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JULY 2003 I. LEGISLATIVE/REGULATORY
UPDATE Pending California Legislation AB 76 (Corbett) would make employers liable for harassment of an employee by a customer or client. The Senate Judiciary Committee approved AB 76 and has referred it to the Committee on Labor and Industrial Relations. SB 796 (Dunn) passed the Assembly Judiciary Committee. SB 796 provides that an employee who prevails in a wage and hour lawsuit would be entitled to keep 25% of the civil penalty, and the employer would be required to pay for the employee’s attorneys’ fees and costs. SB 796 is silent on the ability of a prevailing employer’s ability to recover attorneys’ fees and costs. SB 796 proceeds next to the Assembly Labor and Employment Committee. AB 1032 (Jackson) and AB 1557 (Hancock) would require prospective bidders on state contracts to provide information, under penalty of perjury, detailing whether current or former executives of the company, or any other company with which they are affiliated with, ever violated a broad range of laws. Companies guilty of any of these violations would be barred from contracting with the state. AB 1557 would prohibit any business from bidding on government contracts unless the business pays a living wage and meets more than a dozen other requirements, including prohibitions against compulsory overtime and at-will employment. AB 1557 also would require contractors to police all sub-contractors and ensure that they meet all the new requirements laid out in the bill. AB 1579 (Cogdill) includes measures aimed at eliminating fraud, waste, and inefficiency in California’s workers’ compensation system in an effort to rein in skyrocketing workers’ compensation costs. Specifically, the package institutes an Official Medical Fee Schedule, tightens the rules governing injury determination, prohibits physicians from self-referring to outpatient surgery centers that they have a stake in, requires the use of generic drugs if available, and allows employers to contract with a Health Care Organization to provide medical care to injured employees, among other reforms.
The Fair and Accurate Credit Transactions Act (HR 2622) would overturn an opinion letter issued by the Federal Trade Commission (“FTC”) in 1999 finding that outside investigators are “consumer reporting agencies” under the Fair Credit Reporting Act (“FCRA”). According to the FTC, employers that use a third party to conduct an investigation of workplace misconduct must notify the suspected employee before the investigation begins, obtain his or her consent, and fully disclose the findings before taking an adverse employment action. HR 2622 would revise the FCRA so that the communications to an employer by a third party hired to investigate employee misconduct would not be considered a “consumer report.” If adverse action is taken based on the communication, however, the employer would be required to provide the employee a summary of the nature and the substance of the communication. II. JUDICIAL UPDATE
The U.S. Supreme Court made it easier for employees to win discrimination claims against their employers, siding with a female forklift driver at a Las Vegas warehouse. In a unanimous opinion, the Court held that employees who sue do not need a “smoking gun” memo or other direct evidence of discrimination. Instead, they can take their cases to a jury as long as they can show some evidence that illegal bias was a motivating factor in their being fired or not hired - even if it was not the only factor. In Desert Palace, Inc. v. Costa, Catharina Costa (“the Employee”) was the only woman working on the forklifts in the warehouse at Caesars Palace. Her employment was terminated after getting into a shoving match with a male co-worker. The Employee said she had been subjected to a series of sexist and vulgar comments, as well as unfair treatment. For example, she alleged she was penalized for reporting to work one minute late for the 6 a.m. shift, while male co-workers who were an hour late were not penalized. Her supervisors said they terminated her employment because she was “rude and belligerent.” The Employee sued, alleging gender discrimination under Title VII of the Civil Rights Act of 1964. The circumstances offered a classic example of a “mixed motive” case. The Costa ruling clarifies a subtle point that could determine the outcome of many similar cases. The justices reasoned that the law requires that in order to file a mixed-motive case, an employee merely needs to demonstrate that an employer used a forbidden consideration: “The statute does not mention, much less require, that an [employee] make a heightened showing through direct evidence.” This ruling will make it easier for employees to successfully sue for mixed-motive discrimination.
Employers besieged by unwanted e-mail can only invoke California’s trespass-to-chattels law if the messages cause actual damage to equipment or property, the California Supreme Court ruled. During a two-year period beginning in 1995, Intel employee Kourosh Kenneth Hamidi (“the Employee”) sent thousands of e-mails to Intel employees decrying the company’s labor practices. The Employee did not hack through any computer security systems, and he honored individual requests to be removed from the recipient list. The Court held that it is not enough that the unwanted messages waste time and divert the attention of employees. The Court stressed that the thousands of e-mails that the Employee sent to employees’ company e-mail addresses were different than the bulk spam messages that can overburden a company’s computer systems. “Intel presented no evidence its system was slowed or otherwise impaired by the burden of delivering [the Employee’s] electronic messages,” the Court opined in Intel v. Hamidi. The Court also emphasized that companies like Intel have other remedies, including defamation and business-interference claims.
