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AUGUST 2002 I. LEGISLATIVE/REGULATORY
UPDATE Several bills which may dramatically impact California employers and employees beginning in 2003 are still pending in the legislature or have already been sent to Governor Gray Davis. These bills include:
Governor Davis has until September 30, 2002 to either sign or veto bills that were sent to him by the legislature no later than August 30, 2002. California Supreme Court to Decide Key Overtime Case The California Supreme Court has agreed to review an important ruling denying class action status to a group of managers who sued their employer for unpaid overtime. In Sav-On v. Superior Court, the plaintiffs allege that the drugstore chain failed to pay overtime to 1,400 managers who worked at approximately 300 stores throughout California. Earlier this year, a California court of appeal held that the case should not be certified as a class action because the employees failed to prove that "common questions" predominate among the managers. To establish an appropriate class for certification, the employees must prove, among other things, that the questions of law or fact common to all members of the class predominate over the questions of law or fact that are unique to each member of the group. The court of appeal found that the range of tasks performed by the employees and the time spent on those tasks varied significantly from store to store and manager to manager. We will keep you apprised of the guidance the California Supreme Court provides on the class certification issue. California Supreme Court Allows Employees Represented by Labor Commissioner to Recover Attorneys' Fees The California Labor Code authorizes the California Division of Labor Standards Enforcement ("DLSE") to adjudicate wage claims. If an employee prevails on such a claim and the employer appeals, the DLSE can represent the employee in the appeal if he or she cannot afford legal fees. Recently, in Lolley v. Campbell, the California Supreme Court held that a superior court may assess attorneys' fees against an employer who unsuccessfully appeals an administrative order of the DLSE to pay wages following a hearing. Moreover, even though an employee who is represented by the DLSE does not actually pay attorneys' fees, fees may be awarded to employees who cannot afford counsel and are represented without charge. In the case, Chris Lolley ("the Employee") filed a wage claim against his former employer, Shawn Campbell ("the Employer"). Following an administrative hearing, the hearing officer awarded the Employee more than $27,000 in unpaid overtime, penalties, and interest. The Employer appealed. The Employee could not afford counsel for the appeal and sought assistance from the DLSE. Under state law, the DLSE "may" represent an employee who is "financially unable to afford counsel" and "shall" represent an employee if the employee "is attempting to uphold the amount awarded... and is not objecting to any part of the... final order." As part of the agreement for representation, the Employee assigned to the DLSE his right to recover attorneys' fees. The trial judge concluded that the Employer violated state wage and hour laws and awarded the Employee $14,000 in damages plus costs. The Employee then submitted his request for $6,600 in attorneys' fees. The trial judge refused to grant the request, concluding that the Employee had not "incurred" any attorneys' fees. The court of appeal upheld the ruling, and the Employee appealed to the Supreme Court. The Court disagreed with the lower court, noting that "it has been generally agreed that a party may 'incur' attorney fees even if the party is not personally obligated to pay such fees." Moreover, the Court found that the attorneys' fees provision was intended to discourage unmeritorious appeals of wage claims ˆ regardless of whether the employee could afford private counsel. Although this is an unfortunate decision for California employers, it is important to note that the attorneys' fees provision at issue turns on whether the appeal is "unsuccessful." Here, the Employer argued that its appeal was not "unsuccessful" because the trial judge had reduced the award. The Supreme Court did not decide this issue. The Court has, however, agreed to hear a case to determine what constitutes "success" in appeals from DLSE rulings. We will keep you apprised of future developments. Workers' Compensation Release Barred Discrimination Claim The California Supreme Court recently dismissed a lawsuit filed by an employee who claimed that she was sexually harassed by her supervisor. In Jefferson v. California Department of Youth Authority, the Court determined that a general release signed by the employee in connection with the resolution of her workers' compensation claim relieved the employer of any liability for harassment under the California Fair Employment and Housing Act ("FEHA"). In the case, Mary Jefferson ("the Employee") worked as a teacher's assistant for the California Department of Youth Authority ("the Employer"). She alleged that while working in the classroom, she was subjected to derogatory language by both the teacher for whom she worked and his students. The Employee complained to the teacher and his supervisor but the sexually offensive conduct continued. The Employee was diagnosed with job-related stress and was instructed by her doctor not to return to work. She thereafter filed a claim for workers' compensation benefits for psychological injuries she alleged were caused by the hostile work environment. She also filed a charge with the California Department of Fair Employment and Housing, claiming that she had been sexually harassed. The Employee settled her workers' compensation claim and signed a "Compromise & Release" ("C&R") on a pre-printed workers' compensation