GPH Employment Law Blog

What is a False Claims Act case?

2012-06-03T10:56:00.000-07:00

Both the United States and California have False Claims Acts, which allow employees to file actions on behalf of the government against employers who submit claims for payment that are false. In a recent example of the substantial payments that such lawsuits can lead to, a former Countrywide employee is set to receive $14.5 million based on his allegations that Countrywide inflated appraisals on government-insured loans. In what circumstances may such actions (also called qui tam actions) be brought?

The federal provisions, found in 31 U.S.C. sections 3729 through 3732, allow a private person to file an action in federal court on behalf of the United States against anyone who has presented a fraudulent claim for payment or approval. The action must remain under seal for 60 days, during which time the United States decides whether to take over the prosecution of the action, or to allow the private individual to pursue the claim. The statute provides for recovery of a civil penalty of $5,000 to $10,000 plus three times the actual damages, and reasonable attorney's fees and expenses. If the government prosecutes the action, the private individual receives up to 25 percent of the recovery. If the private person litigates the case alone, he or she receives up to 30 percent. The statute also bars retaliation against any employee who participates in a qui tam action.

The California provisions are similar. Under California Government Code section 12650 through 12656, a private person may file an action for false claims presented to the State or any political subdivision of the state. The action remains under seal for 60 days, to allow the appropriate government entity to take over the prosecution of the action. The remedies are similar.

Following are some examples of qui tam actions, which illustrate the broad range of activities encompassed by the statutes:

The Department of Justice decided to intervene in a qui tam action by former employees of American Commercial College, who had alleged that their employer false certified that it had complied with a federal law barring colleges from obtaining more than 90 percent of their yearly tuition from federal student aid. (2/28/2012)
Boeing agreed to pay $4.4 million to settle claims by a whistle blowing employee that the company billed the government for work on Chinook helicopters that it had already paid for. (1/20/2012)
A Genentech employee received $5.7 million from a $20 million settlement based on allegations that the company encouraged off-label use of Rituxan. (12/2/2011)
An Oracle employee was to receive $40 million under a settlement with the Department of Justice based on claims that Oracle did not provide complete information about discounts to other customers under a software licensing and technical support contract with the United States. (10/7/2011)
A former GlaxoSmithKline employee got $96 million from a $750 million settlement of claims involving manufacturing flaws at a manufacturing plant in Puerto Rico. (9/22/2011)
As a result of allegations of fraudulent Medicaid billings by one of its pharmacists, CVS Pharmacy agreed to pay the United States and 10 states (including California) $17.5 million. (4/15/2011)
Two former University of Phoenix employees received $19 million from a settlement of claims that the school illegally paid admissions counselors based on the number of students they recruited. (12/15/2009)

How To Reduce Liability Risks When Discharging Employees

2012-05-27T10:59:00.000-07:00

The best way to reduce the liability risks associated with firing employees is to make sure that you hire good employees. But, even employers who screen very carefully during the hiring process will find themselves from time to time with employees they do not wish to retain. Here are some important things to keep in mind when deciding to let somebody go:

Employment at will is a myth. Although California law provides that employment is at will in the absence of a contrary agreement (see Labor Code section 2922), the reality is that you cannot fire someone for no reason. Because of the way the burden of proof is allocated in a lawsuit, a discharged employee generally need only show that he or she was performing competently in order to put the burden on the employer to show a legitimate reason for the discharge. We explained this in more detail a couple of years ago in a post entitled Layoffs Mean Lawsuits. When you decide to discharge somebody, make sure that you can articulate a good reason for doing so.
Document the reason before you discharge the employee. You are at a trial where a former employee testifies that she was fired a week after she complained about sexual harassment. The vice president of the department where she worked testifies that she had to let her go because everybody agreed that she was the worst employee they had ever hired. Cross-examination goes like this. "Q: Can you show me a single piece of paper that ever criticized the employee's performance? A: No, we don't do things that way." Is there much doubt about how the jury will vote?
Evaluate employees regularly and tell them how to improve. Another trial. Same type of retaliation claim. The director of human resources testifies that the employee was let go because she was ten minutes or more late for work five times in the first six months that she worked at the company. Cross-examination goes like this: "Q: Was the employee ever written up for being late? A: No. Q: After the employee started work, did you ever tell her that she could be fired for being late? A: No, it's in the policy posted on the employee bulletin board--five lates means you can be fired. Q: Did you ever go over the policy with her? A: No, that's her responsibility. Q: Did it matter to you that she was late the fifth time because her son came down with the flu? A: No. The policy is the policy." How much better the case would be for the company if (1) the policy were in an employee handbook that the employee acknowledged having reviewed in writing, (2) the first time she was late, the employee's supervisor sat down with her and explained the importance of the policy and asked whether there was a reason she could not get to work on time, (3) the second time she was late, there was further counseling and a note in her personnel file, (4) the third time, she received a written warning, and (5) the fourth time she got a written final warning that the next late would result in termination.
Consider a severance agreement. Instead of just letting the employee go, you could offer something extra in return for a release of all liability -- another few weeks of pay, a couple of months extension on medical benefits. With such an agreement, you have an ironclad defense to any lawsuit the employee might try to pursue. This will not work every time. Sometimes, offering a severance package will get the employee wondering whether he or she might have a valuable claim that is worth a lot more, leading him or her to consult an attorney and file a lawsuit.

Who Is The (An) Employer?

2012-05-20T11:07:00.002-07:00

Questions may arise about which of multiple actors is responsible for various aspects of an employment relationship. When a temporary agency provide a worker to one of its clients, can the client be sued for not providing a meal period? Is the agency or the client responsible for compliance with the family leave statutes? If an outside contractor supplies employees to provide document services at its client's work site, who is liable for any workplace harassment claims? Can a payroll service be held liable to its client's employees for failure to pay wages in accordance with the California Labor Code? The last was the subject of the Court of Appeal's recent decision in Aleksick v. 7-Eleven, Inc., Case No. D059236 (May 8, 2012). It provides a good jumping off point for a discussion of the legal principles that determine who a particular worker's employer is.

Kimberly Aleksick worked for a 7-Eleven franchise owned by Michael Tucker. His franchise agreement with 7-Eleven to use a payroll service operated by 7-Eleven. Aleksick brought a class action against 7-Eleven claiming that its practice of converting minutes to hundredths of an hour sometimes shorted employees a few seconds worth of pay. The dispositive question was whether 7-Eleven could be considered Aleksick's employer by operation of the payroll service.

Common Law

Determining whether a worker is an employee is an issue in many areas of law. At common law, the issue arises with respect to responsibility for the worker's torts. If an organization hires an independent contractor to carry out a task, and the independent contractor is negligent, the organization is not liable. Foster v. County of San Luis Obispo, 14 Cal. App. 4th 668, 17 Cal. Rptr.2d 730 (1993) (county not liable for legal malpractice of independent lawyer retained to represent indigent defendant). But, the organization is liable under the doctrine of respondeat superior for negligence of its employees. Barner v. Leeds, 24 Cal. 4th 676, 13 P.3d 704, 102 Cal. Rptr. 2d 97 (2000) (county is liable for malpractice of deputy public defender whom it employs).

The common law standard looks to the degree of control that the putative employer has over the manner and means by which the worker carries out his or her task. The California Employment Development Department published the Employment Determination Guide, which explains the standard in question and answer format, and provides concrete examples.

Wage and Hour

Federal and state law impose minimum wage, overtime and other wage and hour requirements on employers. Those who meet the common law definition of employer must comply with those regulations. However, the laws contain their own definitions that may be more encompassing.

The California wage orders refer to the common law standard but defines employ to include "to exercise control over the wages, hours or working conditions" or "to suffer or permit to work." (The California wage orders are available from the Industrial Welfare Commission website.) The suffer or permit to work language is derived from child labor legislation designed to prevent companies that controlled a work site from disclaiming responsibility for minors who might be working there although not under the direct control of the company. The exercising control standard allows the law to reach through straw men and sham arrangements to get at the true employer, and to apply to situations where multiple entities control different aspects of the employment relationship. The California Supreme Court explained the standards in Martinez v. Combs, 49 Cal.4th 35, 109 Cal. Rptr. 3d 514, 231 P.3d 259 (2010).

In the Aleksick case referred to at the outset the Court of Appeal determined that the payroll service did not meet any of the definitions of employer under California law.

Although the federal Fair Labor Standards Act definition of employ includes suffer or permit to work, the United States Supreme Court has adopted an economic reality test that does not necessarily match the more all-encompassing definition under California law. Tony and Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290 (1985).

Workers Compensation

California's Workers Compensation Act covers persons in the service of an employer under any contract of hire, but not independent contractors. The Act defines an independent contractors as "any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished. Because of the remedial purposes of the Act, the coverage may sometimes extend beyond those who would be considered employees under the common law test. S.G. Borello & Sons v. DIR, 48 Cal.3d 341, 769 P.2d 399, 256 Cal. Rptr. 543 (1989) ("sharefarmers" engaged to harvest cucumbers were employees of the grower).

