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APRIL 2004 I. LEGISLATIVE/REGULATORY
UPDATE In 2002, California enacted legislation to extend disability compensation to cover individuals who take time off from work to care for a seriously ill child, spouse, parent, or domestic partner, or to bond with a new child. SB 1661 established the Paid Family Leave Insurance Program, also known as the Family Temporary Disability Insurance Program (“Paid Family Leave”), to be administered by the State Disability Insurance (“SDI”) program. An estimated 13 million California employees who are covered by the SDI program may also be entitled to Paid Family Leave insurance benefits commencing on or after July 1, 2004. Weekly benefits will range from $50 to $728. Benefit determinations are subject to modification by the State. The maximum claim benefit is six times the weekly benefit amount. No more than six weeks of Paid Family Leave benefits may be received by any employee during any 12-month period. There is a seven-day waiting period before benefits are paid. Thus, an employee will not receive Paid Family Leave benefits during the first seven days of the leave. Employers may require that the employee use up to two weeks of vacation benefits prior to receiving Paid Family Leave benefits. The first week of the vacation benefits would be applied to the seven-day waiting period. SB 727, a Paid Family Leave “clean-up bill,” was signed into law on October 10, 2003. The Employment Development Department (“EDD”) plans to incorporate the regulatory changes due to the enactment of SB 727 in the current regulatory proceeding. SB 727, for example, eliminated the waiting period for Paid Family Leave for a woman who serves a waiting period before collecting disability insurance benefits for pregnancy and then elects to bond with her new child using Paid Family Leave. Comments on these changes, as well as on EDD’s responses to comments received to the initial proposed regulations, will be sought during the next public comment period on the regulations. Individuals cannot receive Paid Family Leave while concurrently receiving SDI, unemployment insurance, or workers’ compensation benefits. Moreover, an individual who is entitled to leave under the Family and Medical Leave Act and/or the California Family Rights Act must take Paid Family Leave concurrent with leave taken under those acts. Employers must provide a brochure outlining employees’ rights under the statute to employees hired after January 1, 2004. The brochure (Form DE 2511) may be obtained via the EDD’s website at www.edd.ca.gov or by contacting the SDI office at (800) 480-3287. II. JUDICIAL UPDATE In Hernandez v. Hughes Missile Systems Co., the U. S. Court of Appeals, Ninth Circuit, (which has jurisdiction over California) held that a jury should decide whether an employer violated the Americans with Disabilities Act (“ADA”) by refusing to hire an individual who previously had been discharged for testing positive for cocaine while on the job. According to the court, there was sufficient evidence that the discharge was based on the employee’s prior drug addiction, rather than on an “unwritten” company policy barring the re-employment of individuals terminated for violating company workplace rules. Joel Hernandez (“the Employee”) was hired by Hughes Missile Systems (“the Employer”) in 1966. During his employment, he experienced problems with drug and alcohol abuse. In fact, in 1986, he agreed to enter into a treatment program rather than be discharged. He returned to his job after completing the program. Five years later, the Employee began experiencing attendance problems. On July 11, 1999, his appearance and conduct at work suggested that he might be under the influence of drugs or alcohol. Thus, in accordance with company policy, he was required to participate in a drug test. After testing positive for cocaine, he was allowed to resign rather than be discharged. The Employer’s documents reflected that he had “quit in lieu of discharge.” Three years later, the Employee applied for the position he had held with the Employer. He acknowledged in his application that he previously had been employed by the Employer. Attached to the Employee’s application were two reference letters -- one from his pastor and the other from his Alcoholics Anonymous counselor. The Employer reviewed and rejected the Employee’s application. The Employer stated that it rejected the Employee’s application under an unwritten company policy of not re-hiring former employees who had been terminated for violating workplace conduct rules. However, in the Employer’s response to the discrimination charge filed with the Equal Employment Opportunity Commission (“EEOC”), the Employer did not mention the unwritten Company policy barring re-employment of individuals who are terminated or resign in lieu of discharge. The Employee sued under the ADA, arguing that the Employer discriminated against him based on his record of drug addiction, or, alternatively, because he was regarded as a drug addict. The trial judge dismissed his lawsuit, but the case was reinstated by the Ninth Circuit. The Ninth Circuit’s ruling was overturned by the U. S. Supreme Court in December 2003. The justices found that the incorrect test had been applied in evaluating the employee’s claims and sent the case back to the Ninth Circuit for further consideration. The Ninth Circuit found that the Employee had presented sufficient evidence from which a reasonable jury could determine that the Employer refused to re-hire him because of his past record of addiction, and not because of a company rule barring the re-hire of previously terminated employees. In reaching its conclusion, the court relied on three points. First, the Ninth Circuit held that a jury could find that the labor relations department employee who reviewed and rejected the Employee’s application knew that the Employee had been a substance abuser and that she based her decision on that information. Second, according to the court, the Employer’s letter to the EEOC appeared to admit that the refusal to re-hire the Employee was based on his history of substance abuse. The court noted that the Employer did not mention the unwritten policy barring re-hiring individuals who had been terminated for violating workplace rules until after the EEOC’s efforts to resolve the dispute had ended. Third, the court found that it would be reasonable for a jury to infer that there was no policy prohibiting the re-hire of terminated employees + or if it did exist, that the policy was not consistently applied. Based on these findings, the Ninth Circuit directed that a trial be held. This case reminds employers that it is important that workplace policies be committed to writing. It also demonstrates the importance of carefully responding to discrimination charges filed with the EEOC or the California Department of Fair Employment and Housing.
