. of Corrections, 21 Cal. 4th 1132 (1999) (non-supervisory

co-workers are not personally liable for harassment under FEHA).

Note also Winarto v. Toshiba America Electronics Components, Inc., 274 F.3d 1276 (9th Cir. 2001), holding that an individual supervisor may be liable for retaliation under FEHA, citing Page v. Superior Court, 31 Cal. App. 3d 1206 (1995), a case decided prior to the California Supreme Court’s decision in Reno v. Baird, 18 Cal. 4th 640 (1998) (no individual manager liability for discrimination claims under FEHA).

III. DISABILITY DISCRIMINATION

A. 2001 FEHA Amendments Expanded California Disability Law Beyond ADA Requirements

Effective January 1, 2001, California’s Fair Employment and Housing Act (“FEHA”) was amended to provide broader protections to employees with disabilities. Government Code Section 12926.1. The amendments include a broader definition of “disability,” an express declaration that the California statute is intended to extend beyond the Americans With Disabilities Act (“ADA”), and specified new unlawful employment practices arising from certain pre-employment and post-employment inquiries. As a result, California disability law now differs substantially from federal law. The most significant changes include the following:

▪ A "disability" is now defined as a mental or physical condition that “limits” a major life activity by making achievement of that life activity “difficult.” Cal. Gov. Code § 12926(k). It need not “substantially” limit a major life activity, as required under the ADA.

▪ The FEHA broadly construes the term “major life activities.” In contrast to the ADA where the inability to “work” must implicate a broad class of jobs in a given field, the FEHA deems “working” to include one particular job as well as a class or broad range of jobs.

▪ Whether a condition limits a major life activity under the FEHA is to be determined without regard to mitigating measures such as medication, assistive devices or reasonable accommodation that may effectively treat or alleviate the condition. This is also different from federal law – see Sutton v. United Airlines, 527 U.S. 471 (1999), (mitigating measures must be taken into account when judging whether person is disabled under ADA).

▪ The following conditions are specifically included in the definitions of physical and mental disabilities, without regard to whether the condition is chronic or merely episodic: HIV/AIDS, hepatitis, epilepsy, seizure disorder, diabetes, clinical depression, bipolar disorder, multiple sclerosis, and heart disease. The following are specifically excluded from the definition of mental disability: sexual behavior disorders, compulsive gambling, kleptomania, pyromania, or psychoactive substance abuse disorders resulting from the current unlawful use of controlled substances or other drugs.

▪ It is an unlawful business practice for an employer to fail to engage in a timely, good faith interactive process with the employee or applicant to determine effective reasonable accommodations, if any, in response to a request for an accommodation by an employee or applicant with a known disability or medical condition.

▪ The amendments also clarify that it is unlawful for an employer to engage in any medical, psychological or disability-related inquiry of any applicant or employee, except that the employer may inquire into the applicant’s ability to perform job-related functions and may respond to the applicant’s request for a reasonable accommodation.

B. Retroactivity of FEHA Amendments to Definition of Disability

Two California appellate cases have come to opposite conclusions as to whether the definition of disability provided in Government Code Section 12926.1 should have retroactive effect.

Colemnares v. Braemar Country Club, Inc., 107 Cal. Rptr. 2d 719 (May 31, 2001), review granted (August 22, 2001), the court held that the amendment to the statutory definition of “disability” in FEHA does not have retroactive application to a case filed in 1997.

In Wittkopf v. County of Los Angeles, 109 Cal. Rptr. 2d 543 (July 24, 2001), review granted (October 10, 2001), the court held that the amendments to the definition of disability must be applied retroactively because they did “not effect a radical change in California disability civil rights law,” and were mere clarifications of already existing law.

The California Supreme Court has granted review of both decisions.