Anti-Discrimination Laws

Federal and state laws prohibit employers from harassing, and discriminating and retaliating against their employees based on protected characteristics. Where more than one entity has control over conditions in the workplace, liability may extend beyond the one considered the employer under common law principles. The EEOC has published an Enforcement Guidance on the application of equal employment opportunity laws to contingent workers placed by staffing firms. The following example from the guidance illustrates how the laws apply to one such situation:

Example 9: A temporary employment agency receives a job order for a temporary receptionist. The client requires that the individual assigned to it speak English fluently because a large part of the job entails communication with English-speaking persons who call the client or who come to the client's work place. The agency assigns an Asian American individual who speaks English fluently, but with an accent. The client insists that the agency replace her with someone who can speak unaccented English. The agency complies with that request and sends an individual who speaks English fluently with no accent. The Asian American individual files a charge with the EEOC. The investigator determines that English fluency was necessary for the job. However, he further determines that CP's accent does not interfere with her ability to communicate and that she has effectively performed similar jobs. The investigator properly concludes that both the client and the staffing firm are liable for terminating CP on the basis of her national origin.

FMLA

The federal Family and Medical Leave Act and the California Family Rights Act require employers with 50 or more employees to provide unpaid leave benefits. As with the anti-discrimination laws, questions may arise about which entity is responsible for the benefits and providing a job when the employee is ready to return to work. The Department of Labor has explained the principles in section 825.106 of its regulations.

The need to determine whether an employment relationship exists arises in many other contexts. While some of those may have unique standards, the general standards discussed here are a useful starting point for all such determinations.

Exemptions from Wage and Hour Rules in California

2012-05-13T13:16:00.000-07:00

The California rules on exemptions differ in several respects from those under the federal Fair Labor Standards Act. In most respects the California rules take a narrower view of the exemptions. In one notable circumstance, the FLSA standard is more favorable to employees. Employers in California must follow the rule that takes the narrowest view of the exemption.

White Collar Exemptions

There are exemptions for executive, administrative and professional employees under both state and federal law, but the specifics differ. Under both standards, the exempt employee generally must be salaried. The federal minimum is $455 per week. The state minimum is two times the state minimum wage (currently $8 per hour) for a 40-hour work week. That calculates to $2773 per month. Federal law requires that the exempt employee's primary duty fall within those by which the exemption is defined. State law requires that the exempt employee devote more than half his or her time to the defined duties.

Executive Exemption. The defined duties are essentially the same. The exempt employee (1) must manage the enterprise, or a customarily recognized department or subdivision of the enterprise, (2) must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent, and (3) must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Administrative Exemption. The defined duties are essentially the same, but the application to specific jobs differs. The exempt employee must (1) perform office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers and (2) must exercise of discretion and independent judgment with respect to matters of significance. Although insurance claims representatives are exempt under the federal standards, they are not under the state standard. See Bell v. Farmers Ins. Exchange, 87 Cal.App.4th 805, 105 Cal.Rptr.2d 59 (2001).

Professional Exemption. Again, the defined duties are essentially the same, but the application to specific jobs differs. The exempt employee (1) must perform work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment, (2) the advanced knowledge must be in a field of science or learning, and (3) the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual
instruction. Licensed professionals in the fields of law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting are exempt under both standards. Pharmacists are exempt professionals under federal law, but not under state law. Registered nurses are exempt professionals under federal law, but, under state law, only licensed nurse practitioners are.

Computer Professionals

Both federal and state law exempt highly skilled computer specialists who perform high-level duties. Under federal law they must earn at least $455 per week, or $27.63 per hour. Under state law, they must earn $38.89 per hour or annual salary of not less than $81,026.25 for full-time employment, and paid not less than $6,752.19 per month.

Outside Sales Persons

Under the FLSA, a salesperson is exempt if his or her primary duty is making sales, or obtaining orders or
contracts for services or for the use of facilities for which a consideration will be paid by the client or
customer, and he or she is customarily and regularly engaged away from the employer’s place of
business. State law has a similar exemption, but expressly requires that the employee spend more than half his or her time away from the employer's place of business.

Commissioned Employees

Under state law, an employee is exempt if more than half his or her compensation is commissions, and he or she earns at least one and a half times minimum wage. Under the FLSA, the commissioned employee exemption is limited to employees of retail or service establishments; auto, truck, trailer, farm implement, boat, or aircraft sales-workers; or parts-clerks and mechanics servicing autos, trucks, or farm implements, who are employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers. As a result, under federal law, employees of brokerage and financial services firms cannot qualify for the commissioned employee exemption.

Highly Compensated Employees

Department of Labor regulations promulgated under the FLSA provide an exemption for highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000, if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption. There is no such exemption under state law.

Minimum Wage Principles

2012-05-06T11:53:00.001-07:00

There is constant debate about whether requiring employers to pay their employees a minimum wage is good public policy.

Henry Hazlitt (against): "The first thing that happens, for example, when a law is passed that no one shall he paid less than $30 for a forty-hour week is that no one who is not worth $30 a week to an employer will he employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation." (From Economics in One Lesson, Chapter XVIII Minimum Wage Laws)

Jeff Chapman and Michael Ettlinger (for): "The minimum wage has been an important part of the U.S. economy for 65 years. It is a statement of how the nation values work; it is a tangible measure of how Americans view employers’ obligation to their workers; it is an equalizer in a low-wage labor market where workers have little bargaining power; and it is an effective policy that helps low- and middle-income families with low-wage workers. These are the reasons why policy makers at both the federal and state level are acting to ensure that the minimum wage continues to be an effective floor to the wages of working Americans." (From The Who and Why of the Minimum Wage)

Whether it is good policy or bad, the minimum wage is the law. The federal Fair Labor Standards Act imposes a national floor of $7.25 per hour, which is enforced by the U.S. Department of Labor. States may impose a higher minimum wage, which California has done with a minimum wage order (enforced by the Division of Labor Standards Enforcement) that requires California employers to pay at least $8.00 per hour. Minimum wage for sheepherders in California is $1422.52 per month.

Most employees who are exempt from the FLSA's overtime provisions (such as executive, administrative and professional employees) are also exempt from the minimum wage requirement. Federal law recognizes some additional exceptions. Employers may apply for permission to pay sub-minimum wage under federal law to those whose productive capacity is impaired by physical or mental disability. The Department of Labor issues certificates that allow employers to pay full-time students 85 percent of the federal minimum wage. Under federal law, those under 20 need only by paid $4.25 for their first 90 days of employment. High school students at least 16 years old may be paid only 75 percent of minimum wage upon issuance of a certificate by the Department of Labor.

Under federal law, employers may credit the reasonable cost of employer-provided meals and housing against the minimum wage. Employers are also entitled to a credit for tips received by employees if they pay those employees at least $2.13 per hour cash wages and the employees receive at least $30 per month in tips.

California law differs. The sub-minimum wage for those under 20 only applies for the first 120 hours of employment. The student learner wage must be at least 85 percent of minimum wage. There is no credit for tips. The credit for meals and housing is limited to the amounts specified in the wage orders.

Another important difference is in how the rate of pay is computed. Under the FLSA, there is a minimum wage violation only if the employee's average wage for a pay period in which no overtime is worked exceeds the minimum wage. California law requires the employer to pay at least the minimum for each hour worked. The federal averaging method is not appropriate under California law. For an explanation of the difference, see Armenta v. Osmose, Inc., 135 Cal. App. 4th 314, 37 Cal.Rptr.3d 460 (2005).

Using Convictions and Arrests To Make Hiring Decisions

2012-04-30T06:53:00.000-07:00

Last week, the EEOC adopted an enforcement guidance on the use of arrest and conviction records in employment decisions. It issued a press release, the guidance document itself, and a question-and-answer document about the guidance. With the guidance in mind, now is a good time for employers to scrutinize how they use such records to make hiring decisions.

The EEOC's concern is that the use of such records may have an disparate impact on those with protected characteristics. As the guidance document explains, "Nationally, African Americans and Hispanics are arrested in numbers disproportionate to their representation in the general population. In 2010, 28% of all arrests were of African Americans, even though African Americans only comprised approximately 14% of the general population. In 2008, Hispanics were arrested for federal drug charges at a rate of approximately three times their proportion of the general population. Moreover, African Americans and Hispanics were more likely than Whites to be arrested, convicted, or sentenced for drug offenses even though their rate of drug use is similar to the rate of drug use for Whites."

Nonetheless, anti-discrimination law recognizes that the wrongful conduct revealed by arrest and conviction records may be sufficiently job-related to justify their use despite a disparate impact. The EEOC says that employers may rely on convictions if (1) data validates the use of convictions for particular offenses as predictors of subsequent work performance, or (2) the employer determines which convictions will be considered by considering the nature of the crime, the time elapsed since the conviction, and the nature of the job, and then provides an opportunity for an individualized assessment for people excluded by the screen to determine whether the policy as applied is job related and consistent with business necessity.

Because they are not proof of wrongdoing, arrest records alone should never be relied upon to make employment decisions. However, the fact of an arrest may prompt the employer to investigate the circumstances of the arrest and conclude that disqualifying misconduct did occur. The guidance documents gives the following example if a proper use of the fact of an arrest:

Andrew, a Latino man, worked as an assistant principal in Elementary School for several years. After several ten and eleven-year-old girls attending the school accused him of touching them inappropriately on the chest, Andrew was arrested and charged with several counts of endangering the welfare of children and sexual abuse. Elementary School has a policy that requires suspension or termination of any employee who the school believes engaged in conduct that impacts the health or safety of the students. After learning of the accusations, the school immediately places Andrew on unpaid administrative leave pending an investigation. In the course of its investigation, the school provides Andrew a chance to explain the events and circumstances that led to his arrest. Andrew denies the allegations, saying that he may have brushed up against the girls in the crowded hallways or lunchroom, but that he doesn’t really remember the incidents and does not have regular contact with any of the girls. The school also talks with the girls, and several of them recount touching in crowded situations. The school does not find Andrew’s explanation credible. Based on Andrew’s conduct, the school terminates his employment pursuant to its policy.

