JULY 2004

I. LEGISLATIVE/REGULATORY UPDATE
Pending Legislation

California Legislation

August 31, 2004 is the last day for legislators to pass bills; and Governor Schwarzenegger must sign or veto such bills by September 30, 2004. The following pertinent bills are pending:

SB 1809 (Dunn): This bill would amend portions of SB 796, California’s “Bounty Hunter Law.” SB 1809 would provide courts with discretion to not impose the maximum penalty mandated by SB 796. SB 1809 also would provide that only the state, not employees, may collect penalties for posting and notice violations. The amendment does not bar the ability to bring a SB 796 enforcement lawsuit or prevent a plaintiff’s attorney from collecting fees and costs. SB 1809 passed the Assembly Judiciary Committee.

AB 1032 (Jackson): This bill would require businesses that contract with California to complete a questionnaire and financial statement regarding the business’s financial ability and experience in performing public work contracts. The bill is currently before the Senate Governmental Organization Committee.

AB 2832 (Lieber): AB 2832 would increase California’s minimum wage to $7.25 per hour in 2005 and $7.75 in 2006. The bill passed the Senate Labor and Industrial Relations Committee and is now before the Senate Appropriations Committee.

AB 2317 (Oropeza): This bill would increase the damage awards for gender pay equity violations. This bill passed the Assembly and is currently before the Senate Appropriations Committee.

AB 2889 (Laird): AB 2889 would make California employers liable for any type of harassment (i.e., race, religion, color, national origin, ancestry, physical or mental disability, medical condition, marital status, age, sexual orientation and sex) of an employee by customers or clients. Current law makes California employers liable for sexual harassment by third parties. AB 2889 was passed by the Assembly and is now before the Senate Appropriations Committee. SB 1903 (Florez): This bill would provide unemployment insurance benefits to employees unemployed due to a labor dispute. SB 1903 passed the Senate, and is currently before the Assembly Appropriations Committee.

AB 1825 (Reyes): This bill would require employers with 50 or more employees to provide supervisors with at least two hours of interactive training on sexual harassment. The training requirements would also apply to supervisors employed by state agencies. The bill passed the Assembly and is currently before the Senate Appropriations Committee.

SB 1453 (Figueroa): SB 1453 would modify the existing California WARN Act to require employers who are conducting a mass lay-off, relocation, or termination to provide the Employment Development Department 60 days notice of the number of employees laid off, relocated, or terminated because work was outsourced outside of the United States. The bill passed the Senate, and is currently before the Assembly Appropriations Committee.

AB 1397 (Longville): AB 1397 would expand protections for employees who serve on juries by prohibiting employers from taking adverse action against such employees or requiring them to use their paid time off, vacation, or personal leave for time spent on jury duty. AB 1397 passed the Assembly, and is currently before the Senate Committee on Labor and Industrial Relations and the Judiciary Committee.

SB 1841 (Bowen): This bill would make the intentional electronic monitoring of employees without prior written or electronic notice a misdemeanor. Prior notice would not be required if the employer has reasonable grounds to believe the monitored employee is engaged in unlawful conduct. The bill passed the Senate, and is currently before the Assembly Appropriations Committee.
SB 1538 (Alarcon): SB 1538 would require employers to pay piece rate workers for rest and meal periods, or pay a penalty equal to one hour wages for each rest or meal period not provided to such employees. SB 1538 passed the Senate and is currently before the Assembly Appropriations Committee.

SB 1499 (Murray): SB 1499 would bar employers from charging employees a fee to cash their payroll checks. SB 1499 passed the Senate and is currently before the Assembly Appropriations Committee. SB 1618 (Baltin): This bill would affect information contained in itemized wage statements mandating that employers could only list an employee’s name and the last four digits of the employee’s Social Security number on the wage statement. State agencies could only use an employee’s identification number or the last four digits of a Social Security number on checks. SB 1618 passed the Senate and is currently before the full Assembly.

