JUNE 2005

I. LEGISLATIVE/REGULATORY UPDATE
Pending Legislation

California Legislation

Below is the status of pending California bills:

AB 20 (Leslie and LaMalfa) would preclude an Americans with Disabilities Act access barrier lawsuit for damages when there is only a de minimis violation that has no significant impact on the disabled person’s right to the goods or services provided by the facility. AB 20 would provide that the remedy for a technical violation is injunctive relief and the recovery of attorneys’ fees. AB 20 is currently before the Assembly Judiciary Committee.

AB 48 (Lieber) was recently passed by the full Assembly. AB 48 proposes to increase the current minimum wage from $6.75 per hour to $7.25 [er hour, effective July 1, 2006, and to $7.75 per hour by July 1, 2007. Moreover, AB 48 provides for an automatic adjustment on January 1 of each following year, at a rate calculated by using the federal Consumer Price Index. If the bill passes, the automatic increases would start in 2008. Having been passed by the Assembly, the bill has moved to the Senate for discussion.

AB 1310 (Nunez) would require private employers with more than 500 employees to follow very specific guidelines when offering a severance agreement, including (1) providing an accurate written statement of the tax consequences to the employee if he or she accepts the offer; (2) stating an accurate written projection of the present value of all compensation that may be lost or impaired as a result of accepting the severance, assuming the employee were to continue his or her employment with the employer for an additional 5, 10, and 15 years; and (3) providing a period of 21 days for the employee to reconsider his or her acceptance of the severance. Should an employer not comply with the proposed requirements, it shall be liable to the employee in the amount of $100 per day for the period of making the severance offer until the date the employer provides the required disclosures and reconsideration opportunity.
This bill passed the full Assembly and is now before the state Senate.

SB 174 (Dunn) would provide that any employee receiving less than the minimum wage or the applicable legal overtime compensation is entitled to recover the unpaid balance of the full amount, interest, attorneys’ fees, and costs of the litigation. If the employee was paid less than twice the minimum wage, the civil action may be brought by the employee on behalf of other current and former employees who were also paid less than twice the state minimum wage. SB 174 passed the entire Senate and is now before the state Assembly.

SB 855 (Poochigan) would have required a potential plaintiff to notify a business of any Americans with Disabilities Act access barrier violation and allow correction time before a lawsuit could be filed. Although the bill failed to pass the Senate Judiciary Committee, reconsideration was granted.

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II. JUDICIAL UPDATE

Fraudulent Prehire Promises Lead to Employer Liability

In Helmer v. Bingham Toyota Isuzu, Kevin Helmer (“the Employee”) worked as a parts and service manager for Lithia Automotive (“Lithia”), earning almost $6,000 per month. The Employee applied for an open parts and services position at Bingham Toyota Isuzu (“the Employer”). The Employer’s director of parts and services told the Employee that the job’s average compensation was $5,700 per month. During the interview process, the director then pulled a financial statement out of his drawer and stated “if [the Employee] had been employed by [the Employer] between January and September 1999, [the Employee] would have made $70,000 up to that point.” Based on the director’s representations, the Employee quit Lithia to join the Employer.

In the Employee’s first three months of employment with the Employer, his monthly paychecks were $4,400, $5,100, and $4,800. Each month he complained to the director (now his supervisor) about the low amount, but was sidestepped. Shortly thereafter, the Employee was fired.

The Employee sued the Employer for fraud for inducing him to leave Lithia and for intentional infliction of emotional distress. The jury found that the Employer did fraudulently induce him to take a job and awarded him economic damages of $490,913, pain and suffering
damages of $50,000, and punitive damages of $1.5 million. The trial court reduced the punitive damages to $675,000.

The Employer appealed the judgment. The California court of appeal, however, found that the Employer committed “promissory fraud” when it told the Employee that he would certainly receive more than $70,000 per year. Although the Employer argued that its “future prediction” was too vague to constitute a firm promise, the court disagreed. The director was in a position to know what a person in the Employee’s job would receive, and the director made a point to review financial statements from his desk drawer before he made the promise. Therefore, the Employer made a specific promise that caused the Employee to leave Lithia. The Employee had relied on the promise and it was reasonable for him to do so.

In order to prevent similar liabilities, California employers should ensure that hiring managers are consistent with directives from human resources prior to making any promises about compensation or any other term of employment. While at-will employment allows an employer to fire an employee for most any reason or change compensation terms at almost any time, it does not permit an employer to lie to induce an employee to come to work.

Supervisor’s Lack of Knowledge of Pregnancy Equates to No Pregnancy Discrimination

In Trop v. Sony Pictures Entertainment, et al, Anne Trop (“the Employee”) was terminated from her position at Tall Trees Productions (“the Employer”) as an assistant for movie producer and director Betty Thomas (“Thomas”). The Employee, who was pregnant at the time of her termination, sued the Employer alleging sexual discrimination based on pregnancy and wrongful termination in violation of public policy, among other claims. The Employer obtained summary judgment, which the court of appeal affirmed, because Thomas had no knowledge of the Employee’s pregnancy at the time the Employee was fired. Thus, the Employee could not establish a prima facie case for discrimination.

The appellate court specifically held that “an employee cannot make out a prima facie case of discrimination based on pregnancy under the California Fair Employment and Housing Act in the absence of evidence the employer knew the employee was pregnant.” Here, the Employee presented no evidence that she was visibly pregnant at the time of termination. In addition, she did not tell Thomas, her direct supervisor, that she was pregnant. While the Employee did tell others she worked with of her pregnancy, she either asked them to maintain her confidence or they assumed she wanted the information kept confidential, and none of her co-workers told Thomas of her pregnancy.

Moreover, the court of appeal held that even if the Employee did establish a prima facie case for sexual discrimination based on pregnancy, the Employer was able to establish that the Employee was fired for poor job performance and not for discrimination based on pregnancy. The court found that the Employer’s reasons for terminating the Employee’s employment – mishandling phone messages, taking an extended vacation during a busy period of work, and returning to work late from the vacation – were credible on their face. The Employee’s job performance did not meet Thomas’s “demanding standards.” In addition, the Employee was not able to present evidence that decisions leading to her termination were actually made on the prohibited basis of pregnancy. The Employee was not able to rebut the Employer’s showing that:

1. Thomas made the decision to fire the Employee before even the Employee herself even learned she was pregnant;
   
2. The Employee’s job performance did not meet Thomas’s expectations; and
   
3. Thomas did not know of the Employee’s pregnancy until after the termination.

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.