NOVEMBER 2004

I. LEGISLATIVE/REGULATORY UPDATE
Pending Legislation

California’s Domestic Partner Rights and Responsibilities Act of 2003 Poses New Requirements for Employers, Effective January 1, 2005

On January 1, 2005, the California Domestic Partner Rights and Responsibilities Act of 2003 (“the Act”) takes effect, and requires qualifying employers to extend the same rights and benefits to domestic partners registered with the State of California as currently provided to spouses of employees. Although the Act does not explicitly state what changes employers must make to existing workplace policies, it instructs courts to construe the provisions of the Act liberally, when faced with any ambiguity regarding interpretation. The law does not impact rights afforded to spouses under federal law, such as immigration rights, social security benefits, and coverage under federal employment benefits laws.

California first allowed domestic partners to register with the state in 1999; in 2002, registered partners were granted limited workplace rights. These rights included unemployment insurance should one partner be required to resign his employment and relocate due to the employment of the other partner; and “Kin Care” leave, allowing employees to use up to 50% of their annual entitlement to paid sick leave to provide care for an ill domestic partner. Although the Act broadly seeks to expand domestic partner rights, the only employers who must amend their workplace policies to comply with this statute are those who currently provide benefits to employees’ spouses.

California now requires public and private employers to provide domestic partners with the following:

• Paid family leave (“PFL”) to care for either a seriously ill domestic partner or a partner’s child;
  
• PFL in connection with the birth or adoption of a child or placement of a child in foster care;
  
• Use of paid sick leave (if provided) to care for a sick domestic partner or a partner’s child; and
  
• The right to collect unemployment benefits if a partner must quit his/her job due to the relocation of employment of his/her domestic partner.

Some of the new benefits that employers will most likely be required to provide are:

• Health and welfare benefits to the same extent such benefits are offered to spouses;
  
• Right to take extended unpaid leave to care for a domestic partner;
  
• Moving expenses, membership, membership discounts, travel benefits, and any other non-ERISA benefit that is currently offered to spouses; and
  
• The same rights regarding nondiscrimination as those provided to spouses.

Insurance companies currently providing employers with spousal insurance coverage must offer health insurance to domestic partners of employees and their children on the same terms.

There are several unresolved issues relating to the Act, including:

ERISA Preemption. In light of the Ninth Circuit’s decision in Air Transportation Association v. City & County of San Francisco (9th Cir. 2001) 266 F.3d 1064, upholding a partial invalidation of a similar San Francisco ordinance, courts may invalidate portions or all of the Act because it “relates to” employee benefit plans governed by ERISA. In the event of finding such ERISA preemption, domestic partners might still receive some benefits under the Act. These benefits would include: ERISA benefits offered by employers through non-ERISA plans, such as family medical and bereavement leave paid out of general assets, or non-ERISA benefits, such as moving expenses, membership and membership discounts, and travel benefits.

Family Medical Leave. Under the FMLA and CFRA. The Act expands an employee’s right to take family and medical leave to care for a domestic partner. Since the Act expands state law, employers should be aware that employees caring for their domestic partner may be entitled to take up to 24 weeks of extended leave, whereas spouses may only take a maximum of 12 weeks, because the leave to care for a partner under the California Family Rights Act does not run concurrently with the Family Medical Leave Act.

SB 2: Health Insurance Act of 2003 Struck Down

The California electorate struck down the California Health Insurance Act of 2003 (SB 2) when Proposition 72 was rejected on November 2, 2004.

Governor Gray Davis, in the waning days of his term signed SB 2 which would have required many California employers provide health insurance to their employees, and in some cases, their dependents.

Proposition 64

On November 2, 2004, California voters passed Proposition 64, titled “Limits on Private Enforcement of Unfair Competition Laws.” As a result, California Business & Professions Code section 17200 et seq., the Unfair Competition Law (“UCL”), will be rewritten in a number of significant aspects.

First, under the old version of the UCL, “any person” could sue on behalf of himself or herself and the “general public” -- whether or not that person actually suffered any injury as a result of the alleged unfair competition. Proposition 64 revised the UCL to have a “standing” requirement and mandates that a person suing “has suffered injury, in fact, and has lost money or property as a result of such unfair competition.”

Second, a person who sues under UCL on behalf of others must now meet the procedural requirements for class actions. Proposition 64 includes the requirement that “any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of section 17204 (as discussed above) and complies with Section 382 of the Code of Civil Procedure (setting forth class certification requirements).” Thus, in order to pursue a UCL claim on behalf of others, a plaintiff must now show, as in other class actions, that there is (a) a commonality of issues of fact and law; (b) that his or her claims are typical of those of the class; (c) that he or she is an adequate representative of the interests of the class; and (d) that a class action is the superior method of resolving claims.

Third, representative suits brought on behalf of the general public are now the sole province of the California Attorney General or local government prosecutors.

