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FEBRUARY 2004 I. JUDICIAL UPDATE
The District of Columbia Court of Appeals recently overturned a $5 million punitive damages award in a sexual harassment/retaliation claim. In Daka, Inc. v. McCrae, the plaintiff, a banquet chef, complained about ongoing sexual harassment by his immediate supervisor. The conduct included the supervisor’s speaking openly and repeatedly during work about his private sexual activities, hiring male employees on the basis of their sexual attractiveness, and attempting to condition continued work and favorable scheduling based on an employee’s acquiescence to his sexual demands. The sexually harassing behavior was undertaken in the presence of, and directed at, the plaintiff and his co-workers. After the plaintiff complained about the inappropriate behavior, his work hours were cut, and he was demoted to a non-management position. He was eventually fired for “parking his car in a loading zone.” At trial, the jury returned a verdict of $187,500 in compensatory damages and $5 million in punitive damages. On appeal, the District of Columbia Court
of Appeals held that the punitive damages award was unreasonably excessive
in light of the amount of the compensatory damages award. The court noted
the ratio of punitive damages to compensatory damages in the verdict was
26-to-1, and cautioned that anything above a 5-to-1 ratio would be hard
to justify as being “reasonable.” Ninth Circuit Upholds Company’s Right to Restrict Office Postings The Ninth Circuit Court of Appeals recently ruled that Hewlett-Packard (“HP”) did not unlawfully discriminate against an employee who posted (at his work station) Bible verses denouncing homosexuality. In Peterson v. Hewlett-Packard Co., the employee (“Peterson”) posted biblical scriptures critical of homosexuals. The postings were visible to anyone who passed by. Peterson’s supervisor removed the postings, finding them to be offensive to certain employees and contrary to company anti-harassment policy. Peterson stated that he condemned “gay behavior” and intended the passages to be hurtful to gay and lesbian employees in the hope that the messages would cause them to “repent and be saved.” He argued that HP’s workplace diversity campaign, which showed photographs of employees with various captions such as “Black”, “Old”, “Hispanic”, and “Gay,” was targeted against heterosexual and fundamental Christian employees such as himself. He therefore believed that he was entitled to post his own beliefs. When Peterson stated that he would continue to post scriptures if HP maintained its diversity program, he was suspended and asked to reconsider his position. After he returned to work, he continued to post anti-gay Bible verses at his cubicle, and was ultimately discharged for insubordination. Peterson sued in Federal District Court,
alleging religious discrimination in violation of Title VII and the Idaho
Human Rights Act, wrongful termination in violation of public policy,
and other state law claims. The District Court rejected all claims, and
Peterson appealed to the Ninth Circuit. The Ninth Circuit found neither
religious discrimination nor any legal obligation to accommodate Peterson’s
religious beliefs. Instead, it concluded that Peterson had been discharged
because he violated the company’s anti-harassment policy, attempted
to create a hostile work environment, and disregarded HP’s repeated
instructions that he remove the postings. Finally, the court held that
requiring HP to accommodate Peterson’s religious beliefs would have
caused HP an undue hardship.
