MAY 2001

I.
LEGISLATIVE UPDATE

California Bills Currently Pending

Several bills are currently pending in the California Legislature, if passed, that may impact employers. The bills include:

•AB 840 (Pacheco): This bill would limit punitive damage awards against small business to three times the compensatory damages awarded at trial. AB 840 would also create an avenue of de novo appellate court review of awards in excess of three times the actual damages for businesses which are not deemed small businesses. AB 840 has been referred to the Judiciary Committee.

•AB 917 (Romero): This bill would increase the civil penalty of employers who fail to keep complete and accurate records on employees' names, wages, and the ages of minor employees, and who fail to provide the Labor Commission access to business premises in order to make an authorized investigation. AB 917 would change the amount of the civil penalty from a lump sum penalty of $500 to $100 per employee for each payroll period during which the employer failed to comply.

•AB 1015 (Wright): This bill would make it unlawful to engage in specified employment discrimination based upon a person's lawful conduct that occurred off of the premises of the employer and not during working hours. AB 1015 has been referred to the Committee on Labor and Employment.

II.
JUDICIAL UPDATE

Potential New Defense in California to
Sexual Harassment Claims

California employers may have new device in their defense against employee claims of sexual harassment, according to a decision announced by the Ninth Circuit Court of Appeals. The Ninth Circuit stated that the same sexual harassment defense created by the United States Supreme Court in 1998 for federal claims should apply to California FEHA claims as well.

In 1998, the United States Supreme Court held that an employer can avoid strict liability for sexual harassment by a supervisor under Title VII if:

(1) It took no tangible employment action against the employee;

(2) It exercised reasonable care to prevent and correct harassment; and

(3) The employee failed to make a complaint under the company's policy or otherwise failed to avoid harm.

In Kohler v. Inter-Tel Technologies (2001) 244 F.3d 1167, the Ninth Circuit recently held that the same defense should apply to claims of sexual harassment under California's Fair Employment and Housing Act. Since the California Supreme Court has yet to rule on this issue, the Ninth Circuit's decision constitutes its "prediction" of how the state high court would rule in a similar case. This prediction is a stark contrast from earlier decisions by California courts of appeal which have held employers strictly liable for sexual harassment by a supervisor, whether the employer knew of the harassment or exercised reasonable care to prevent it.

If you would like to discuss these or any other employment law matters, please do not hesitate to contact any member of Klinedinst's Employment Law Department.