This is not the end of UCL claims. UCL remains sweeping in its scope and allows a person to file suit for any unlawful, fraudulent, or unfair business act. Further, it must be noted that while private actions under UCL on behalf of others must now comply with class certification requirements, the class action procedure is alive and well in California, as demonstrated by the California Supreme Court’s recent decision in Sav-On Drug Stores v. Superior Court (2004) 34 Cal.4th 319, which gave trial courts a great deal of discretion in deciding whether or not to certify a class.

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II. JUDICIAL UPDATE

Attendance at a Voluntary Religious Convention
Constitutes a “Religious Observance” under FEHA

In California Fair Employment and Housing Commission v. Gemini Aluminum Corporation, a California court of appeal reversed a judgment for Gemini Aluminum Corporation (“the Employer”) and found substantial evidence to support the Fair Employment and Housing Commission’s (“the Commission”) decision that the Employer discriminated against its employee (“the Employee”) by failing to accommodate his religious beliefs, failing to prevent discrimination, and retaliating against him for protesting the discrimination, all in violation of the Fair Employment and Housing Act (“FEHA”). The Employee, a Jehovah’s Witness, requested two days off to attend a Jehovah’s Witness Convention. He made the request to his supervisor, Jack Kaufman (“Kaufman”), who was responsible for taking the request to management and who was also a member of the management committee that would consider the request. Kaufman submitted a written request for the Employee, but the committee denied the request for failure to include the reason. Kaufman resubmitted the request, this time stating the reason was to attend a religious convention. The request was again denied. The Employee spoke with Kaufman about his religion and explained why he needed the days off. The Employee said his local congregation encouraged all of their members to attend the convention and it was his responsibility to be there. Despite being denied the time off, the Employee took off one day of work to attend the convention.

When the Employee returned to work, he was given a ten day suspension for failing to appear for work on Friday and Saturday, despite the fact he had not been scheduled to work on Saturday. The Employee protested the suspension, telling Kaufman he thought it was unfair because he felt obligated to attend the convention for his religion and he knew others who received lesser suspensions for more absences. Thereafter, the Employee told Kaufman that he was going to the “Labor Board.” Kaufman conveyed this discussion to the management committee and, a few days later, the Employee was fired.

The Employee filed a religious discrimination complaint with the California Department of Fair Employment and Housing (“DFEH”). The Commission ruled that the Employer had discriminated against the Employee. The Employer filed a petition for writ of administrative mandate in the Los Angeles County Superior Court. The Superior Court found the Commission’s findings were not supported by substantial evidence, granted the Employer’s petition, and directed the Commission to vacate its decision. The DFEH appealed.

The appellate court reversed. Under FEHA, it is an unlawful employment practice for an employer to discriminate against a person because of religious creed. It is also unlawful to discriminate against employees because of a conflict between the person’s religious belief or observance and any employment requirement unless the employer can demonstrate that it has exercised an available reasonable alternative means of accommodating the religious belief or observance. The statute does not limit “religious beliefs” to Sabbath observances or other religious holy days. Rather, it includes all aspects of religious belief, observance, and practice. Thus, an employee establishes a prima facie case of religious discrimination under the FEHA where: the employee sincerely holds a religious belief, the employer is aware of that belief, and the belief conflicts with an employment requirement.

The court stated that under California law an employer is required to accommodate not just a religious belief, but also a religious observance, if it is reasonably possible to do without undue hardship. There is nothing in the language of the FEHA that obligates an employer to accommodate only those religious practices that are required by the tenets of the employee’s religion.

The court also found that the Employer was aware of the Employee’s belief and its conflict with an employment requirement. The Employer contended that it did not have to accommodate the Employee’s request until he explained his religious beliefs and provided enough information for the Employer to understand the significance of the convention and how his attendance was tied to his religious beliefs. The court disagreed, observing that an employee need only cite to a religious connection, and does not have to provide an employer a complex explanation.

The court next considered the retaliation claim. An employee states a FEHA retaliation claim by showing he engaged in a protected activity, his employer subjected him to adverse employment action, and a causal link exists between the protected activity and the employer’s action. The Employee testified that when Kaufman informed him of the committee’s denial, he protested the decision, telling Kaufman it was his religious responsibility to go, then took off one day to attend. Three days later he was suspended. After learning of his suspension, the Employee told Kaufman that it was unfair because his need to attend the convention was a religious one. The Employee called Kaufman a few days later and told him that he was going to the Labor Board on July 9th and Kaufman told the management committee about this conversation. On July 9th, the Employee filed an administrative complaint regarding his suspension and, on the same day, the Employer’s management committee met and decided to terminate the Employee.

Informal complaints to management about discriminatory practices are sufficient to trigger the prohibition against retaliation. The Employee engaged in protected activities by: (1) protesting the Employer’s failure to attempt to accommodate his religious observance, (2) complaining to Kaufman that the suspension was unfair because of his religious needs, and (3) telling Kaufman that he intended to go to the Labor Board. The court concluded that the Employer’s awareness of the protected activities and the adverse action that followed within a relatively short time were sufficient to raise an inference of causal connection.