IV. AWARD OF ATTORNEY’S FEES TO PREVAILING DEFENDANT UNDER FEHA

In Rosenman v. Christensen, Miller, Fink, Jacobs, Glaser, Wiel & Shapiro, 91 Cal.App.4th 859 (August 21, 2001), the California Court of Appeal clarified the standard for awarding attorney’s fees to a prevailing defendant in a FEHA case. Under the fee-shifting provisions of FEHA, a successful plaintiff is typically awarded reasonable attorney’s fees for prosecuting his/her claims. The court applied a strict standard for an award of fees to a prevailing defendant. Citing an earlier Court of Appeal decision, Cummings v. Benco Building Services, 11 Cal. App. 4th 1383 (1992), and using the criteria applied in Title VII cases by the U.S. Supreme Court in Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978), the court held that a prevailing defendant may not collect attorney’s fees only if the trial court finds that the plaintiff’s action was frivolous, unreasonable, or without foundation.

In this case, the court found the plaintiff’s claim was not frivolous, relying in part on the fact that two of the jurors had voted for her. The court also relied on the fact that the plaintiff had survived a motion for summary judgment and a motion for nonsuit, but emphasized that the trial court’s denial of such motions will not automatically bar an award of attorney’s fees to the defendant. The court further emphasized that the trial court must make written findings to support an award of fees to a prevailing defendant based on these criteria, including the plaintiff’s ability to pay the fees awarded.

V. CONSTRUCTIVE DISCHARGE

In Thompson v. Tracor Flight Systems, Inc., 86 Cal. App. 4th 1156 (February 2, 2001), the Court of Appeal held that a manager’s screaming episodes could constitute intolerable working conditions forcing an employee to resign. The plaintiff, a Hispanic woman and the director of human resources, alleged that every time she suggested something to the general manager, it became a “screaming issue.” She began to avoid the manager and started having headaches, stomach problems, insomnia and other health problems. At one point, the manager asked plaintiff whether there was a “wetback” they could hire to fill an open position. During a dispute over this issue, the manager was yelling and trembling and plaintiff believed he might hit her. Plaintiff then resigned.

Plaintiff asserted claims for sex, race and ancestry discrimination and retaliation for engaging in protected activity. The Court of Appeal affirmed the jury’s verdict rejecting her sex and national origin discrimination claims, but finding that she was subject to adverse employment action because she engaged in protected activity. Specifically, the court ruled that the jury could find constructive discharge on these facts.

Also note Starzynski v. Capital Public Radio, Inc., 88 Cal. App. 4th 33 (March 29, 2001) (applying Turner v. Anheuser-Busch, Inc., 7 Cal. 4th 1238 (1994), court held plaintiff’s claim for constructive discharge was defective since plaintiff failed to show termination was wrongful).

VI. AT WILL EMPLOYMENT

In Starzynski v. Capital Public Radio, Inc., 88 Cal. App. 4th 33 (March 29, 2001), the court affirmed summary judgment in favor of the employer on claims for breach of an implied contract to terminate only for good cause and breach of the covenant of good faith and fair dealing. The plaintiff had signed an employment agreement stating that his employment was at will and that this status could only be modified by action of the employer’s board of directors. Thus, the plaintiff’s allegations that his supervisor had reassured him that he could not be terminated if his performance was satisfactory could not create an implied in fact contract not to terminate except for good cause.

The court distinguished Wagner v. Glendale Adventist Medical Center, 216 Cal. App. 3d 1379 (1989) (subsequent oral assurances of continued employment modified at will language in employment agreement), on the ground that the agreement in Wagner did not limit the way in which the at will provision could be modified. The court, citing Guz v. Bechtel National, Inc., 24 Cal. 4th 317 (2000), also rejected plaintiff’s claim for breach of the covenant of good faith and fair dealing noting that the covenant cannot impose substantive terms and conditions in conflict with the express terms of the agreement.

VII. COVENANTS NOT TO COMPETE

A. Termination for Refusal to Sign Illegal Non-Compete Constitutes Tortious Discharge in Violation of Public Policy

In Walia v. Aetna, Inc., 113 Cal. Rptr. 2d 737 (November 21, 2001), review granted (February 27, 2002), the California Court of Appeal affirmed a $1.28 million verdict for an employee who was terminated for refusing to sign an employment agreement that contained a non-compete clause, holding that the employer’s conduct constituted a tortious discharge in violation of California public policy. The non-compete provision was part of Aetna’s standard employment agreement required for all U.S. employees in certain job categories. The non-compete clause prohibited the employee from working for a competitor in the same state or within a 50 mile radius of the employee’s sales territory for a period of six months after leaving the company.