Other laws bar use of some arrest and conviction records without regard to their discriminatory adverse impact. For example, the Fair Credit Reporting Act bars consumer reporting agencies from reporting records of arrests that did not result in entry of a judgment of conviction, where the arrests occurred more than seven years ago.

In California, arrest records may not be considered at all unless the arrest resulted in a conviction, or the applicant is awaiting trial. Employers may not inquire about marijuana convictions that are more than two years old. See California Labor Code sections 432.7, 432.8.

Learn About the Equal Pay Act

2012-04-22T08:52:00.000-07:00

The Equal Pay Act is a federal statute that tries to assure pay equality between male and female employees, even though job titles may differ.

Although the Equal Pay Act has been in effect since 1963, a pay gap continues. A GAO study released in October 2011 estimated that "in 2010, less-educated women earned 86 cents—compared with 81 cents in 2000—for every dollar men earned, after adjusting for available factors that may affect pay." Commentators continue to decry the gap. Witness this recent post by Congresswoman Jackie Speier.

The substantive provisions of the Act appear in 29 U.S.C. section 206(d), which states:

"No employer having employees subject to any provisions of this section shall discriminate, within any establishment in which such employees are employed, between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex: Provided, That an employer who is paying a wage rate differential in violation of this subsection shall not, in order to comply with the provisions of this subsection, reduce the wage rate of any employee."

The Equal Pay Act regulations promulgated by the EEOC elaborate on those provisions.

Unlike similar sex discrimination claims under Title VII, there is no exhaustion requirement. Claimants may file their claims in court without first going to the EEOC. California has its own Equal Pay Act, found in Labor Code section 1197.5, which is substantially the same as the federal one. California courts rely on federal precedent to interpret the statute. Green v. Par Pools Inc., 111 Cal.App.4th 620, 3 Cal.Rptr.3d 844 (2003). As is the case with the federal statute, there is no exhaustion requirement.

The Ninth Circuit applied the Equal Pay Act in an action by the USC women's basketball coach, who was paid less than the men's basketball coach. Stanley v. University of Southern California, 178 F.3d 1069 (9th Cir. 1999). Summary judgment for the university was affirmed: "Stanley [the women's coach] had far less relevant experience and qualifications than Raveling [the men's coach]. She had fourteen years less experience as a basketball coach. She, unlike Raveling, never coached the Olympic team. She had no marketing experience outside coaching. She had never written any books on basketball.

Whether an employee's rate of pay is less than the rate paid to another employee is not always a mathematical calculation. If the work is equal the pay must be in the same form.

Example 16 from the EEOC's Compliance Manual section on compensation discrimination explains this as follows: A male tennis instructor and a female tennis instructor at a particular health club provide tennis lessons that are substantially equal. The male instructor is paid a weekly salary, but the female instructor is paid by the lesson. Even if the two instructors receive essentially the same pay per week, there is a violation because the male and female are not paid in the same form for substantially equal work.

Other examples from the Compliance Manual explain other concepts under the Equal Pay Act:

Two of them illustrate how to determine whether a pay differential between work sites is a factor other than sex:

Example 17: CP [complaining party], a school teacher, alleges that she is paid less than a male teacher who performs equal work in the same school district. The school district asserts that their compensation cannot be compared under the EPA because they work in different schools. The investigation determines that the school district is a single establishment because hiring, assignments of teachers, and compensation rates are determined centrally, and personnel are sometimes reassigned to different schools. Therefore, the compensation rates of the two teachers can be compared.

Example 18: CP, a female, works for a computer services firm that has offices in numerous cities. She alleges that she is paid less than a male who performs the same job in a different branch office. The employer claims that the separate offices are separate establishments and that, therefore, the compensation rates in each office cannot be compared. The evidence shows that while the headquarters of the company exercises some control over the branches, the specific salaries offered to job applicants are determined by supervisors in each local office. The local offices therefore constitute separate establishments, and CP's salary cannot be compared to the salary of an employee in a different office.

Several of the examples explain what constitutes equal work:

Example 21: CP, a hotel clerk, alleges that she is paid less than a male who performs substantially equal work. CP only has a high school degree, while the male comparator has a college degree. However, performance of the two jobs requires the same education, ability, experience, and training. A college degree is not needed to perform either job. Therefore, the skill required to perform the two jobs is substantially equal.

Example 22: CP, a male, works for a telephone company diagnosing problems with customer lines. He alleges that he is paid less than his female predecessor in violation of the EPA. The evidence shows that the job of CP's predecessor required expert training in diagnostic techniques and a high degree of specialized computer skill. The respondent switched to a newer, more advanced computer testing system after CP's predecessor resigned. The job now requires much less overall skill, including computer skill, than was required when CP's predecessor held it. Therefore, the skill is not equal, and no violation is found.

Example 24: CP alleges that she and other female grocery store workers are paid less than males who perform substantially equal work. Most of the tasks performed by the males and females are the same. In addition to those same tasks, the male employees place heavy items on the store shelves, while the female employees arrange displays of small items. The extra task performed by the men requires greater physical effort, but the extra task performed by the women is more repetitive, making the amount of effort required to perform the jobs substantially the same.

Example 30: CP, a bank teller, alleges that she is paid less than a male bank teller who performs the same job. The respondent claims that the compensation disparity is justified because wages are paid under a merit system. That alleged merit system is unstructured, based on a manager's "gut feeling." Furthermore, the respondent offers no objective evidence to support CP's lower compensation under its merit system. In this case, the merit system is not bona fide and does not justify the compensation disparity.

Example 32: CP, a high school teacher, alleges that she is paid $5,000 less than a male teacher who performs substantially equal work. The respondent states that the compensation difference is due to its seniority system and that the male teacher has greater seniority. The investigation reveals that the male has worked at the school three years longer than CP, which would only justify a $3,000 difference in pay under the seniority system. An EPA violation is found.

The Brinker Meal Period Decision

2012-04-15T10:00:00.000-07:00

California Supreme Court

The California Supreme Court has handed down its long anticipated ruling in Brinker Restaurant Corp. v. Superior Court, Case No. S166350. Applying rules of construction and common sense, the Court ruled that employers need not force their employees to take a meal break:

"An employer's duty with respect to meal breaks under both [Labor Code] section 512, subdivision (a) and Wage Order No. 5 is an obligation to provide a meal period to its employees. The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so. What will suffice may vary from industry to industry ... On the other hand, the employer is not obligated to police meal breaks and ensure no work thereafter is performed. Bona fide relief from duty and the relinquishing of control satisfies the employer's obligations, and work by a relieved employee during a meal break does not thereby place the employer in violation of its obligations and create liability for premium pay." The law requires a first meal period no later than the end of an employee's fifth hour of work, and a second meal period no later than the end of an employee's 10th hour of work.

The Court also put to rest any question there may have been about the separate rest period entitlement: "Employees are entitled to 10 minutes' rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on."

What does the decision mean for employers?

Because the Supreme Court has foreclosed the argument that the lack of a record of a meal period within the first five hours of employment automatically makes the employer liable for a meal period violation, the decision should limit the circumstances in which class action certification is appropriate for such claims. In the absence of an employer policy that violates the meal period, each individual employee would have to prove that he or she was prevented from taking a meal break. But, in the case before it, the Court did not rule out a class action, leaving it to the Superior Court to determine, in light of the conclusions reached in the decision, whether common issues predominated over individual ones.

Further, the Supreme Court's decision does not read the meal period requirement out of California law. Employers must still ensure that all their non-exempt employees are completely relieved of duty for 30 minutes by the end of the first five hours of work.

What should employers do?

Now that the Supreme Court has conclusively determined the extent of the employer's obligation with respect to meal periods, employers should review their policies and practices to make sure that they are in compliance.

1. Employers should make sure that all supervisors and managers are informed of the legal requirement recited in the Supreme Court's opinion, and that any violations will result in discipline.

2. Employers should review their employee handbooks to make sure that it informs employees of their right to 30 duty free minutes by the end of their fifth hour of work. The acknowledgment of receipt of the handbook should contain a separate initialed acknowledgment of the employer's policy to provide meal periods.

3. Employers should make sure that their timekeeping systems accurately record meal periods. Section 7 of the California wage orders requires employers to maintain accurate records of meal periods.

4. Employers should consider encouraging employees to take their meals away from the work location. This will avoid claims that an employee was not relieved of all duty because someone asked a work-related question, or requested performance of a work duty.

5. Employers should self-assess the one-hour of premium pay imposed by California Labor Code section 226.7, if they need an employee or group of employees to work without a meal period. Although the Labor Code and wage orders permit employees to give written waivers "when the nature of the work prevents an employee from being relieved of all duty," such waivers are revocable at the employee's option and may be subject to challenge for having been coerced.

May Employers Base Employment Decisions on Off-Duty Conduct?

2012-04-08T11:16:00.000-07:00

Three teachers have recently been in the news for their extracurricular activities. A Philadelphia high school teacher was suspended for complaining on her blog that her students acted like "rude, disengaged, lazy whiners." A Florida high school football coach was fired for sending racy pictures to his non-student girlfriend. Another Florida teacher was fired for posting to Facebook that gay marriage was a sin and that same-sex unions were a cesspool. See Teachers Under The Morality Microscope by Jonathan Turley in the Los Angeles Times. These and other cases raise questions about the legal limits on an employer's ability to make employment decisions based on off-duty conduct.

