JULY 2005

I. LEGISLATIVE/REGULATORY UPDATE
Pending Legislation

California Legislation

Below is a summary of the status of various bills pending in the California legislature:

AB 48 (Lieber) would boost California's minimum wage to $7.25 per hour starting JulyÃ1, 2006 and $7.75 per hour in 2007 and would tie California's minimum wage to the consumer price index going forward. The bill passed the state Assembly and is now in front of the Senate Appropriations Committee.

AB 822 (Benoit) would allow an employer, with an employee's authorization, to transfer the employee's wages to a paycheck card that could be used at automated teller machines. The bill would also permit itemized wage statements to be furnished electronically, so long as the employer provided employees with electronic access, in a confidential setting, to print the statements during business hours. AB 822 is in front of the Assembly Labor & Employment Committee.

AB 169 (Oropeza) would increase damages for victims of gender wage discrimination to include a civil penalty of two times the unpaid wages, or four times the unpaid wages if the violation is willful. The bill passed the Assembly and is before the Senate Judiciary Committee.

AB 1310 (Nunez) would bar large employers from offering cash or anything of value in return for an employee's voluntary resignation, unless the offer is accompanied by a written disclosure of both the tax consequences of accepting the offer and the financial consequences of resigning. The employee must also be given at least 21 days to consider the offer. AB 1310 passed the Assembly and is before the Senate.

SB 174 (Dunn) would authorize new types of class action lawsuits when a dispute over minimum wage or overtime payment is involved. Moreover, SB 174 proposes to eliminate the mandatory requirements needed to establish a class action lawsuit. The bill passed the Senate and is before the Assembly Appropriations Committee.

SB 285 (Maldonado) would permit employees who qualify for overtime exemption to take partial vacation days from vested vacation time. SB 285 is in the Senate.

SB 300 (Kuehl) would alter the California Family Rights Act ("CFRA"). Since July 1, 2004, employers with 50 or more employees have been required to give up to 12 workweeks of leave in a 12 month period to employees in order to care for their seriously ill child, spouse, or parent. The CFRA also provides an absolute right to leave. SB 300 makes a number of changes to CFRA, most notably extending the benefits without requiring proof of care. SB 300 would entitle an employee to CFRA benefits without requiring that the employee actually be the person providing the care for an ill family member. SB 300 would also permit employees to take family and medical leave to care for a seriously ill adult child, even if that child is independent, as well as a seriously ill sibling, grandparent, or domestic partner. SB 300 passed the Senate and is in front of the Assembly Appropriations Committee.

The state Assembly and Senate have until September 9, 2005 to pass measures, and Governor Schwarzenegger must sign or veto them by October 9, 2005. It is important to note that some measures may not make it to the governor's desk this year, but they will remain under consideration when the legislature reconvenes in 2006.

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II. JUDICIAL UPDATE

Employee Who Signed Ambiguous Waiver of ADEA Claims Can Proceed with Lawsuit

In Thomforde v. International Business Machines Corp., Dale Thomforde ("the Employee") was an engineer at IBM ("the Employer") for more than 25 years when he was selected for layoff. In connection with the layoff, the Employee was provided a "General Release and Covenant Not to Sue," under which in exchange for certain benefits, the Employee agreed to release the Employer from claims related to his employment, including those arising from the federal Age Discrimination in Employment Act ("ADEA"). The document also stated that the Employee agreed not to sue the Employer over these kinds of claims, and that if he violated this "covenant not to sue," he would pay IBM's costs to defend the lawsuit. The provision further stated that the covenant not to sue did not apply to lawsuits based solely on the ADEA and did not preclude filing a charge with the Equal Employment Opportunity Commission.

Before signing, the Employee asked the Employer's attorneys if the exception for ADEA claims in the covenant not to sue paragraph meant he could sue the Employer as long as his case was limited to an ADEA claim. The attorneys refused to provide clarification. After consulting with his own attorney, the Employee determined that the language meant he could sign the release but still pursue an ADEA claim.

The Employee subsequently signed the release and filed an ADEA lawsuit. The Employer asked the court to reject the case because of the executed release. The Eighth Circuit Court of Appeals denied the request, explaining that under the Older Workers Benefits Protection Act ("OWBPA"), a waiver of ADEA claims must meet certain requirements including being written in a manner that the employee can understand. If any OWBPA requirements are not met, the waiver is void. The court held that the waiver was ambiguous and, thus, did not comply with the OWBPA. The waiver language first stated the Employee "released" the Employer from all claims, including ADEA claims. A few paragraphs later, it contained a "covenant not to sue" that exempted ADEA claims. According to the court, without a clear understanding of the legal differences between a release and covenant not to sue, these provisions would appear to be contradictory. And, if the Employer chose to include legal terms of art in the waiver, it had a duty to fully explain them to clear up any ambiguity.

No Retaliation Found Where Employee Pressured Into Dropping Lawsuit

In Pinero v. Specialty Restaurants Corporation, Alberto Pinero ("the Employee") was hired by Specialty Restaurant Corporation ("the Employer") as the general manager at a restaurant. When hired, the Employee had already filed an age discrimination claim against Alfred Balderrama, his former employer. Balderrama was also a member of the Monterey Park City Council. The Employee did not disclose the lawsuit to the Employer.

Subsequently, the Employee was promoted to general manager at another restaurant. After the promotion, the Employer's president and CEO learned that the Employee had filed a lawsuit against Balderrama. He met with the Employee and asked him to dismiss his lawsuit. The Employee replied that it was a private matter. The CEO subsequently set up a meeting with the Employee, his attorney, and two of the Employer's attorneys, among others. The Employee was told he filed a frivolous lawsuit against Balderrama, that he should dismiss it, and that if he did not he would be fired for failing to disclose the existence of the lawsuit.

The Employee claimed that after the meeting, he began to be criticized in his work. He was, however, fired, demoted, or transferred and he did not lose any benefits, bonuses, or commissions as a result of the criticism. The Employee resigned and filed a retaliation lawsuit against the Employer.

The appellate court emphasized that in order to recover, the Employee was required to establish that he suffered some type of adverse employment action as a result of engaging in protected activity (here, the lawsuit against Balderrama.) The court examined the facts and concluded that there was adequate factual support for the Employer's criticism of him. The court further concluded that the Employee had not presented sufficient evidence that the criticisms he received were "based on a retaliatory motive and [were] reasonably likely to deter [him] and others from engaging in protected activity." Moreover, criticism was not an "adverse employment action."

It is unlawful to retaliate against any employee for engaging in protected activity, and the filing of a lawsuit is a protected activity under the FEHA. Therefore, the effort to pressure the Employee into dropping his lawsuit was risky. An employee, however, must also show that he suffered as a result of the retaliatory conduct.

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.