While acknowledging that certain non-competition provisions may be permissible under the "narrow restraint exception" (which provides that a small or limited restriction will not run afoul of California's general prohibition of contracts that restrain lawful employment), the court held that Aetna’s provision did not fall within that exception since it prevented the employee from remaining in the health care industry for a period of six months unless she took a job at least 50 miles away or moved out of state.

Also note Advanced Bionics Corp. v. Medtronic, Inc., 105 Cal. Rptr. 2d 265 (March 22, 2001), review granted (June 13, 2001). In that case, a Minnesota employee signed a covenant not to compete with his employer, Medtronic, a company headquartered in California, to work in its Minnesota office. After the employee resigned, he moved to California and began work with a competitor, Advanced Bionics. On the day he began his new job, the employee and his new employer sued Medtronic in California for declaratory relief, alleging that the non-compete agreement was invalid and against California public policy. The next day, Medtronic filed suit in Minnesota seeking to enjoin the California action. The California and Minnesota courts both issued competing restraining orders.

On appeal, the California Court of Appeal affirmed the California Superior Court’s restraining order, holding that the case should go forward in California because Minnesota law permitting non-compete agreements is contrary to a fundamental public policy of California prohibiting such agreements and refused to stay the California case.

The California Supreme Court has granted review of both Walia and Advanced Bionics.

B. Choice of Law and Severability Clauses Will Not Save Employment Agreements With Illegal Non-Compete Clauses

In both Walia v. Aetna, Inc., supra, and D’Sa v. Playhut, Inc., 85 Cal. App. 4th 927 (2000), the California Court of Appeal has ruled that contracts with illegal non-compete provisions will not be saved by choice of law or severability provisions in the agreements. Under these cases, an employment agreement containing an illegal non-compete will be declared unenforceable in its entirety. Such a rule may leave an employer without other protections contained in the contract such as provisions protecting trade secrets and other confidential information. The Walia case is presently being reviewed by the California Supreme Court.

VIII. ARBITRATION

A. Minimum Requirements for Mandatory Arbitration of

FEHA Claims

The California Supreme Court set the standard by which employees can be compelled to arbitrate FEHA claims in Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83 (2000). In that case, the court held that FEHA claims may be subject to mandatory arbitration agreements only if the arbitration agreement meets certain conditions:

(1) the agreement must provide for a neutral arbitrator;

(2) the agreement cannot limit the employee’s remedies that would otherwise be available in a civil court;

(3) the agreement must provide for adequate discovery;

(4) the agreement must provide for a written decision subject to judicial review;

(5) the employee cannot be required to bear any type of expense that the employee would not be required to bear if he/she sued in court; and

(6) there must be a “modicum of bilaterality” – e.g., both parties must waive their jury trial rights.

The court further held that courts cannot sever unconscionable terms of the agreement “if the central purpose of the contract is tainted with illegality.”

Also note Pinedo v. Premium Tobacco Stores, Inc., 85 Cal. App. 4th 774 (December 19, 2000) (arbitration agreement unenforceable where employee’s right to damages substantially limited and employee forced to bear initial costs of arbitration).

B. Application of Armendariz to Non-Statutory Claims

In Little v. Auto Stiegler, Inc., 112 Cal. Rptr. 2d 56 (September 17, 2001), review granted (December 19, 2001), a suit for breach of contract and wrongful termination in violation of public policy, the Court of Appeal held that since the plaintiff had not asserted claims based on FEHA or other statutory rights, the absence of the minimum requirements set forth in Armendariz did not invalidate the arbitration clause, and the employee should be compelled to arbitrate his claims. The Supreme Court has accepted review of this decision.

Also note Swiderski v. Millberg, Weiss, Bershad, Hynes & Lerach, 94 Cal. App. 4th 719 (December 18, 2001) (arbitration agreement not unconscionable where both employer and employee were required to arbitrate claims; cost-sharing provision not unfair in arbitration of non-statutory claims, and could be severed if appropriate).

C. Retroactive Application of Armendariz

Blake v. Ecker, 93 Cal. App 4th 728 (November 2, 2001), a decision by the Second Appellate District, held that Armendariz should be retroactively applied. The case was remanded to the trial court to reconsider the original motion to compel arbitration in light of Armendariz.