Private Employers

Under the at will presumption of Labor Code section 2922, a private employer may discharge an employee for any reason, so long as it is not an illegal reason. Thus, in the absence of a statutory bar, an employer may base discharge on off duty conduct. For example, even though tobacco use is lawful, an employer could require its employees to refrain from tobacco use. (For an example of an unsuccessful effort by a smoker to challenge his termination, see Rodrigues v. EG Systems, Inc., 639 F. Supp. 2d 131 (D. Mass. 2009).) In reaction to that possibility, some states (not including California) have enacted protections for tobacco-using employees. (See this compilation by the National Conference of State Legislatures.)

Although the language of California Labor Code section 96(k) appears to protect employees from adverse action based on "lawful conduct occurring during nonworking hours away from the employer's premises," it has been interpreted to apply only to conduct that already has constitutional protection. See Attorney General Opinion No. 00-303 (10/10/2000); Barbee v. Household Automotive Fin. Corp., 113 Cal. App. 4th 525, 6 Cal.Rptr.3d 406 (2003); Grinzi v. San Diego Hospice Corp., 120 Cal. App. 4th 72, 14 Cal. Rptr. 3d 893 (2004).

California Labor Code section 432.7 bars employers from taking adverse action based on any arrest or detention that does not result in a conviction, but allows them to inquire about an arrest for which the employee or applicant is out on bail or on his or her own recognizance pending trial. Thus, the employer may base adverse action on results of its own investigation of the facts surrounding the incident for which the employee was arrested. Cranston v. City of Richmond, 40 Cal.3d 755, 710 P.2d 845, 221 Cal. Rptr. 779 (1985).

California Labor Code sections 1101 and 1102 prohibit employers from acting against their employees based on their political beliefs and activities. Under those provisions, a newspaper editor who was fired after public stating his support for a mayoral candidate had a cause of action for wrongful termination. Ali v. L.A. Focus Publication, 112 Cal.App.4th 1477, 5 Cal.Rptr.3d 791 (2003).

As we explained in a previous blog entry, posting comments online about one’s employment may be protected under the National Labor Relations Act. Basing action on information from an employee's off duty online comments may also violate privacy and wiretapping laws. See, for example, Pietrylo v. Hillstone Restaurant Group, Case No. 06-CV-5754 (D.N.J. Sep. 25, 2009), where a jury awarded $3,400 to two employees fired after management got log in to their private MySpace chat group.

An employee may claim that the employer punishes off duty conduct differently based on a protected characteristic. For example, after Delta fired a female employee who posted suggestive photos of herself in a Delta uniform on her "Queen of the Sky" blog, she claimed that the airline did not treat male employees similarly. Simonetti v. Delta Airlines, Inc., Case No. 05-cv-2321 (N.D. Ga. 2005). Her case was dismissed without prejudice during Delta's bankruptcy proceedings, and never decided on the merits.

Public Employers

As a general rule, public employees are not at will, but may only be discharged for good cause. Their statutory right to continued employment establishes a property right that is protected by due process. Skelly v. State Personnel Bd., 15 Cal.3d 194, 539 P.2d 774 (1975). These principles impose additional restrictions on public employers who seek to discharge employees for off duty conduct.

Generally, a public employer must show that the off duty conduct is rationally related to the employee's particular job, and would result in impairment or disruption of public service. For example, the U.S. Supreme Court upheld the discharge of a police officer who sold video of himself stripping and masturbating online, because his off duty conduct was "detrimental to the mission and functions of the employer."
City of San Diego v. Roe, 543 U.S. 77 (2004). By contrast, a male correctional officer could not be terminated for wearing female clothing away from work, because there was no evidence that his performance of his job was impaired. Yancey v. State Personnel Bd., 167 Cal.App.3d 478, 213 Cal. Rptr. 634 (1985).

Although criminal convictions may constitute good cause for termination of a public employee, the employer may not rely on the conviction if it resulted from a nolo contendere plea. County of Los Angeles v. Civil Service Com., 39 Cal.App.4th 620, 46 Cal.Rptr.2d 256 (1995). Instead, the employer must introduce evidence that independently establishes the wrongdoing.

Which Law Tells Employers How To Treat Their Employees?

2012-04-01T17:15:00.000-07:00

Recent news reports about labor law violations at plants operated by one of Apple's contractors in China prompt consideration of who may regulate an employer's relationships with its workers. An employer based in California may have employees in other states, and in other countries. Employers in other states and countries may have employees in California. Which rules must the employers in such situations follow?

Within the United States

Within the United States, the Constitution requires each state to give "full faith and credit" to "public Acts, Records, and judicial Proceedings of every other State." But, the Due Process Clause bars a state from applying its law to a dispute unless it has a significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair. Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985). A state may enforce its own law over another state's law if it has a materially greater interest.

Here are some specific applications of those principles:

Although any state that has sufficient contacts with the parties and the dispute may apply its workers compensation law, once a state has made a final award under its workers compensation law, other states are barred by the full faith and credit clause from awarding the worker additional compensation for the same injury. Magnolia Petroleum Co. v. Hunt, 320 U.S. 430 (1943).

California has a strong policy against enforcement of non compete clauses under Business and Professions Code section 16600. Therefore, a California court should enforce that policy in a dispute over the employment of a non-California worker who had agreed not to compete with his former Maryland-based employer, where it would bar a California company from hiring the worker. Application Group, Inc. v. Hunter Group, Inc., 61 Cal.App.4th 881, 72 Cal.Rptr.2d 73 (1998).

California's Fair Employment and Housing Act does not apply to the relationship between a California company and its employees based on other states. Campbell v. Arco Marine, Inc., 42 Cal.App.4th 1850, 50 Cal.Rptr.2d 626 (1996).

California's wage and hour laws apply to work performed by out-of-state residents in California for California employers, but not to work performed by those employees in other states. Sullivan v. Oracle Corp., 51 Cal.4th 1191, 254 P.3d 237 (2011).

Outside the United States

When an employer based in the United States has employees in another country, it must comply with that country's laws, but the United States may also regulate the employment relationship. For example, Congress has expressly extended the reach of federal anti-discrimination protections to a U.S. citizen working in a foreign country for a United States employer, unless compliance would violate the law of the foreign country. See Public Law No. 102-166. Although it is generally assumed that Congress could constitutionally extend other employment laws to the operations of American companies overseas, it has declined to do so.

California law recognizes that an employer who complies with a foreign government's wishes may lack the discriminatory intent to violate the Fair Employment and Housing Act. In West v. Bechtel Corp., 96 Cal.App.4th 966, 117 Cal.Rptr.2d 647 (2002), an arm of the Saudi government contracted with a Bechtel entity for services on a project in Saudi Arabia. Bechtel terminated the plaintiff's involvement in the project after the Saudi entity objected to his employment because he was over 50. Because the Bechtel manager who terminated the plaintiff's involvement in the project lacked personal animus based on age, the claim for age discrimination lacked merit.

Foreign employers with employees in the United States must abide by the laws of the United States and the laws of the states in which they have employees, unless the employee works for a foreign government on a diplomatic mission. In that case, the Foreign Sovereign Immunities Act bars liability.

Employment Lawsuits against Public Employers

2012-03-25T10:00:00.000-07:00

Pasadena City Hall

The Supreme Court's decision this past week in Coleman v. Court of Appeals of Maryland (Case No. 10-1016) prompts consideration of some of the quirks in the law governing lawsuits by public employees against their state, county and municipal employers. (Coleman held that state employees may not sue for denial of FMLA leave for their own serious health conditions.) What happens when an employee tries to sue city hall or Sacramento?

State Sovereign Immunity

Unless they consent, States are not subject to suit for damages under federal law because of the sovereign immunity conferred by the 11th Amendment. See Kimel v. Florida Bd. of Regents, 528 U.S. 62 (2000). That bar extends to lawsuits in both federal and state court. Alden v. Maine, 527 U.S. 706 (1999).

Through its authority to enforce the 14th Amendment by appropriate legislation, Congress may abrogate the States' immunity. To do so, Congress must make its intent to abrogate unmistakably clear in the statutory language, and must tailor the legislation to remedy conduct that violates the Fourteenth Amendment’s substantive provisions. Application of those principles to some major federal employment laws gives the following results:

Title VII -- the chief anti-discrimination law abrogates sovereign immunity. State employees may sue for discrimination under Title VII.
The Age Discrimination in Employment Act abrogates sovereign immunity.
The Fair Labor Standards Act does not purport to enforce the Fourteenth Amendment, and does not abrogate sovereign immunity. The Equal Pay Act (which is part of the FLSA) probably abrogates the immunity, but the Supreme Court has not finally determined the issue.
The Americans with Disabilities Act does not abrogate sovereign immunity for suits by state employees against their employer. Board of Trustees of Univ. of Ala. v. Garrett, 531 US 356 (2001).

The immunity extends to the State itself and to arms of the state. For example, because of the extensive control that the State exercises over school districts in California, they enjoy sovereign immunity. Belanger v. Madera Unified School Dist., 963 F.2d 248 (9th Cir. 1992.).

The immunity does not bar suits against state officials for prospective equitable relief to ensure that federal law is carried out. (Thus, federal agencies may still sue state officials to enforce compliance with the FMLA after the Coleman ruling.) It also does not bar actions directly against state officials under 42 U.S.C. section 1983 for invading federal rights under color of state law. Hafer v. Melo, 502 U.S. 21 (1991). Section 1983 does not abrogate sovereign immunity. Quern v. Jordan, 440 U.S. 332 (1979).