The court then reviewed the Employer’s alleged nondiscriminatory reason for terminating the Employee. The Employer fired the Employee because it believed he had been “blatantly insubordinate and failed to comply with its attendance policy by not providing documentation of his June absences.” But the company’s president gave conflicting testimony about whether the absence of documentation really did cause him to terminate the Employee. The court concluded that the enforcement of the policy was not rigid and that the Employee would not necessarily have been fired for violating it, had he spoken personally to the president or written him a personal note.

Finally, the court discussed FEHA’s requirement that an employer “take all reasonable steps necessary to prevent discrimination” in the workplace. One such “reasonable step” is a prompt investigation of discrimination claims. But the Employer made no investigation and, instead, retaliated. Other “reasonable steps” include establishing and promulgating anti-discrimination policies and implementing effective procedures to handle complaints and grievances regarding discrimination. The Employer, however, had not developed a complaint or a grievance procedure regarding discrimination and had no policy addressing religious accommodation. The court concluded that the Employer took no reasonable steps to prevent discrimination.

Corporate Reorganization Resulting In Demotion of
Female Administrative Managers Over 40 is Not Discriminatory

In Carter v. CB Richard Ellis, Inc., a California court of appeal reversed the trial court’s denial of defendant’s motion for judgment notwithstanding the verdict (“JNOV”) and found that plaintiff’s evidence was insufficient to establish a prima facie case of disparate impact sex or age discrimination or a breach of contract claim.

Plaintiff Helen Carter (“the Employee”) was hired by CB Richard Ellis, Inc. (“the Employer”) in 1969 as a word processing secretary. She was 21 years old at the time of hire and was employed by defendant for 30 years. During her tenure, she received several promotions and eventually became the regional administrative manager for defendant’s Orange County region and administrative manager for its Newport Beach office. As of 1998, only one of the Employer’s administrative managers was male and more than half of them were over 40. There were ten administrative managers in Southern California, all female, and eight were over the age of 40. Like the Employee, most of these administrative managers had begun working for the company as secretaries and, over time, were given additional responsibilities. When administrative manager openings occurred, nearly all of the applicants were women.

In the late 1990s, the Employer underwent a major structural reorganization during which many of the former responsibilities of the administrative managers were transferred to specialists in one of nine newly-created regions. Only a portion of the existing administrative managers qualified for these new regional positions.

As a result of the restructure, the Employee’s title changed and, while her salary remained the same, she was no longer eligible for bonuses, which had been a significant part of her compensation. Approximately 15 of the 57 former administrative managers were eventually promoted to one of the new regional positions. Those promoted were all women and most were over the age of 40. The Employee applied for two of the positions, but these jobs were filled by other women. In October 1999, the Employee was offered a position as “Senior Office Services Administrator” at an increased salary, but she declined the offer and resigned in November 1999.

The Employee sued the Employer for disparate impact discrimination based on her gender and age. She also sued for breach of contract, claiming she had a contract not to be demoted without good cause. Disparate impact discrimination occurs where, regardless of motive, a facially neutral employer practice or policy, bearing no manifest relationship to job requirements, has a disproportionate adverse effect on members of a protected class. The Employee contended that the Employer’s reorganization caused disparate impact on women and those over 40 because the reorganization demoted administrative managers, all but one of whom were women, and half of whom were over 40. But the evidence showed that neither women nor persons over 40 were not affected as a group. Only administrative managers were affected as a group.

The court found that the Employee failed to establish a prima facie case of disparate impact discrimination, in that the Employee’s entire case was based on the erroneous premise that administrative managers were a protected group because administrative managers were almost all women and about half were over the age of 40. The court noted that the Employee utilized the law’s prohibition of discrimination against women and those over 40 “as a diversionary tactic to conceal the real complaint -- an adverse employment action taken against a very limited subset of a protected group -- not because of their status as members of the protected group, but because of their status as members of the limited subset.” At most, the evidence established a disparate impact on administrative managers, not a protected group such as women or persons over 40.

The evidence was also insufficient to establish a contract. The contract claim arose from statements made during the Employee’s initial interview in 1969. She was told the salary for her position, that there were annual increases based upon performance and, as long as she did a good job, she would get merit increases based on her performance. Based on this representation, the Employee concluded that she had a contract that allowed a change in her job duties and responsibilities, but not demotion or termination or any other adverse effect upon her employment. The court stated that the Employee’s conclusion “that these words of encouragement constituted an enforceable promise that she would never be subject to a change of job assignment, that she would never be demoted from a job never promised to her (and which she would not obtain for another 15 years), or that her future job would never be reclassified for reasons unrelated to her individual performance, are speculative, conjectural, and patently unreasonable.” If the law were otherwise, employers would have to withhold all words of encouragement to new employees for fear of actionable consequences.

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.