FEBRUARY 2003

I. LEGISLATIVE/REGULATORY UPDATE
Pending Legislation

IWC Denies Petition to Increase State Minimum Wage

Citing economic concerns, the state Industrial Welfare Commission ("IWC") denied a petition that would have increased California's minimum wage to $8 per hour within two years. The IWC is responsible for examining the factors affecting the economy and making a reasoned decision as to when and how much the minimum wage should be increased.

California's minimum wage, which was increased to the current $6.75 per hour rate on January 1, 2002, is the third highest in the nation and significantly higher than the federal minimum wage of $5.15 per hour. If the petition had passed, not only would the state's minimum wage have risen to $8 per hour, but all future hikes would have been indexed to increases in the Consumer Price Index.

Labor representatives present at the meeting stated they would resubmit a petition asking the IWC to again evaluate and raise the state's minimum wage. The minimum wage issue will also be considered during the legislative session that has just begun in the form of SB 57 (Burton).

Kin Care Law

The effect of SB 1471 (new Labor Code section 234) has been an issue of late. The question: Does section 234 prohibit employers from disciplining employees for excessive absences which are taken to care for kin?

Section 234 provides that: "An employer absence control policy that counts sick leave taken pursuant to Section 233 as an absence that may lead to or result in discipline, discharge, demotion, or suspension is a per se violation of Section 233...."

Section 234 is a modifier of Labor Code section 233 which only mandates that employers providing sick leave are required to permit employees to utilize one-half of their total leave time to care for specified family members and domestic partners. The critical language is "... sick leave taken pursuant to Section 233 ... ," meaning that if an employer penalizes the employee for doing what section 233 permits, the employer has violated the law.

On the other hand, nothing in section 233 protects unexcused absences in excess of one- half of the total sick leave bank/accrual (or where no sick time policy exists). Likewise, section 234 does not prohibit any discipline for excessive absenteeism (whatever the reason).

If an employer has a bona fide sick leave plan, the employer must ˆ regardless of the needs of the company ˆ permit half of the time to be used for kin care. Beyond that, there is no obligation to permit additional kin care related absences.

Pending California Legislation

The California Legislature is back in session. A number of bills are pending which, if passed, would impact California employers and employees:

SB 57 (Burton) would mandate yearly increases in California's minimum wage by indexing the wage to the federal Urban Consumer Price Index in perpetuity and requiring the indexed increase to be rounded to the nearest 5 cents. Had this requirement been in place starting in 1980, California's minimum wage would currently be $8.40 per hour (25% higher than the current minimum wage rate of $6.75 per hour).

AB 18 (Leno) would permit local governments to institute discrimination standards that are more stringent than California's Fair Employment and Housing Act.

AB 76 (Corbett) would make it unlawful for an employer to fail to take immediate and appropriate corrective action to prevent harassment of an employee by any person (including clients and vendors), once the employer knows or should have known of this conduct. This bill contemplates overruling Salazar v. Diversified Paratransit, Inc. which held that employers are not liable for the inappropriate conduct of a client or customer.

SBX 1 10 (Sher and Scott) would require employers to fund 100% of California's workers' compensation program. Currently, the workers' compensation program receives 80% of its funding through the state's general fund and 20% from employers. Although this legislation was initially introduced as an urgency bill, those provisions have been amended.

AB 233 (Diaz) would modify current California law regarding the standards governing when an employer pays an employee's attorneys' fees after an appeal of a decision by the Division of Labor Standards Enforcement ("DLSE") to superior court. Under the bill's definition of "successful," an employee would be entitled to attorneys' fees if he or she received any award greater than zero. This bill would overrule current California case law that defines "successful" as a court judgment in an amount greater than the DLSE's award.

We will continue to keep you updated on these and other important bills as the year continues.

II. JUDICIAL UPDATE

Motor Carrier Exemption from State Overtime Rules is Affirmed

In Collins v. Overnite Transportation Co., a California court of appeal held that the motor carrier exemption from the California overtime rules was not repealed by AB 60, the "Eight-Hour-Day Restoration and Workplace Flexibility Act of 1999." In doing so, it rejected a class action filed on behalf of driver employees seeking overtime pay and other relief from a motor carrier.

Overnite Transportation Co. ("the Employer") was a motor carrier governed by Wage Order 9. A number of employees sued the employer for overtime pay, arguing that AB 60 imposed statutory liability on motor carriers and impliedly repealed the overtime exemption from state law that motor carriers previously enjoyed. The court of appeal reviewed the legislative history of the overtime exemption for drivers that existed under state and federal law. The court of appeal concluded that California's legislature gave the Industrial Welfare Commission ("IWC") the authority to review and retain non-statutory exemptions in the Wage Orders and rejected the employees' argument that the motor carrier exemption was repealed by implication. The court recognized that the motor vehicle exemption was derived from a long-standing statutory scheme, found in both state and federal law, that reflects the peculiar circumstances of the trucking industry. The court determined that it should not be inferred that the Legislature intended to repeal the exemption without an expressed declaration of intent. Because the motor carrier exemption was one of the exemptions found in a valid 1997 Wage Order, the IWC had power to retain it and had in fact done so.