Municipalities as persons under Section 1983

Counties, municipalities and other local government entities do not have sovereign immunity under the 11th Amendment. Hence, they are generally subject to suit for violation of federal law in both federal and state court, including suits by their employees.

Although they are subject to suit under section 1983, the statute has been interpreted to limit their liability as entities to cases where the deprivation of a federal right is the result of a policy, custom or practice of the local government entity. Monell v. New York City Dept. of Social Servs., 436 US 658 (1978).

Negligent Hiring, Supervision and Retention

2012-03-18T10:32:00.000-07:00

A recent decision from the California Supreme Court has brought attention to the legal principles that impose liability on the employer for the misconduct of its employees. In C.A. v. William S. Hart Union High School Dist., Case No. S188982 (Mar. 8, 2012), the Court ruled that a school district could be held liable in damages for sexual abuse of a student by one of its counselors, so long as the student could prove that one of the district's supervisors or administrators negligently exposed the student to a foreseeable danger of molestation by the counselor. The decision applies the principles of (1) respondeat superior, (2) course and scope of employment, and (3) duty.

Respondeat superior

Respondeat superior is a Latin phrase that literally means "let the master answer." As a legal principle, it means that the employer can be held liable for the acts and omissions of its employees. If a delivery service's driver carelessly hits another vehicle while making a delivery, the delivery service is liable for any damages caused by the collision.

Course and scope of employment

An employer is not liable for an employee's acts and omissions when the employee is not acting as an employee, but as an individual in pursuit of his or her own interests. Only when the employee is acting in the course and scope of employment is the employer liable. If the delivery service's driver hits another driver on the way to his daughter's soccer game on Saturday afternoon, the deliver service is not liable. An employee can be acting outside the course and scope of employment even while at the workplace during work hours. For example, an employee who sexually harasses another employee at work is acting for strictly personal reasons, and not in the course and scope of employment. Farmers Insurance Group v. County of Santa Clara, 11 Cal.4th 992, 906 P.2d 440, 47 Cal. Rptr.2d 478 (1995). Similarly, the counselor whose actions formed the basis for the lawsuit in the William S. Hart case was acting outside the scope of employment. John R. v. Oakland Unified School Dist., 48 Cal.3d 438, 256 Cal. Rptr. 766, 769 P.2d 948 (1989).

Duty

Liability for harm to another depends upon the existence of a legal duty to prevent that harm. If you are walking on a public thoroughfare and see a crime in progress, you do not have a duty to prevent harm to the victim. Alvarez v. Jacmar Pacific Pizza Corp., 100 Cal.App.4th 1190, 122 Cal.Rptr.2d 890 (2002). On the other hand, a property owner owes its tenants a duty to take reasonable measures to protect them from crimes that the owner should know are likely to occur. O'Hara v. Western Seven Trees Corp., 75 Cal.App.3d 798, 142 Cal.Rptr. 487 (1977). In California, courts determine the existence of a legal duty based on the following factors identified by the California Supreme Court in Rowland v. Christian, 69 Cal.2d 108, 70 Cal.Rptr. 97, 443 P.2d 561 (1968): the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, the policy of preventing future harm, the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost, and prevalence of insurance for the risk involved.

The existence of a legal duty may impose liability on an employer for damage caused by an employee even when that employee is acting outside the course and scope of employment. For example, a landlord who employed a drug-addled convicted felon as a security guard, and allowed him to carry loaded firearms during the course and scope of employment, could be held liable when the security guard shot one of the landlord's tenants. Hawkins v. Wilton, 144 Cal.App.4th 936, 51 Cal.Rptr.3d 1 (2006).

Public entities like the school district defendant in the William S. Hart case are only liable if an statute expressly imposes a duty. Cal. Gov. Code section 815. Government Code section 815.2 makes a public entity "for injury proximately caused by an act or omission of an employee of the public entity within the scope of his employment." This means that, although plaintiffs may not pursue a general negligence theory against a public entities, they may hold public entities liable for their employees' wrongs under the respondeat superior principle.

All of which brings us to the Supreme Court's William S. Hart decision. Because the sexual abuse was outside the scope of the counselor's employment, the plaintiff could not sue the school district directly for her misconduct. Although the plaintiff could not hold the school district directly liable for its own negligence, he could pursue a claim based on the district's respondeat superior liability for its the acts and omissions of its supervisors and managers related to the hiring and supervision of the counselor. The complaint alleged that there was a history of misconduct from which the district employees should have known that there was a danger to students whom she counseled.

What should employers do?

The possibility of being held liable for wrongs committed by employees even when they are not acting within the scope of employment means that employers must implement strict hiring standards. Background checks, pre-employment drug screening and rigorous scrutiny of applicants throughout the hiring process. Those who work with those who are particularly vulnerable, such as children and patients, must be particularly careful.

Employee Handbooks Take The Stress Out Of HR

2012-02-26T10:00:00.000-08:00

Although they take a little bit of work, employee handbooks can make human resources management less stressful. Consider the before and after handbook answers to the following inquiries:

1. My grandmother died last night. I have to go to the funeral tomorrow evening in Florida.
Before: Gee, that's terrible. I don't know if I can give you the time off. I'll have to get back to you.
After: I am so sorry for your loss. Under the policy in our handbook, you are entitled to two paid days off in connection with the death of an immediate family member.

2. Supervisor: Where were you last Friday (the day after Thanksgiving)? Employee: I wasn't feeling too good, so I decided not to come in. Take it out of my sick pay.
Before: Supervisor: I don't know if I should do that. Were you really sick? Employee: Yeah, I really was.
After: Supervisor: I'm sorry. Under our handbook policy, you have to provide a doctor's note for any unscheduled absence after a holiday. Employee: I don't have one. Supervisor: Then, this will have to come out of your vacation pay, or go unpaid.

Proper drafting of the handbook will provide protection for the employer in employee disputes:

The employer has the right to insist on agreement to an arbitration clause as a condition of employment.Lagatree v. Luce, Forward, Hamilton & Scripps, 74 Cal.App.4th 1105, 88 Cal.Rptr.2d 664 (1999). But, if you wish to require arbitration, you must have employees sign a page containing the arbitration clause, and include language informing them that they are giving up their right to go to court. Written acknowledgment of receipt of a handbook containing an arbitration clause is not a knowing agreement to arbitration. Nelson v. Cyprus Bagdad Copper Corp., 119 F. 3d 756 (9th Cir. 1997).
Be sure to include a statement that the employer's technology resources should be used only for company business, and that employees have no right of privacy with respect to communications through that technology. This will avoid invasion of privacy claims, and make sure that such communications may be used in any disputes with the employee. Such clauses have even been invoked to prove waiver of the attorney-client privilege for communications with an attorney from work. Holmes v. Petrovich Development Co., 191 Cal. App. 4th 1047, 119 Cal.Rptr.3d 878 (2011).
Be sure to include an effective complaint mechanism in your harassment policy. Under federal law, it is a complete defense that the employer exercised reasonable care to prevent and correct the harassment and that the employee unreasonably failed to take advantage of any preventive or corrective opportunities or otherwise failed to avoid harm. Faragher v. City of Boca Raton, 524 U.S. 775 (1998). Under California law, the avoidable consequences may limit the recoverable damages if (1) the employer took reasonable steps to prevent and correct workplace sexual harassment; (2) the employee unreasonably failed to use the preventive and corrective measures that the employer provided; and (3) reasonable use of the employer's procedures would have prevented at least some of the harm that the employee suffered. State Dept. of Health Services v. Superior Court, 31 Cal.4th 1026, 79 P.3d 556 (2003).

The few problems that some think are posed by handbooks are easily answered:

It's too much work. There is work involved, but you do not have to reinvent the wheel. An employment law firm like ours can do the hard work for you.
It will mean that we can only fire employees for good cause. But, the courts have ruled that a properly worded disclaimer will prevent such consequences. For example, in Courtney v. Canyon Television & Appliance Rental, 899 F. 2d 845 (9th Cir. 1990), the handbook stated: "As a matter of policy, Canyon is not bound by the provisions of this Handbook and may make exceptions to its administration where, at the discretion of the company, such exceptions are warranted." As a result, the employer was not required to adhere to another statement in the handbook that an employee would receive "a counseling session and ... extra training or development ... to achieve acceptable job performance" before being discharged.
We will be stuck with provisions we do not like. Employers may change their policies unilaterally, so long as they do so only after a reasonable time, and provide reasonable notice to their employees. Asmus v. Pacific Bell, 23 Cal.4th 1, 999 P.2d 71 (2000). Employees retain any vested benefits.

Vacation Pay

2012-02-20T09:04:00.000-08:00

California employment law requires special treatment of vacation pay. Although employers are not required to offer vacation pay at all, if they do, they must adhere to certain rules.

By operation of California Labor Code section 227.3, vacation pay is treated as part of an employee's wages, which vests as it is earned. Because it vests, it can never be forfeited. Use it or lose it policies are prohibited.

Because these rules only apply to vacation pay, it is important to understand what that is. The California Labor Commissioner considers any leave time that is offered without condition. Personal time off and personal and floating holidays are examples of benefits that are considered to be vacation. Thus, an employer who provides 10 days of paid vacation plus a paid personal day has actually provided 11 days of what the Labor Commissioner considers vacation. The benefit accrues at a regular rate throughout the year.