In Chapman v. Enos, a California court of appeal held that a person can be a supervisor for purposes of corporate liability for harassment even though he or she is not accountable for the employee’s work. April Chapman (“the Employee”) was an investigator for the Sonoma County District Attorney (“the Employer”). Bruce Enos (“Enos”) was a deputy district attorney assigned to Chapman’s unit. Enos engaged in inappropriate sexual behavior toward the Employee over an extended period of time. After the Employee complained, she was reassigned to a new office, and following an investigation, Enos was suspended for one week. The Employee later sued Enos and the Employer for sexual harassment and retaliation. Given the inappropriate nature of Enos’s behavior, and because California employers are strictly liable for supervisor sexual harassment pursuant to California’s Fair Employment and Housing Act (“FEHA”), the Employer’s liability hinged on whether Enos was a “supervisor.” The Employee’s immediate supervisor was the chief investigator, who was located in a different office and gave virtually no direction over the Employee’s daily activities. Enos was not accountable for the Employee’s work, had no power to promote her, and did not complete her performance evaluations. Nevertheless, the Employee testified that she believed that Enos was her “boss,” she “cleared” her time off with Enos, and Enos regularly assigned her tasks even though he did not supervise her work. The Employer argued that Enos was not the Employee’s supervisor, because he was not ultimately accountable if she did not do her job. The trial court integrated this concept into a jury instruction and the jury returned a verdict for the Employer. The Employee appealed on the basis that the jury instruction was improper. The court of appeal reversed the jury verdict and held that being accountable for an employee’s work is not a necessary component of the definition of a supervisor under the FEHA, but is simply indicative of a supervisory role. Whether or not a harasser is a supervisor is a critical issue in sexual harassment cases because California law mandates strict liability for employers when the harasser is a supervisor but not when he or she is a co-worker. Although the California Supreme Court recently created a defense limiting damages in a supervisor harassment case, it also affirmed that employers are strictly liable for supervisor harassment. Chapman potentially increases the scope of liability for supervisor harassment because of the broad interpretation given to the term “supervisor.” The case also emphasizes the importance of supervisor training and harassment/discrimination reporting policies.
In Abramson v. Juniper Networks, a California court of appeal ruled that an arbitration agreement between an employee and his former employer was illegal. In the case, David Abramson (“the Employee”) was director of corporate communications at Juniper (“the Employer”). Prior to his employment, he signed an offer letter and an employment agreement, both of which contained arbitration provisions. Less than a year later, the Employee’s employment was terminated. The Employee filed suit and sought declaratory relief that the arbitration provisions were unenforceable. The trial court granted the Employer’s motion to compel arbitration and dismissed the case. The Employee appealed this order. The court of appeal reversed the order of dismissal and ordered the matter stayed. Subsequently, the Employee filed a demand for arbitration, which was not commenced because the parties disagreed as to who should pay the filing fee and administrative expenses. The arbitration agreement provided that each side was to pay one-half of the costs and expenses and that each side was to bear his/its own attorneys’ fees and costs. The Employee argued that the Employer should pay all costs, pursuant to Armendariz v. Foundation Health Psychare Services, Inc. The Employer relied on the arbitration agreement itself. The Employer requested an order lifting the stay and allowing the case to proceed in court based on the impasse over the arbitration fees and costs. The trial court denied this motion on the ground that Armendariz is not applicable unless a claim pursuant to California’s FEHA is asserted. The Employee subsequently refiled his arbitration demand, and advanced his share of the initial fees + $4,250. The Employee requested that the arbitrator address two initial issues: (1) who should pay the fees, and (2) the validity of the arbitration agreement. The arbitrator ordered the parties brief these two issues, but the Employer instead returned to court seeking enforcement of the order compelling arbitration. The Employee opposed this motion on the ground that he had already advanced over $4,000 and would be unable to pay the $6,450 balance. The court granted the Employer’s motion to compel arbitration. The American Arbitration Association subsequently terminated the arbitration proceedings because the Employee failed to make his share of the payments. The court of appeal considered whether the arbitration agreement would meet the Armendariz factors and whether the agreement was unconscionable. The court first determined that the Employee’s wrongful termination claim was arbitrable, but only if the arbitration agreement met the five Armendariz factors: (1) adequate discovery, (2) written decision with limited judicial review, (3) relief that is available in court must be permitted, (4) employee’s forum costs are limited and (5) provision of a neutral arbitrator. The court determined that the 50-50 fee splitting requirement of the agreement did not pass muster under Armendariz. This case reminds employers that pre-dispute arbitration agreements need to comply with the Supreme Court’s guidelines under Armendariz.
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
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