D. Severability of Unconscionable Arbitration Provisions

In Blake v. Ecker, supra, the court also directed the trial court to consider the effect of the severance provision in the agreement. The court noted that the concerns expressed in Armendariz that severing offending provisions would result in a modified agreement that the parties never agreed to were of less concern in this case because the contract contained an express severance provision. The court held that the trial court must consider all of the language of the agreement, including the severance provision, and the circumstances involved in the creation of the agreement in deciding whether the arbitration provision is enforceable.

E. No Agreement to Arbitrate Where Arbitration Agreement in Employee Handbook Not Signed By Employee

Romo v. Y-3 Holdings, Inc., 87 Cal. App. 4th 1153 (March 20, 2001), another post-Armendariz case, held that no agreement to arbitrate existed where the employee handbook contained such an agreement but the employee never signed it. The fact that the employee had signed an acknowledgment of receipt for the handbook in which the arbitration agreement was contained was insufficient to create an enforceable arbitration agreement.

IX. WAGE AND HOUR ISSUES

A. California’s Salary Basis Test

On May 30, 2001, Miles Locker, chief counsel of the California Division of Labor Standards Enforcement issued a Letter Opinion providing that exempt employees must receive their full salary for any month in which they perform any work, without regard to the number of days or hours worked. Federal law provides that exempt employees must receive their full salary for any week in which they perform work. The opinion letter caused a furor among employers.

Less than one month later, the State Labor Commissioner withdrew the Letter Opinion and Governor Gray Davis demoted Mr. Locker. In its December 17, 2001 meeting, the California Industrial Welfare Commission formally adopted a position statement clarifying that California maintains a weekly salary basis test rather than the monthly salary basis test suggested by Mr. Locker’s May Letter Opinion. Thus, California law remains in line with federal labor law which permits employers to not pay employees for any full week in which no work was performed.

B. Stringent Application of Administrative Exemption

In Bell v. Farmers Insurance Exch., 87 Cal. App. 4th 805 (March 5, 2001), the California Court of Appeal affirmed a jury verdict of $90 million in favor of 2,400 current and former claims adjusters who claimed they were improperly classified by Farmers Insurance as exempt administrative employees and denied overtime. The court found that the claims adjusters did not qualify for the administrative exemption to overtime under the stringent requirements of California law because they spent most of their time on “routine and unimportant” matters. On matters of greater importance, the plaintiffs merely acted as “go-betweens” for their supervisors.

C. Overtime Claims Under California’s Unfair Business Practices Statute

In Cortez v. Purolator Air Filtration Products, 96 Cal. Rptr. 2d 518, the California Supreme Court extended the reach of the California Unfair Competition Law by permitting a lawsuit for “restitution” of unpaid overtime. This ruling has two significant consequences. First, overtime claims may be brought in a “representative” capacity – that is, anyone can bring the claim against the employer. In an individual or class action, the plaintiff must have been damaged before suing. Second, claimants have up to four years to file suit for unpaid overtime, a full year longer than was available before Cortez.

X. WORKERS’ COMPENSATION

A. Release Obtained in Workers’ Compensation Proceeding Bars Subsequent Sex Discrimination Claim

In Jefferson v. Cal. Dept. of Youth Authority, 109 Cal. Rptr. 2d 300 (March 26, 2001), review granted (July 11, 2001), the Court of Appeal for the Fourth District granted summary judgment to the employer holding that a general release obtained in a settlement of the employee’s workers’ compensation claims for psychological injuries due to alleged sexual harassment barred the employee’s sex discrimination claims under FEHA. The decision conflicts with a 1993 decision by the Court of Appeal for the Second District, Delaney v. Superior Fast Freight, 14 Cal. App. 4th 590 (1993), which refused to grant summary judgment in a case with a similar release, holding that it was a triable issue of fact whether the parties intended to release all claims. The Supreme Court has granted review of Jefferson.