Industrial Welfare Commission Funding Discontinued

The California Industrial Welfare Commission (“IWC”), best known for setting the minimum wage and other workplace regulations, shut down on July 1, 2004 because of a lack of funding. In place of the IWC, future decisions about the minimum wage, overtime rules, and other working conditions will be left up to California’s Legislature. California employers are still required to post and comply with the wage order(s) appropriate for their business. Wage order enforcement remains, as it was in the past, the responsibility of the Division of Labor Standards Enforcement.

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II. JUDICIAL UPDATE

Unfair Competition Claims

In Snowney v. Harrah’s Entertainment, the California Supreme Court agreed to consider whether companies based outside of California may be sued under California’s unfair competition laws if they advertise in the state via billboards, newspapers, or the Internet. A superior court judge dismissed the lawsuit in 2002. However, a court of appeal reinstated it, holding that advertisements, toll-free numbers, and interactive web sites provided sufficient contact to give California residents jurisdiction to sue in California.

Family and Medical Leave

Although many employers know the Family and Medical Leave Act’s (“FMLA”) basic requirements, unusual circumstances may be confusing. Two recent cases involving the employer’s duty to inform employees of their leave rights and the importance of determining an employee’s work site for FMLA purposes are important to examine.

In Conoshenti v. Public Service Electric & Gas Company, Richard Conoshenti (the “Employee”) was employed by Public Service Electric & Gas Company (the “Employer”) and was accused of keeping inaccurate time records and leaving his shift early. The Employer provided the Employee a “last chance agreement” which allowed him to keep his job if he met certain conditions, including regular attendance. The Employee kept up his end of the bargain, however, a few months later, while off duty, he was seriously injured in a car accident. He asked for two weeks off to recover, but was ultimately out for more than four months. The Employer never notified the Employee of his FMLA rights or that FMLA leave was available for up to 12 weeks. The day the Employee returned to work, he was terminated for violating the attendance provisions of the “last chance agreement.”

The Employee sued, alleging that the Employer violated the FMLA by not notifying him of his family leave rights. The Third Circuit ruled that this case may go to a jury. Even though the Employee was out longer than 12 weeks, the Employer’s failure to advise him of his FMLA rights interfered with the exercise of those rights. The court accepted the Employee’s argument that had he been properly advised of his FMLA rights, he could have made an informed decision about structuring his leave in a way that preserved his job viable.

In another recent FMLA case, Collinsworth v. Earth Link/One Main, Inc., Vickie Collinsworth (the “Employee”) was an account executive at an Earth Link office (the “Employer”) in Overland Park, Kansas. Following surgery for breast cancer, she worked from home. During that period, the Employer told the Employee her job was being moved to Pasadena, California. She refused to transfer and was subsequently fired. The Employee brought an FMLA lawsuit against the Employer. The Employer asked the court to dismiss the case, arguing that the Employee was not eligible for FMLA leave. To qualify, an employee must work at a location where at least 50 employees are employed by the employer within 75 miles. Here, the Employer contended that even though it employed thousands nationwide, it had fewer than 50 employees within 75 miles of its Overland Park location where the Employee’s job was located.

The Employee contended that her work site was in fact the Employer’s Pasadena office, which had more than 50 employees. Although the Employee was based in Overland Park, her assignments were sent back and forth via e-mail, fax, and phone to the Pasadena office, where many of her supervisors were located. The Employee also made several trips to the Pasadena office.

A federal court has given the Employee the green light to proceed with her case, finding that she raised sufficient factual issues about the actual location of her work site. This case underscores the dangers of assuming an employee is not covered by FMLA just because a person works at a small branch location.

Liability and Damages Must Flow from the Same Violation

In Prigmore v. Mira Costa Community College District, a court of appeal decided that an injured school teacher did not prove that she suffered damages from the school district’s failure to accommodate her disability. Though she was damaged by her termination, the court found the termination lawful.