In Blitz v. Fluor Enterprises, Inc., the California’s Fourth Appellate District Court of Appeal held that an employer (“Fluor”) could not enforce its at-will employment agreement because an employee (“Blitz”) had not been provided with the agreement until after he had accepted employment and resigned his prior employment. Critical in the Court’s analysis was the fact that Fluor, in an attempt to induce Blitz to accept employment, repeatedly assured him that his employment would be on a “long-term” basis. It was not until Blitz orally committed to employment with Fluor and had resigned his prior position that Fluor presented him with a written employment agreement which specified, among other things, that his employment was to be “at-will.” Blitz protested the at-will provision and asked that the contract be modified to reflect the previous promises of long-term employment. The request was refused, although Blitz’s supervisor (“Supervisor”) assured Blitz that the provision “would never be enforced.” Approximately two years later, Blitz was informed that he was being “rolled-off” the project upon which he was working, and encouraged to look for employment outside the company because it appeared that there were “no available positions” within Fluor that were appropriate for his skills and experience level. His employment was ultimately terminated. The trial court dismissed the case, but the Court of Appeal reversed, concluding that “[Blitz] would never have accepted Fluor’s offer if it did not include a promise of long-term, rather than project-based, employment. Supervisor’s own testimony acknowledged that he understood Blitz would not accept an offer from Fluor if it did not include a promise of long-term employment. Thus, by promising Blitz a long-term position, Fluor obtained a benefit it would likely not have obtained otherwise, i.e., Blitz’s services on a 'high priority' project. Fluor would be unjustly enriched if it were allowed to retain that benefit with no repercussions. By the same token, Blitz’s detrimentally relied upon Fluor’s promise when he resigned his prior long-term employment.” It should be noted that this case does not stand for the proposition that all post-employment at-will agreements are unenforceable; rather, it highlights the arguments employees may make to invalidate such agreements if they are not presented in a timely manner. It is therefore recommended that any employer wishing to enforce an at-will agreement present job applications with the agreement before any job offer is made. At-will agreements and policies may also be referenced and/or presented in job applications, employment offer letters, and employee handbooks which are presented to the employee at the time a job offer is conveyed.
II. LEGISLATIVE/REGULATORY
UPDATE As set forth in previous updates, Senate Bill 796, which was signed by former Governor Davis shortly before he was recalled from office, makes it easier and more lucrative for workers (and their attorneys) to sue employers over Labor Code violations. The law, which went into effect on January 1, 2004, allows plaintiffs who sue their employers for wage and hour violations to receive a portion of the civil penalties that were previously reserved for the State. The legislation, which has been dubbed the “Bounty Hunter Law,” thereby provides increased incentives for employees and their attorneys to pursue such litigation. The California Chamber of Commerce has
announced that it will be sponsoring a bill which would “provide
relief” from the law. It is anticipated that the bill will be proposed
in late February or early March 2004. Governor Schwarzenegger’s
administration has told the State Legislature that the Governor would
like the law repealed. Labor leaders, however, remain staunchly supportive
of the Bounty Hunter Law, as does the powerful Trial Lawyers Association.
The First Appellate District Court of Appeal recently ruled that a prior superior court decision preventing Californians from voting on a referendum against Senate Bill 2 (which mandates that California employers provide health care for employees) was erroneous. The court’s order ensures that the SB2 referendum will be placed on the November 2004 ballot. California voters will thus have the opportunity to either confirm or repeal the controversial law. SB2 requires that beginning in 2006, California
employers with 200 or more workers would have to provide medical insurance
coverage for their employees and dependents, including domestic partners,
or pay a tax which will fund a government-managed healthcare system for
uninsured employees. Employees with 50 to 199 workers would pay for coverage
for employees only, beginning in 2007, while businesses with 20-49 workers
would pay for employee coverage when a tax credit is enacted. A recent
study by the Los Angeles Area Economic Development Corporation estimated
the cost of SB2 at more than $7 billion to California business and workers,
$1.5 billion of which will be paid by workers.
Unemployment Insurance Fraud Legislation Introduced SB 595 (Johnson) calls for more frequent reports of unemployment insurance account activities to be provided to California employers. Existing law requires that at least once per year, the Director of Employment Development must furnish to each employee an itemized statement of the charges to that employer’s unemployment reserve account, and a statement of the reserve account showing the credits and charges, the net balance of the account, and the contribution rate for the applicable rating period. SB 595 would require the Director to furnish each employer with such statements on a quarterly basis. The bill argues that increased frequency will enable employers to detect fraudulent claims sooner and ensure that unemployment insurance tax dollars are not misspent. SB 595 has been passed by the Senate, and is now being considered by the Assembly.
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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