B. Exception to Exclusivity for Injury Due to Co-Worker’s Aggression Requires Proof of Intent to Injure

In Torres v. Parkhouse Tire Service, Inc., 26 Cal. 4th 995 (August 30, 2001), the California Supreme Court held that the exception to Workers’ Compensation exclusivity in California Labor Code section 3601(a)(1) for a “willful and unprovoked physical act of aggression” by a co-worker requires proof that the intended to injure the plaintiff. The court made clear that Workers Compensation remains the exclusive remedy for injuries that result from horseplay in the workplace.

XI. OTHER LEGISLATIVE DEVELOPMENTS

A. Amendments to Investigative Consumer Reporting Agencies Act

Recent amendments to the California Investigative Consumer Reporting Agencies Act (ICRA), Cal. Civil Code § 1786 et seq., effective January 1, 2002, now require employers to give job applicants and employees who are the subject of an “investigative consumer report” (defined as a report which compiles information on the subject's “general reputation, personal characteristics or mode of living”) a copy of any report received. Prior to this amendment, the California statute, like its federal counterpart, required employers to obtain consent from applicants and employees before conducting a background check, but only required the employer to provide a copy of the report to the subject if the employer made an adverse decision (e.g., rejection of the applicant) based upon information in the report.

In addition, ICRA requirements are no longer limited to investigations conducted by third party reporting agencies, but rather apply to any person or entity that compiles such information, and therefore appear to apply to in-house investigations as well. Investigations subject to ICRA notice and consent requirements include background checks such as employment verification and criminal records checks on job applicants as well as candidates for promotion or reassignment.

The stated purpose of the amendments is to prevent identity theft. The California Legislature reasoned that by requiring employers to provide copies of investigative consumer reports to applicants and employees, the subjects of the reports will be able to discover if someone has stolen their identity.

The amendments create a specific exception to the ICRA requirements where the investigation is sought “based upon the suspicion of wrongdoing by the subject of the investigation.” Thus, under California law, an employer does not have to provide notice to a suspected harasser or embezzler that he/she is being investigated or obtain his/her consent to conduct an investigation.

The amendments to the ICRA also increased penalties for noncompliance from $2,500 to $10,000. Further, if a court determines that the employer’s violation of the statute was grossly negligent or willful, the employer may be liable for punitive damages.

B. Domestic Partner Provisions

Effective January 1, 2002, Assembly Bill 25 significantly expands the rights conferred to registered domestic partners. In addition to a variety of other rights, A.B. 25 confers several new employment rights to domestic partners, including the following:

▪ Permits an employee to use half of his/her allotted sick leave to care for a domestic partner or the child of a domestic partner. Cal. Lab. Code § 233. (Since January 1, 2000, California law has required employers to allow employees to use half of the sick leave that the employee would accrue in that year to attend to the illness of the employee's child, parent, or spouse.)

▪ Requires group health care service plans and disability insurance carriers that provide hospital, medical, and surgical benefits to offer coverage to the domestic partners of employees, subscribers, or policyholders to the same extent that they provide benefits to dependents of such individuals upon application of the employer or group administrator. (A.B. 25 does not require employers to provide health benefits to employees' domestic partners, a requirement that would likely be preempted by federal law for plans covered by ERISA.)

▪ Amends California law to provide that a domestic partner is a “dependent” so that benefits received for a domestic partner are exempt from state taxation. These benefits remain taxable under federal law unless the domestic partner qualifies as a “dependent.”

▪ Extends eligibility for unemployment benefits to an employee who quits to accompany or join his or her domestic partner to a new location. Prior law allowed an employee who quit his or her job to relocate with a spouse to collect such benefits.

Notes: A.B. 25 does not change any family care or medical leave requirements under the California Family Rights Act. Governor Davis vetoed legislation that would have expanded this law to cover domestic partners in 2000. In order to enjoy the rights conferred to domestic partners under A.B. 25, the domestic partners must be registered with the California Secretary of State. Local domestic partnership registration is insufficient to trigger these rights. California does not recognize domestic partnership registrations from outside California.

C. Victims of Domestic Violence Employment Leave Act

The Victims of Domestic Violence Employment Leave Act (S.B. 662), enacted last year, prohibits employers with at least 25 employees from discriminating or retaliating against an employee who misses work to seek services associated with domestic violence. Cal. Lab. Code § 230. The employee may use vacation, personal leave, compensatory time off or unpaid leave for the following purposes:

(1) to seek medical attention for injuries caused by domestic violence

(2) to obtain services from a domestic violence shelter, program or rape crisis center

(3) to obtain psychological counseling related to an experience of domestic violence

(4) to participate in safety planning or other actions to prevent future domestic violence.