Paid leave that is tied to an objective standard is not vacation. Holiday pay is not vacation, because it is tied to the occurrence of the holidays recognized by the employer. Bereavement leave is not vacation, because it is tied to the death of a family member. Sick leave is not vacation, because it is tied to the employee becoming ill. Note, however, that an employer that lumps sick leave and vacation together as paid time off must treat all that leave time as vacation.

Although an employer may not impose it a use it or lose it policy, it may impose accrual caps. An accrual cap is a limit on the amount of paid leave that an employee may accumulate. After the limit is reached, no further paid leave accrues until some is used. But, the employer must set the accrual cap high enough so that the employee has a realistic chance of taking the entire vacation and still continuing to accrue vacation. A cap of two times the annual allotment is considered fair. Thus, if the employer offers two weeks of vacation, it should set the accrual cap at four weeks.

Employers may also control when vacation starts to accrue and when it may first be used. Thus, it is permissible to require employees to work six months before they begin to earn vacation, or to prohibit the use of earned vacation within the first six months of employment. The employer may not accelerate accrual. For example, a policy that postponed the accrual of vacation for six months could not then vest each employee who passed the six month mark with a week of paid leave.

There are two limited exceptions to California's vacation pay rules:

Employees covered by a collective bargaining agreement are limited to the vacation pay provisions in the collective bargaining agreement.
The requirements of section 227.3 are preempted by federal law if the employer offers paid leave as part of a legitimate ERISA plan. For further explanation of this exception see Czechowski v. Tandy Corp., 731 F. Supp. 406 (N.D. Cal. 1990) and Section 15 (Vacation Wages) of the DLSE Policy and Interpretations Manual.

Age Discrimination

2012-02-05T14:30:00.000-08:00

Age discrimination is like other forms of discrimination, except when it is not. The federal Age Discrimination in Employment Act (ADEA) prohibits discrimination and harassment based on age against employers who are over 40. The California Fair Employment and Housing Act (FEHA) includes age over 40 among its protected characteristics. Until 1996, the ADEA allowed discrimination against those over 70. Since then the law has protected all employees over 40. Because the protections do not apply to those under 40, employers may prefer older employees without violating the statutes.

The EEOC's charge statistics show a rise in age discrimination complaints from 16,548 in 2006 to 23,465 in 2011. As a result, the agency has focused some of its enforcement efforts on age discrimination cases. For example, in October 2011, it filed suit against the Texas Roadhouse restaurant chain, alleging that it discriminated against older workers.

Like those who sue based on other protected characteristics, age discrimination plaintiffs may prove their cases through the burden shifting approach established by the United States Supreme Court in the McDonnell Douglas case. See Reid v. Google, Inc., 50 Cal.4th 512, 235 P.3d 988 (2010); Diaz v. Eagle Produce Ltd. Partnership, 521 F.3d 1201 (9th Cir. 2008). Under that approach, the plaintiff must first establish a prima facie case by showing that he or she was (1) at least forty years old, (2) performing the job satisfactorily, (3) discharged, and (4) either replaced by a substantially younger employee with equal or inferior qualifications, or discharged under circumstances otherwise giving rise to an inference of age discrimination. However, the fact that the plaintiff was replaced by someone who was also over 40 does not defeat an age discrimination claim. O’Connor v. Consol. Coin Caterers Corp., 517 U.S. 308 (1996).

Age discrimination law differs from that applicable to other protected characteristics in the following ways:

If it costs more to provide the same benefit to employees over 40, the employer may pay the same amount for benefits for both those over 40 and those under, even if that results in workers over 40 receiving fewer benefits.
Because of the 11th Amendment, state employees may not sue for damages in age discrimination cases, but local government employees may. Kimel v. Florida Board of Regents, 528 U.S. 62 (2000).
Although the ADEA allows state and local governments to use age as a basis for hiring and retiring law enforcement officers and firefighters, the FEHA does not.Other California statutes impose a mandatory retirement age of 60 on firefighters and law enforcement officers, but allow those in Los Angeles County to continue employment past 60 with medical certification of fitness for duty.
Employers may establish compulsory retirement for a bona fide executive or high policymaker who has reached age 65 and is entitled to a pension benefit of at least $44,000.
Releases of age discrimination claims are not effective unless the employee is advised to consult an attorney, is given 21 days to consider the terms of the release, and seven days to reconsider after signing the release.

Rounding

2012-01-29T10:01:00.000-08:00

Kronos InTouch

Employers routinely round off the number of minutes worked to fit the needs of their payroll systems. Recently, class action lawyers who believe that the practice shortchanges employees have filed class actions challenging the practice. For example, a lawsuit under review in the California Court of Appeal for the Fourth District challenges the use by See's Candy of a Kronos timekeeping device that rounded to the nearest tenth of an hour. See's Candy Shops Inc. v. Superior Court, Case No. D060710 (4th Dist.). On January 18, 2012, the California Supreme Court granted review and directed the Court of Appeal to hear a challenge to a trial court ruling that rounding could violate the wage and hour laws.

Such actions would appear to face long odds, because both federal and state regulators have said that the practice is legal. Department of Labor regulation 29 C.F.R. § 785.48(b) states: "It has been found that in some industries, particularly where time clocks are used, there has been the practice for many years of recording the employees' starting time and stopping time to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour. Presumably, this arrangement averages out so that the employees are fully compensated for all the time they actually work. For enforcement purposes this practice of computing working time will be accepted, provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked."

The California Labor Commissioner’s enforcement policy follows the federal practice. See DLSE Enforcement Policies and Interpretations Manual, sections 47.1 and 47.2.

Until the question is clarified in a judicial decision, California employers should be careful to record employees work time as accurately as possible.

Whistleblower Lawsuits

2012-01-22T20:44:00.000-08:00

Last week, an employee whistle blower complaint was filed against individuals and organizations associated with the Lap-Band weight-loss device. Deuel v. 1 800 Get Thin, LLC, Case No. BC477064 (Jan. 17, 2012). A copy of the complaint is available here. This prompts a reminder that whistle blower, or retaliation, lawsuits pose difficult problems for employers.

There are two types of whistle blower lawsuits. In a qui tam action, the plaintiff seeks relief against the substantive wrongdoing on behalf of the government. The federal False Claims Act is an example. It allows a civil action by a private person on behalf of the government against a contractor who fraudulently bills the government. The successful plaintiff gets a portion of the recovery and attorney's fees. California has its own False Claims Act, which provides for similar relief. For an example of a successful such action, see "Quest Diagnostics settles Medi-Cal whistle-blower suit" in the L.A. Times.

The more common type of whistle blower lawsuit is where an employee calls attention to illegal activity, and then is subjected to adverse action by the employer. The anti-discrimination laws all contain provisions that prohibit retaliation against employees who complain about discrimination and harassment. See EEOC v. Go Daddy Software, Inc., 581 F.3d 951 (9th Cir. 2009) ($135,000 in lost earnings, $5,000 for emotional distress, and $250,000 in punitive damages for retaliation against employee who complained about discrimination); Wysinger v. Automobile Club of Southern California, 157 Cal.App.4th 413, 69 Cal.Rptr.3d 1 (2007) (jury awarded $204,000 in economic damages, $80,000 in noneconomic and $1 million in punitive damages for retaliation against employee who complained about age discrimination).

In some circumstances, employees may also pursue claims for retaliation based on other types of unlawful conduct by the employer. For example, the California Whistleblower Protection Act authorizes claims by state employees who are subjected to adverse action for complaining about waste, fraud, abuse of authority, violation of law, or threat to public health. The employee must first file an administrative charge with the designated state agency.

Labor Code section 1102.5 is the basis for an action by employees of private and public employers who can prove that their employer retaliated against them for providing information to a government or law enforcement agency, where the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation. This and other whistle blower statutes establish a public policy to protect whistle blowers, which may be invoked to support a claim for wrongful termination in violation of pubic policy. See Green v. Ralee Engineering Co., 19 Cal.4th 66, 960 P.2d 1046, 78 Cal.Rptr.2d 16 (1998).

When an employee has complained about activity that is protected by one of the statutes, the employer must be prepared to prove a legitimate reason for any adverse action that it takes against that employee. That is because a complaining employee can prove a prima facie case of retaliation by establishing the protected activity, adverse action, and that the adverse action followed closely on the protected activity. The establishment of a prima facie case puts the burden on the employer to prove that it had a legitimate reason for its actions.

Accommodating Mental Disabilities

2012-01-15T10:48:00.000-08:00

A recent case from New York provides fodder for a discussion of the scope of an employer's obligation to accommodate an employee's mental disability. A law firm fired one of its attorneys after learning that he attempted to have charges for adult movies and calls to escort services to the firm's clients. The attorney sued for discrimination and failure to accommodate his bipolar disorder. The New York Division of Human Rights awarded him $600,000, but the Appellate Division of the New York Supreme Court tossed out the award. Hazen v. Hill Betts & Nash, LLP, Case No. 104781/10 (N.Y. App. Div. Jan. 5, 2012). "[A] petitioner's disability does not shield him from the consequences of workplace misconduct."

Although the court's conclusion accurately described the circumstances of that case, employers must engage in a more nuanced analysis to avoid liability. For example, employees with mental disabilities that cause them to violate workplace attendance policies may nonetheless be entitled to an accommodation. See Humphrey
v. Memorial Hospitals Association, 239 F.3d 1128 (9th Cir. 2001) (medical transcriptionist with obsessive-compulsive order that prevented her from getting to work on time might be entitled to work from home or to unpaid time off to bring her disability under control). The EEOC has opined that a schizophrenic warehouse worker who violates a company's conduct toward others and dress policies may be entitled to a pass. See
EEOC Enforcement Guidance on the Americans with Disabilities Act and Psychiatric Disabilities, No. 30, Example C.