form. Attached to the C&R was a statement that both parties wished to avoid litigation, the settlement was to compensate the Employee for all aspects of the injury, and all claims against the Employer's employees were also waived. Two weeks later, the Employee filed a civil lawsuit for sexual harassment. The trial court and the court of appeal dismissed the Employee's suit, finding that the signed release barred her claims. The Employee argued that her suit should be reinstated because she believed that the release applied only to her workers' compensation claim and she had no intention of relinquishing her FEHA claims. She also argued that the nature of the release (a preprinted workers' compensation form) and the failure to reference FEHA claims demonstrated that the release was not intended to prevent her from suing for sexual harassment. The Employee's arguments were rejected as the Supreme Court concluded that the broad settlement language was enforceable. This case reaffirms the critical importance of well-drafted releases - particularly in the workers' compensation arena, when an employee may assert additional claims related to an on-the-job injury. Employers who seek to obtain a full release of all claims by way of concluding a worker's compensation proceeding should make clear in the documentation that such a release is the intent of the parties. If the employer remains silent, it runs the risk that the employee may later assert that the release should be limited to workers' compensation claims. Conversely, if the employee has a charge pending and remains silent, he or she may be barred in the subsequent civil action. Supervisors Liable for Retaliation Claim In a recent case, a California court of appeal has affirmed that individual supervisors may be held personally responsible for a retaliation claim. In Walrath v. Sprinkel, Richard Walrath (the "Employee") sued Hatcher Press ("the Employer") and its president for retaliatory wrongful discharge in violation of public policy and age discrimination in violation of the California Fair Employment and Housing Act ("FEHA"). The claim against the president alleged that the Employee's employment was terminated in retaliation for the discrimination charge. The suit against the president was dismissed because he had not been named in the administrative complaint filed with the California Department of Fair Employment and Housing ("DFEH"). Filing a complaint with the DFEH is generally a prerequisite to a civil lawsuit alleging FEHA claims. A California court of appeal reinstated the case against the president. The court held that, unlike statutory discrimination claims that can only be brought against employers, a common law retaliation claim may be stated against an individual. The Employee could not pursue the case against the president under FEHA because he had not been named in the administrative complaint. However, the court allowed him to pursue the suit for retaliatory wrongful termination arising out of the violation of public policy against age discrimination as set forth in FEHA, because such a common law claim does not require an employee to exhaust administrative remedies under FEHA before filing suit. The opinion reminds employers that all managers and supervisors should be trained regarding their responsibilities pursuant to state and federal employment laws and provided resources to which they can turn for advice. Ninth Circuit Extends Reach of Title VII In Kang v. U.Lim Am., Inc., the Ninth Circuit court of appeals recently allowed non-citizens employed at a foreign subsidiary to be included in their employer's tally to establish coverage under Title VII of the Civil Rights Act of 1964. Title VII prohibits discrimination because of race, color, sex, religion, or national origin, and covers employers with fifteen or more employees. Soo Cheol Kang ("the Employee") worked for U. Lim America (the "Employer"), a U.S. based company that had six or fewer employees during the applicable time period. Other employees worked at a plant in Tijuana, Mexico owned by U. Lim de Mexico ("ULM"), which was wholly owned by the Employer. ULM employed more than 50 employees, none of whom were U.S. citizens. The Employee filed discrimination charges against ULA, but these were dismissed by the district court because the Employer did not have the necessary 15 employees for Title VII to be applicable. The Employee appealed to the Ninth Circuit. The court of appeals examined the relationship between the Employer and ULM, finding that the two companies were an "integrated enterprise" for Title VII coverage. The court determined that:
Title VII defines "employee" to include U.S. citizens employed by U.S. companies located in foreign countries. The Employer argued that by inference this excludes non-U.S. citizens working for U.S. companies outside the United States. The court disagreed and held that the definition should be broadly interpreted to enable Title VII to protect employees based on the size of the employer. The court opined that the Employer, when combined with its Mexican subsidiary, is not the kind of small business Congress intended to be exempt from Title VII. The Employee also claimed to have suffered discrimination by a manager, a fellow Korean, who said that the Employee was superior to Americans and Mexicans and therefore should work harder and longer. Thus, discrimination may not always be based upon a perception of inferiority. Employers should not presume that they can escape the impact of employment laws will be escaped because of a belief that the company is too small to be of interest to the government. Further, an employer should be aware of the laws and regulations that apply to its size and legal structure. 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.
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