Edna Prigmore (the “Employee”) was a part-time professor at Mira Costa Community College (the “Employer”). The Employee tripped on a telephone cord while she was at work and injured her knee. She submitted workers’ compensation forms to the Employer and took a week off from work. Following her injury, she used crutches and was unable to walk to the students’ computer work stations to assist them. Ultimately, she had knee surgery. Shortly thereafter, she received a letter from the Employer informing her that her teaching job would not be renewed for the fall semester.

At trial, the Employee claimed that the Employer discriminated against her based upon a “disability” and that the Employer failed to accommodate her disability. Specifically, she stated that she requested a parking space closer to the classroom where she taught, permission to elevate her leg, an assistant to help her in the computer lab, and an office in which she could store her books. The jury found that the Employer had failed to make reasonable accommodations for the Employee’s disability and awarded her $70,000. The jury did not find, however, that the Employer had refused to renew her teaching contract as a result of the disability. Rather, the jury believed the Employer’s reasons that a number of students had complained that the Employee did not return messages in a timely fashion; the Employee had failed to prepare an adequate syllabus for the beginning of one of her classes; she had taken a two-week vacation in the middle of a semester; and a co-worker in the admissions and records department had complained about the Employee’s paperwork. After the jury verdict, the Employer argued the Employee did not present sufficient evidence to prove it failed to accommodate her, and asked the court to overturn the jury’s verdict. The trial court agreed that “there was no evidentiary support for the jury’s finding of economic damages or non-economic damages for discrimination based upon failure to accommodate.” The Employee appealed, arguing that the Employer’s failure to renew her teaching contract constituted a failure to accommodate her disability. The appellate court rejected that argument and agreed with the trial court that there was no evidence to support the jury’s award of damages for the Employer’s failure to accommodate her.

This case illustrates that there must be a connection between the wrongful conduct found and the damages caused. In this case, the jury found that the Employer was wrong in failing to provide the requested accommodation. However, the trial court held that no damages resulted from that conduct. The Employee was damaged by the failure to renew her contract, but that damage was not found to be the result of wrongful conduct. Because it takes both wrongful conduct and damages to support a verdict, the Employer won the case.

Not Every Whistleblower Engages in a Legally Protected Activity

In Slater v. National RV, Inc., a court of appeal dismissed a claim involving an employee who alleged that he was fired after reporting a supervisor’s sexual harassment and suggesting a recall of the company’s product. The court found that the concerns did not amount to legally protected whistleblowing and National RV (the “Employer”) had legitimate, non-retaliatory business reasons for firing the employee.

The Employer hired Robert Slater (the “Employee”) as its parts and service administrative coordinator. One year later, he became customer service director and reported to the Employer’s president. The Employee learned that the president was sexually harassing a female employee. On several occasions, the Employee told the president that his conduct was improper and told him to stop. The president responded by berating him, and taking away some of his job duties. At the same time, the Employee became aware of two instances in which a weld on a hitch pin on a particular model broke, causing the trailer to detach from its tow vehicle. The Employee told the president that under the National Highway Transportation Safety Administration rules, the Employer had to recall the product.

Nine months later, the Employer fired the president. The Employee relayed to the new chief operating officer his concerns about the former president’s harassment and the trailer recall. The chief operating officer responded that there was no need for a recall. The Employee again repeated his concerns about the recall and harassment issues.

Later that month, a co-worker complained that the Employee intimidated him. The Employee was fired based on that incident and customer complaints about his management of the parts and services department.
The Employee sued the employer for retaliation and wrongful termination in violation of public policy. The Employer won the case by way of summary judgment motion, which the Employee appealed. The court of appeal decided the Employee did not engage in any protected activity. He did not report the harassment to the new chief operating officer until the former president had already been fired, thereby ending any harassment. Also, the recall did not raise an illegal practice, but merely a potential business liability. Also, the Employer demonstrated a legitimate, non-retaliatory reason for the termination, plus complaints from customers and other employees.

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.