An employer should use the following analysis to determine its responsibilities when dealing with an employee who has violated an employer's workplace conduct standards:

Does the employer have information from which it could reasonably conclude that the employee has a disability? If an employer does not know that an employee has a disability, it cannot be accused of discrimination, and has no obligation to provide a reasonable accommodation. Further, an employer may not even inquire about a possible disability unless it has a reasonable belief, based on objective evidence, that: (1) an employee's ability to perform essential job functions will be impaired by a medical condition; or (2) an employee will pose a direct threat due to a medical condition.
Is the workplace conduct standard job-related for the position in question and consistent with business necessity? The EEOC's opinion that the warehouse worker referred to in its guidelines might be entitled to a pass on the conduct and dress policies was based on its conclusion that those policies were not job-related for a warehouse worker with no customer contact.
Is there a reasonable accommodation that would allow the employee to perform the essential functions of his or her job despite the disability? The EEOC Enforcement Guidance gives the following example: A reference librarian frequently loses her temper at work, disrupting the library atmosphere by shouting at patrons and coworkers. After receiving a suspension as the second step in uniform, progressive discipline, she discloses her disability, states that it causes her behavior, and requests a leave of absence for treatment. The employer may discipline her because she violated a conduct standard -- a rule prohibiting disruptive behavior towards patrons and coworkers -- that is job-related for the position in question and consistent with business necessity. The employer, however, must grant her request for a leave of absence as a reasonable accommodation, barring undue hardship, to enable her to meet this conduct standard in the future. See No. 31, Example A.

Earlier posts on the disability laws appeared on 7/10/2011, 6/12/2011, 1/14/2009, 9/14/2008, and 7/20/2008.

Insurance Agent Is An Independent Contractor, Not An Employee

2012-01-08T10:00:00.000-08:00

The enactment by the California legislature of new penalties for willful misclassification of independent contractors should have employers paying close attention to the applicable standards. (See Labor Code section 226.8.) A recent decision from the First District Court of Appeal in San Francisco is instructive. Arnold v. Mutual of Omaha Ins. Co., Case No. A131440 (Dec. 30, 2011).

Kimbly Arnold was licensed by the Department of Insurance as an independent agent or broker. When she was appointed by Mutual of Omaha as a nonexclusive agent, she was under appointment with another insurance company to offer its products. Her contract with Mutual of Omaha stated that she was an independent contractor, and made her responsible for maintaining any required license. The evidence submitted in support of Mutual's summary judgment motion showed that she had no supervision, did not receive a performance evaluation. Training was available, but attendance was not required. Mutual's insurance agents were responsible for their own expenses, including business cards, vehicles and office equipment. If they elected to use Mutual's office, they had to pay monthly fees to cover the expenses.

Arnold brought a class action on behalf of all Mutual's licensed agent's, claiming that they were employees and should have been reimbursed for expenses under Labor Code section 2802, and were not paid the wages they were owed timely upon termination of employment, as required by Labor Code section 201 and 202. The Court of Appeal affirmed the grant of summary judgment for Mutual, because Arnold was not an employee entitled to the protections of those sections.

The Court of Appeal rejected Arnold's argument that she met the "definition" of employee in Labor Code section 2750, which provides "The contract of employment is a contract by which one, who is called the employer, engages another, who is called the employee, to do something for the benefit of the employer or a third person." Section 2750 is not a definition of "employee," but a definition of "contract of employment."

Because it found no statutory definition, the court turned to the common law principles articulated by the California Supreme Court in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989). That decision identified the "principal" factor of the test to be whether the person receiving the services has the right to control the manner and means of accomplishing the result. It identified the following additional factors: whether the principal has the right to discharge at will, without cause; whether the one
performing services is engaged in a distinct occupation or business; the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; the skill required in the particular occupation; whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; the length of time for which
the services are to be performed; the method of payment, whether by the time or by the job; whether or not the work is a part of the regular business of the principal; and, whether or not the parties believe they are creating the relationship of employer-employee.

In this case, all the factors pointed to an independent contractor arrangement.

For a post about another case in which the employer did not fare so well, see $14.4 Million To FedEx Drivers Misclassified As Independent Contractors.

California Supreme Court Punts On Clarifying Exemption Rules

2012-01-01T11:13:00.000-08:00

California Supreme Court

The California Supreme Court has passed on an opportunity to provide California employers with clear guidelines for applying the exemptions from the state's wage and hour rules. In Harris v. Superior Court, Case No. S156555 (Dec. 29, 2011), the Court chastised the Court of Appeal for applying an "administrative/production worker dichotomy" as a dispositive test for the administrative exemption, but declined to provide any usable tests of its own.

The case was a class action on behalf of claims adjusters for Liberty Mutual and Golden Eagle. Guided by two decisions in another claims adjuster class action against Farmers Insurance (Bell II and Bell III), the Court of Appeal ordered the employers' exemption defense stricken. For the Court of Appeal, the dispositive question was whether the claims adjusters were administrative workers or production workers. Although there was evidence that the adjusters' work in Harris was not routine and unimportant, they fell on the production side because their work -- investigating claims, determining coverage and setting reserves -- was not carried on at the level of policy or general operations.

The Supreme Court ruled that the lower court should have paid closer attention to changes in wage and hour law after the Bell litigation had gotten under way. In 1999, the California Legislature amended the Labor Code to reinstitute daily overtime, and directed the Industrial Welfare Commission to review the duties that met the test of the administrative, executive and professional exemptions. In 2001, the IWC adopted new wage orders that provided a more detailed explanation of what constituted administrative work than the previous wage orders. The wage orders are available at the IWC's website. The new wage orders stated that the activities constituting exempt work "shall be construed in the same manner as such terms are construed in the following regulations under the Fair Labor Standards Act effect as of the date of this order: 29 C.F.R. Sections 541.201-205, 541.207-208, 541.210 and 541.215."

The text of the new wage orders combined with the language of the cited federal regulations led the Supreme Court to conclude that there are two components to the part of the definition requiring that administrative work be directly related to management policies or general business operations. The work must be qualitatively administrative, and quantitatively of substantial importance to the management or operations of the business. Administrative work includes work done by white collar employees engaged in servicing a business, which may include advising management, planning, negotiating and representing the company. In light of those principles, it was inappropriate to adopt the administrative/production dichotomy as a dispositive test.

In the end, the Court declined to adopt any bright line rules. "The essence of our holding is that, in resolving whether work qualifies as administrative, courts must consider the particular facts before them and apply the language of the statutes and wage orders at issue." It also declined to rule whether the claims adjusters in the case before it were exempt. "We express no opinion on the strength of the parties' relative positions. We merely hold that the Court of Appeal majority erred in its analysis."

Reporting Time Pay and Split Shifts

2011-12-25T09:05:00.000-08:00

A recent decision from the Second District Court of Appeal in Los Angeles discusses two requirements found in the the California wage orders -- minimum pay for those who show up to work but are sent home early, and extra pay for those who work a split shift. Aleman v. Airtouch Cellular, Case No. B231142 (Dec. 21, 2011).

The reporting time pay provision of the wage orders states: "(A) Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee’s regular rate of pay, which shall not be less than the minimum wage. (B) If an employee is required to report for work a second time in any one workday and is furnished less than two (2) hours of work on the second reporting, said employee shall be paid for two (2) hours at the employee’s regular rate of pay, which shall not be less than the minimum wage. (C) The foregoing reporting time pay provisions are not applicable when: (1) Operations cannot commence or continue due to threats to employees or property; or when recommended by civil authorities; or (2) Public utilities fail to supply electricity, water, or gas, or there is a failure in the public utilities, or sewer system; or (3) The interruption of work is caused by an Act of God or other cause not within the employer’s control. (D) This section shall not apply to an employee on paid standby status who is called to perform assigned work at a time other than the employee’s scheduled reporting time." 2001 Wage Order, Section 7.

One of the plaintiffs in Aleman sought reporting time pay when he was required to attend regularly scheduled weekend "store meetings" once or twice a month, each of which lasted less than two hours. The Court of Appeal ruled that he was not entitled to two hours' of pay because the meetings were "scheduled." and he worked more than half the scheduled time. "There is only one reasonable interpretation of subdivision 5(A) as it pertains to scheduled work—when an employee is scheduled to work, the minimum two-hour pay requirement applies only if the employee is furnished work for less than half the scheduled time." It distinguished an earlier case where an employee was called into work for a talk that lasted 45 seconds, and then fired. Price v. Starbucks Corp., 192 Cal.App.4th 1136 (2011). Because that talk was not "scheduled," the employee was entitled to two hours of pay.

The wage orders define split shift as "a work schedule, which is interrupted by non-paid non-working periods established by the employer, other than bona fide rest or meal periods." 2001 Wage Order, Section 2(Q). Under Section 4(C), "[w]hen an employee works a split shift, one (1) hour’s pay at the minimum wage shall be paid in addition to the minimum wage for that workday, except when the employee resides at the place of employment." The Court of Appeal ruled that an employee was only entitled to a split shift premium of the total compensation for the work periods plus an hour was less than the minimum wage. A federal district court had earlier come to the same conclusion. Galvez v. Federal Express, Inc. (N.D. Cal. Apr. 28, 2011).