The employee may take a total of 12 weeks of unpaid leave for domestic violence and any purpose allowed under the Family and Medical Leave Act (if eligible). An employee seeking such leave must provide reasonable notice, unless notice is not feasible. The employer may require certification of the need for the absence within a reasonable time thereafter. Certification could include a police report, court order, or documentation from a medical provider, domestic violence advocate or counselor. The employer must maintain the confidentiality of such information.

Any employee who has been discriminated or retaliated against for taking time off for these purposes may be reinstated and reimbursed for lost wages and work benefits. In addition, an employer who willfully refuses to rehire, promote or otherwise restore an employee or former employee may be guilty of a misdemeanor.

These requirements expand upon a California law enacted in 2000 that prohibits discrimination or retaliation against an employee who is a victim of domestic violence and takes time off from work to obtain judicial relief to protect the health, safety or welfare of the employee or his or her child. Cal. Lab. Code § 230.

D. Lactation Accommodation

Effective January 1, 2002, A.B. 1025 requires employers to provide a reasonable amount of break time to employees desiring to express breast milk for the employee’s infant child. The employer must make reasonable efforts to provide the employee with a room (other than a toilet stall) close to the employee’s work area to express milk in private. The break time may be scheduled to run concurrently with break time that the employer already provides to the employee. However, an employer must provide additional, unpaid break time for expressing milk when concurrent scheduling is not possible. The statute exempts employers whose operations would be “seriously disrupted” by providing such break time. Cal. Lab. Code §§ 1030-1033.

E. Confidentiality of Social Security Numbers

Effective July 1, 2002, S.B. 168 prohibits any person or entity from including an individual’s Social Security number on materials mailed to that individual, and prohibits the public posting of Social Security numbers and the printing of Social Security numbers on pass cards for access to products or services. There is no prohibition against the use or release of Social Security numbers for internal verification or administrative purposes or for including Social Security numbers in mailed items if the number is required by law. Cal. Civ. Code § 1798.85.

The statute provides an exception for preexisting use of Social Security numbers in a manner inconsistent with the new law if:

1) The use remains continuous (if use is discontinued for any reason, the statutory prohibitions apply).

2) The person or entity provides an annual disclosure, commencing in 2002, informing the individual that he/she has the right to stop the use of his Social Security number in the manner prohibited by the new statute.

3) Any written request by an individual to stop the use of his Social Security number in the manner prohibited by the new statute must be implemented within 30 days after receipt without charge.

F. Prohibition of English Only Work Rules

Effective January 1, 2002, it is an unlawful employment practice under FEHA to limit or prohibit the use of any language in the workplace unless the policy is justified by “business necessity” and the employer has notified its employees of the circumstances and time when the language restriction must be observed and the consequences for violating the restriction. Cal. Gov. Code § 12951.

Business necessity is defined as an “overriding legitimate business purpose” such that the language restriction is necessary to the safe and efficient operation of the business and there is no alternative to the policy that would accomplish the business purpose served by the language restriction.

G. Applicants’ and Employees’ Off Duty Conduct

A.B. 1015 amends Labor Code section 96 (k) to prohibit discrimination against job applicants who have previously filed a claim with the Labor Commissioner. In addition, the new law clarifies that Labor Code section 96 (k) does not prevent an employer from maintaining certain conflict of interest and anti-moonlighting policies. An employer may maintain a policy against conduct in direct conflict with the essential business interests of the employer where breach of the policy would materially and substantially disrupt the employer’s business operation without running afoul of Labor Code section 96 (k).

H. Application of FEHA to Religious Corporations

A.B. 1475 amends FEHA to make its anti-harassment provisions applicable to health care facilities which are owned or operated by a religious corporation and provide services to non-members of that religion. Cal. Gov. Code § 12940.