In State Dept. of Rehab. v. Workers’ Comp. Appeals Board, a decision that sets limits on workers’ compensation temporary disability indemnity benefits (“TDI”), the California Supreme Court appeared to refine what it considers to be a discriminatory employment action taken against employees injured on the job. Ronald Lauher (“the Employee”) returned to work with a permanent injury for which he received ongoing medical care. The Employee argued that the Labor Code required his employer, the California Department of Rehabilitation (“the Employer”), pay for transportation, TDI, and meal or lodging expenses incurred to obtain medical treatment. The Court, however, concluded that once an employee’s injury is permanent and stationary and the employee returns to work, he or she is no longer entitled to TDI payments for continuing medical treatment. The Employee also claimed that the Employer’s requirement to use sick leave or vacation time when absent from work for continuing medical treatment constituted discrimination against him for the injury, a violation of Labor Code section 132a. The Court responded, however, that to state a case under 132a, an employee must show: (1) that he or she suffered some adverse result as a consequence of some action or inaction by the employer that was triggered by the industrial injury, and (2) that he or she had a legal right to receive or retain the deprived benefit or status. Since the Employee had no legal right to TDI benefits, and his absences were treated the same as absences for medical appointments for non-industrial injuries, there was no violation of section 132a.
The California Supreme Court recently announced that it will review a controversial decision under the state’s Fair Employment and Housing Act. Earlier this year, a California court of appeal, in Yanowitz v. L’Oreal, reinstated a lawsuit filed by a cosmetics sales manager who claimed she was retaliated against for refusing to terminate the employment of an unattractive sales associate. To learn more about this case, review the Klinedinst Employment Law Update (April, 2003 ) by clicking here.
In Carter v. California Department of Veteran Affairs, Helga Carter (“the Employee”) worked as a nurse for the California Department of Veterans Affairs (“the Employer”). As the Employee was encouraged by her Employer, she developed a personal relationship with one of the resident veterans, including quilting with him and inviting him to her home for dinner. However, the resident developed an inappropriate attachment to the Employee, claiming to have had a clandestine affair with her, chasing her down the hallway in his scooter, leaving sexually explicit voicemails at her home, and spreading rumors that he had slept with her at the facility. The Employee complained to her supervisor, who counseled the resident to stop his treatment of the Employee, to no avail. Eventually, the Employee sued the Employer for sexual harassment under the Fair Employment and Housing Act (“FEHA”) and a host of other claims. A jury ruled in the Employee’s favor and awarded her nearly $200,000. The primary issue presented on appeal was whether an employer may be liable under FEHA for the conduct of the resident, who was a non-employee client. The court of appeal analyzed both FEHA’s statutory language and the legislative history and found that FEHA imposes liability on an employer for harassment by another employee if the employer knows of the activity and fails to take immediate and corrective action. Thus, the court concluded that FEHA does not impose a duty on the employer to protect an employee from sexual harassment by a non-employee, such as a customer or client. The Carter decision is consistent with a ruling issued by another California court of appeal last year in Salazar v. Diversified Paratransit, Inc. In that case, the court ruled that the company could not be held liable under FEHA for the harassment committed by a bus passenger. On January 22, 2003, the California Supreme Court agreed to review the Salazar decision. As a practical matter, however, the Carter ruling should not modify how an employer responds to harassment allegations. Regular training and prompt, thorough investigations of any complaints should still be the rule.
In McDaneld v. Eastern Municipal Water District Board, Ronald McDaneld (“the Employee”) worked as a mechanic for the Eastern Municipal Water District (“the Employer”). The Employee requested one week leave to care for his father following ankle surgery. During the week, the Employee played golf and worked on his sprinkler system. Also, one day before the Employee’s leave ended, his father returned to his own home. The Employee, however, did not report for work. Rather, he alleged that he needed to stay home to care for his pregnant wife who had injured her back. When the Employer learned of the Employee’s activities during the leave, it decided to terminate his employment. Shortly thereafter, the Employee filed a lawsuit alleging that the Employer retaliated against him for exercising his right to leave under state and federal law. The California court of appeal found that, in some cases, an employer may not penalize an employee for using leave incorrectly if it failed to provide adequate notice about the terms of family leave. Inadequate notice, however, does not prevent an employer from discharging an employee if the employer has an honest belief that the employee misused his or her leave. Here, the court affirmed the dismissal emphasizing that the Employer reached a justifiable conclusion that the Employee misused his leave and was untruthful. Regardless of this ruling, employers should provide employees with key information about family and medical leave, including the employer’s expectation that the employee will return to work if the need for the leave should alter.
In Herr v. Nestle U.S.A., Inc., a California court of appeal upheld a $5 million jury award in favor of Richard Herr (“the Employee”) who claimed that Nestle (“the Employer”) had a policy of promoting only young people. During his employment, the Employee received positive performance reviews. He applied for several positions but was rejected despite his excellent reviews and extensive experience. Those who were promoted were allegedly between the ages of 28 and 35, were less experienced than the Employee, and in some cases did not meet the minimum job qualifications. The Employee was reassigned to a position that would give him a broader background and better qualify him for future openings. Instead, two months later, the Employee was informed that his new position was being eliminated. He later accepted a temporary position, and was not offered a promotion when an opening was created. The Employee filed suit alleging age discrimination under California’s Fair Employment and Housing Act (“FEHA”). He relied on the Employer’s omission of age from the protected categories in its equal employment opportunity policy and reported statements made by management that it had a “policy to promote young, energetic people in management positions” and that the staff was instructed to “see about getting rid of the deadwood.” The court of appeal held that there was substantial evidence to support the jury’s determination that the Employer’s failure to promote the Employee was motivated by age bias. The Herr case reminds employers to ensure that policies and practices should prohibit discrimination based on all of the categories listed in both FEHA and Title VII. Moreover, all employees should be made aware of equal employment opportunity policies and that any violation will result in discipline.
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