Religious Institutions and Anti-Discrimination Laws

2011-12-18T10:00:00.000-08:00

A recent decision from the Santa Ana division of the Fourth District Court of Appeal prompts a look at how the anti-discrimination laws apply to religious institutions. In Henry v. Red Hill Evangelical Lutheran Church of Tustin, No. G044556 (Dec. 9, 2011), the Court of Appeal affirmed the dismissal of a discrimination claim by a teacher at a church school who had been fired for living with her boyfriend and raising their child together without being married.The application of federal anti-discrimination laws to religious institutions is before the United States Supreme Court in Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, No. 10-553.

The applicable state law is the California Fair Employment and Housing Act. The applicable federal laws are Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act. They deal with the issue in different ways.

The FEHA by its express terms does not apply to religious organizations at all. Under California Government Code section 12926(d), "'Employer' does not include a religious association or corporation not organized for private profit." Section 12926.2 contains exceptions to the exclusion for those employed in religious health care facilities that do not limit their care to those of a particular religion (but not including those in executive or pastoral care positions) and those employed by a nonprofit public benefit corporations affiliated with a particular religion that operates an educational institution as its sole or primary activity. Otherwise, a church or other religious institution cannot be held liable under the FEHA no matter what the employee's duties or what the basis for alleged discrimination. See, for example, Kelly v. Methodist Hospital of Southern California, 22 Cal.4th 1108, 997 P.2d 1169, 95 Cal.Rptr.2d 514 (2000) (age discrimination).

In contrast, the federal statutes allow religious organizations to give employment preference to members of their own religion, but otherwise prohibit employment discrimination. Thus, a Roman Catholic school may limit its hiring those of the Roman Catholic faith, but may not refuse to hire a Roman Catholic because of race, national origin, sex, or disability. The federal Courts of Appeals have also recognized a ministerial exception to application of the anti-discrimination laws based on the First Amendment. The EEOC has explained both principles in Questions and Answers: Religious Discrimination in the Workplace. In the Hosanna-Tabor Evangelical Lutheran Church and School case, the Supreme Court recognized the ministerial exception and applied it to bar a claim under the Americans with Disabilities Act.

Public Entities and Implied Employment Contracts

2011-12-11T10:00:00.000-08:00

The California Supreme Court recently provided an answer to the Ninth Circuit that may affect litigation between local governments and their employees. On the appeal from dismissal of a claim against Orange County for changing retired employee health benefits, the Ninth Circuit wanted to know whether a county could form an implied contract. In Retired Employees Association of Orange County, Inc. v. County of Orange, No. S184059 (Nov. 21, 2011), the Supreme Court concluded that it could so long as there was no legislative prohibition against such an arrangement.

From 1985 until 2007, the County of Orange combined active and retired employees into a single unified pool for purposes of calculating health insurance premiums. If there had been separate pools, the premiums for active employees would have been lower than those for retired. The County paid a large portion of the premiums for active employees, but retired employees paid the majority of their own premiums. To save money, the county passed an ordinance in 2007 that split the groups into separate pools. That resulted in the retired employees' having to pay higher premiums. The retired employees' retirement association sued, claiming that the long-standing practice of combining retired and active employees into a single pool had created an implied contractual right to continuation of the single unified pool.

A long line of cases have established that public employment is not held by contract, but by statute. See Miller v. State of California, 18 Cal.3d 808, 557 P.2d 970, 135 Cal.Rptr. 386 (1977); Jenkins v. County of Riverside, 138 Cal.App.4th 593, 41 Cal.Rptr.3d 686 (2006). That principle has been invoked in a wide variety of circumstances to bar claims by public employees who sought to enforce rights that were not found in the express language of a statute. See, e.g., Shoemaker v. Myers, 52 Cal.3d 1, 801 P.2d 1054, 276 Cal. Rptr. 303 (1990) (public employee has no claim for breach of an implied covenant of good faith and fair dealing).

Here, the Supreme Court pointed to another line of cases, which hold that, where a public entity has authority to enter into a contract, normal contract rules apply, unless a statute provides otherwise. M.F. Kemper Const. Co. v. City of Los Angeles, 37 Cal.2d 696 (1951). In the public employment context, the Supreme Court had previously acknowledged that public entities may be bound by implied contracts in the absence of a statutory prohibition. Youngman v. Nevada Irrigation Dist., 70 Cal.2d 240 (1969). In addition, the Meyers-Milias-Brown Act (Cal. Gov. Code sections 3500-3511) authorizes agreements with public employee bargaining representatives through the memorandum of understanding process.

The Retired Employees Association based its claim on the history of provisions in the memorandums of understanding between the county and the employees' organizations. Because there is no statute that would prohibit implied contractual obligations, the association had a legal basis on which to pursue the claim. The Supreme Court did not opine on whether the facts made out a claim, but just answered the question of law posed by the Ninth Circuit.

If the application of the case is restricted to memorandums of understanding, it will not have a significant effect on public employee lawsuits. But, the court said that implied obligations may be created out of an ordinance or resolution in appropriate circumstances, and did not limit its statement to the adoption of a memorandum of understanding.

The Customer Is Not Always Right

2011-11-13T09:06:00.001-08:00

Businesses succeed by satisfying their customers. In a phrase coined by either Marshall Field or Harry Gordon Selfridge: "The customer is always right." But, where a customer's wishes collide with an employee's legal rights, the employer may have to ignore the customer's wishes.

A 2010 case from the United States Court of Appeals for the Seventh Circuit illustrates the dangers of acceding to customer preferences. In Chaney v. Plainfield Healthcare Center, 612 F.3d 908 (7th Cir. 2010), a white patient said that he only wanted to receive care from white health care providers. The facility complied by issuing written instructions that no Black providers were to enter the patient's room. That was consistent with its policy of honoring patients' racial preferences. The Court of Appeals found that the policy contributed to an unlawful hostile environment. The EEOC Compliance Manual similarly states that "customer preference is not a defense to race discrimination."

The Cheney court distinguished cases that had recognized gender as a bona fide occupational qualification in the health care and prison fields, where the customers had privacy concerns. See Jennings v. New York State Office of Mental Health, 786 F. Supp. 376 (S.D.N.Y. 1992). A recent case from the Southern District of New York acknowledged the need to accommodate privacy concerns, but ruled that there were means for accommodating that interest other than a flat ban on appointing female correctional officers to a particular position. See White v. Department of Correctional Services, Case No. 08-0993 (S.D.N.Y. Sep. 30, 2011).

A 2002 California Court of Appeal case recognized another limited exception to the usual rule. In West v. Bechtel Corp., 96 Cal.App.4th 966, 117 Cal.Rptr.2d 647 (2002), the court reversed a $100,000 judgment based on age discrimination allegations. The Saudi Arabian government entity that Bechtel had a contract with vetoed the hiring of a 62-year old employee for a key position because of his age. Because there was no evidence that the decision-maker at Bechtel had a discriminatory motive, the employee had no case. Bechtel had made a neutral business decision based on the direction of the Saudi government entity.

Although there are limited circumstances where an employer' accession to customer preference may be a defense to a discrimination claim, those are exceptions to the firmly established rule to the contrary.

In addition, failure to take corrective action when informed of a customer's harassing behavior may expose the employer to hostile environment liability. In Salazar v. Diversified Paratransit, Inc.,117 Cal.App.4th 318, 11 Cal.Rptr.3d 630 (2004), the court ruled that a female driver had a viable hostile environment claim if her employer had failed to take action after she reported that a client had harassed her.

Does It Matter Whether Your Employees Are At-Will?

2011-11-06T10:00:00.000-08:00

Some private employers worry whether they have done enough to preserve their at-will employment relationship with their employees. Others make risky decisions based on the unjustified belief that the at-will employment doctrine will protect them from liability. (Public employers do not face these issues, because their employees enjoy statutory and constitutional rights to their jobs. In unionized workplaces, collective bargaining contracts typically require just cause for discharge of union workers.)

In California, employment is presumed to be at-will, under Labor Code section 2922. That means that the employment relationship may be terminated at any time by either the employer or the employee. Even if the employer does not expressly agree to some other relationship, it may create an implied agreement not to discharge excerpt for good cause based on its actions, as explained in Foley v. Interactive Data Corp., 765 P. 2d 373 (1988).

In the absence of an express or implied agreement not to discharge except for good cause, the employer may discharge for any reason or for no reason, so long as it is not an illegal reason. That is a substantial limitation on the employer's discretion to end the employment relationship, because of the great number of illegal reasons under federal and California law. You cannot fire someone because of a protected characteristic, such as race, sex, disability, ethnicity, national origin, religious belief, age, or sexual orientation. You cannot fire someone in retaliation for complaining unlawful discrimination or harassment. You cannot fire someone in violation of public policy, such as whistle-blowing. And so on.

The way that the burdens of proof are allocated in employment lawsuit further diminishes the value of the at-will doctrine. Under the McDonnell-Douglas burden-shifting rule, the plaintiff bears the minimal burden of showing that he or she has a protected status (such as race, having complained about discrimination, or whistle-blowing), was subjected to adverse employment action, and some other minimal evidence that the protected status has a causal connection with the adverse action. For example, in a retaliation case, it is enough for the plaintiff to show that he or she complained and was fired, and that the firing came closely on the heels of the complaint. See Arteaga v. Brink's, Inc., 163 Cal. App. 4th 327 (2008). Once the plaintiff satisfies that minimal burden, the burden shifts to the employer to provide a legitimate reason for its action.

Because it is so easy for employees to challenge discharges in court, it is not safe to rely on the at-will doctrine to avoid liability in a lawsuit. Employers must make sure that there is a documented, legitimate basis for every discharge decision.