One Ethnic Slur Sufficient to Constitute Hostile Work Environment Harassment

In Dee v. Vintage Petroleum, a California court of appeal held that a single ethnic remark may be sufficient to create a hostile work environment. Glenda Dee ("the Employee") worked as a production clerk for Vintage Petroleum, Inc. ("the Employer"). The Employee was supervised by Andy Marsh; Marsh was supervised by Paul Strickland. Strickland degraded and insulted the Employee; ordered her to take a document from Marsh's desk; told her to hide information from Marsh; and made one racial slur toward her.

The trial court granted the Employer's motion for summary judgment holding that under California's Fair Employment and Housing Act ("FEHA") "one racial comment is insufficient... to establish a hostile environment." On appeal, the Employee argued that Strickland's ethnic slur combined with his other comments established a triable issue of fact on the issue of a hostile work environment. The court of appeal concurred, emphasizing that when a single offensive act is committed by a supervisor, the sole act may be sufficient to establish employer liability for a hostile work environment.

To avoid similar potential liability, employers should take steps to prevent lawsuits by adopting effective policies that prohibit discrimination and harassment and provide both employees and supervisors with proper training.

Paramour Theory of Sexual Harassment Rejected

In Mackey v. Department of Corrections, a California court of appeal rejected two plaintiffs' claims that they were sexually harassed based upon the consensual romantic relationships of others in the workplace.

Edna Miller and Frances Mackey ("the Employees") sued the California Department of Corrections ("the Employer") for, among other claims, sexual harassment and retaliation. Their claims centered around their supervisor's consensual relationships with other women in the workplace and the alleged retaliation they experienced after complaining about the relationships.

The court of appeal rejected the Employees' claims and emphasized that this type of sexual favoritism does not violate California's Fair Employment and Housing Act ("FEHA"). Rather, "[a]n isolated instance of favoritism toward a 'paramour' (or spouse, or a friend) may be unfair, but it does not discriminate against women or men ... since both are disadvantaged for reasons other than their genders." Moreover, the Employees' retaliation claims were similarly rejected because none of their complaints arguably concerned sexual harassment or discrimination within the meaning of FEHA. Rather, the Employees were complaining of unfairness, which is not a protected activity under FEHA.

Employer Liability for Non-Employee Conduct in Doubt

The California Supreme Court agreed to review an important sexual harassment ruling issued by a California court of appeal. In Salazar v. Diversified Paratransit, Inc., the lower court held that employers cannot be sued pursuant to the California Fair Employment and Housing Act ("FEHA") for harassment committed by clients or customers.

The case involved Raquel Salazar ("the Employee"), who worked as a bus driver for Diversified Paratransit ("the Employer"), which provides transportation for developmentally disabled individuals. According to the Employee, she quit and sued after one of her regular passengers engaged in inappropriate sexual conduct toward her while on the bus.

The court of appeal found that FEHA's language does not hold employers liable for the inappropriate conduct of a client or customer. In fact, the court noted, the Legislature rejected a proposal to amend FEHA that would have expanded an employer's liability to include harassment of an employee "by any person." Thus, the Employee's lawsuit was dismissed.

We will, of course, report on this decision as soon as it is issued by the California Supreme Court.

U.S. Supreme Court to Hear Mixed-Motive Case

The U.S. Supreme Court will decide whether an employee must introduce direct evidence of discriminatory animus to prove a mixed-motive discrimination case under Title VII of the Civil Rights Act of 1964. In Costa v. Desert Palace, Catharina Costa ("the Employee") was terminated by Caesars Palace ("the Employer") after she was involved in a physical altercation with a co-worker. The Employer argued that the Employee was fired because of her disciplinary history and the altercation. The Employee contended that her sex was a motivating factor in the termination decision.

Under Title VII, an employment discrimination claim may be based on either a single-motive (or pretext) theory or a mixed-motive theory. Mixed-motive cases involve two steps. The employee must first prove that "an impermissible motive played a motivating part in an adverse employment decision." Then, the employer must show that it would have made the same decision even if it had not considered the employee's protected characteristic.

In 2002, the Ninth Circuit Court of Appeals refused to impose a higher burden of proof in mixed-motive cases. According to the court, an employee need not provide direct evidence of discriminatory animus on the part of the decisionmakers; instead, the employee must simply show that a protected characteristic was a motivating factor in the employment action.

We will advise you of the U.S. Supreme Court's decision when it is issued.

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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