S.B. 504 broadens the religious exemption from the anti-discrimination provisions of FEHA by allowing non-profit, religious public benefit corporations to restrict employment to individuals of a particular religion if the corporation’s sole or primary activity is operating an educational institution. Cal. Gov. Code § 12926.2.

XII. SIGNIFICANT EMPLOYMENT CASES PENDING BEFORE CALIFORNIA SUPREME COURT

Department of Health Services v. Superior Court, 113 Cal. Rptr. 2d 878, (November 19, 2001), review granted, February 13, 2002)

Issue: Whether Faragher / Ellerth defense is applicable to claims under FEHA.

See discussion of facts and Court of Appeal decision in section II A.

Walia v. Aetna, Inc., 113 Cal. Rptr. 2d 737 (November 21, 2001), review granted (February 27, 2002)

Issue: Enforceability of non-compete

See discussion of facts and Court of Appeal decision in section VII.

Advanced Bionics Corp. v. Medtronic, Inc., 105 Cal. Rptr. 2d 265 (March 22, 2001), review granted (June 13, 2001)

Issue: Effect of choice of law provisions on enforceability of non-competition clause in California and effect of conflict with Minnesota law where contract was executed.

See discussion of case in section VII A.

Esberg v. Union Oil Co. of California, 104 Cal. Rptr. 2d 477 (February 27, 2001), review granted (May 16, 2001)

Issue: Nature of adverse action necessary to support age discrimination claim under FEHA.

The Court of Appeal held that FEHA does not permit a claim for age discrimination based on the denial of educational assistance provided to other employees. Relying on the absence of language prohibiting discrimination in the “terms, conditions or privileges of employment” (this language is included in the section of FEHA applicable to other prohibited discrimination), the court held that age claims under FEHA must be premised on adverse action related to hiring, discipline or termination decisions.

Valdez v. Clayton Industries, Inc., 107 Cal. Rptr. 2d 15 (May 8, 2001), review granted (August 8, 2001)

Issue: Same sex harassment; retaliation

See discussion of facts and Court of Appeal decision in section II C.

Colemnares v. Braemar Country Club, Inc., 107 Cal. Rptr. 2d 719 (May 31, 2001), review granted (August 22, 2001), and

Wittkopf v. County of Los Angeles, 109 Cal. Rptr. 2d 543 (July 24, 2001), review granted (October 10, 2001)

Issue: Retroactivity of 2001 amendment to statutory definition of “disability” in FEHA.

See discussion of both cases in section III B.

Little v. Auto Stiegler, Inc., 112 Cal. Rptr. 2d 56 (September 17, 2001), review granted (December 19, 2001)

Issue: Application of Armendariz arbitration requirements to non-statutory employment claims.

See discussion of case in section VIII B.

Clayton-Brame v. Superior Court, 106 Cal. Rptr. 2d 806 (May 10, 2001), review granted (August 8, 2001)

Issue: Factual showing necessary to establish “substantial evidence” of discrimination for failure to promote

The Court of Appeal for the Second Appellate District reversed the trial court’s finding that the plaintiff was passed over for promotion because of her union activity where the plaintiff had scored lower than all but one of the persons promoted on the examination and the only successful applicant who scored lower than she did had special computer skills that the plaintiff conceded she did not possess.

Smith v. Rae-Venter Law Group, 106 Cal. Rptr. 2d 873 (May 21, 2001), review granted (August 29, 2001)

Issue: Determination of “successful” appeal of Labor Commission decision for purposes of award of attorney’s fees.

The Sixth District Court of Appeal held that an award of attorney’s fees is proper only if the appeal to the trial court results in a greater award than the Labor Commission decision.

Jefferson v. Cal. Dept. of Youth Authority, 109 Cal.Rptr.2d 300 (March 26, 2001), review granted (July 11, 2001)

Issue: Whether general release in Workers’ Compensation case for psychological injuries due to alleged discrimination bars subsequent claim for underlying discrimination.

See discussion of case in section X A.

-----------------------

[1] Note: In several places in this paper, there is discussion of appellate decisions for which the California Supreme Court has granted review. Readers should remember that opinions of the California Court of Appeal for which Supreme Court review has been granted may not be cited as precedent. A list of the most significant employment law cases presently before the California Supreme Court appears at the end of this paper.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download