Doing Business in 2020: Courts Tackle Employment Law
Part 2: New Employment-Related Court Decisions Impacting California’s Public and Private Entities
California and federal courts handed down a number of labor and employment-related decisions last year, impacting compensation, medical leave, harassment, discrimination and more.
In Part 2 of this annual series, Best Best & Krieger LLP explores the most impactful court decisions from last year that will affect how employers do business in 2020 and beyond.
Wage & Hour
On-Call Employees Entitled to Reporting Time Pay
In a jolt for employers with on-call employment systems, the Second District Court of Appeal determined “reporting for work” means presenting oneself as ordered — whether by appearing at a job site, logging on to a computer remotely or phoning in before the start of a shift.
At issue in Ward v. Tilly’s, Inc., was the clothing retailer’s advance call-in requirement, which meant sales employees had to call in 2 hours before the start of an on-call shift to learn if they would work. The court held that this triggered the reporting time pay provisions that IWC Order 7-2001, also known as Wage Order 7, lays out. The Order requires mercantile companies to pay non-exempt employees reporting time pay for each workday the employee is required to:
- report to work,
- reports and isn’t put to work or
- is paid less than half of their normal or scheduled day’s work.
The court held that requiring reporting time pay for on-call shifts in this instance was consistent with the Order’s goal of compensating burdened employees and encouraging employers to give employees proper notice and advanced scheduling of work shifts.
Calif. Supreme Court Limits Recovery in PAGA-Only Claims
In ZB, N.A. v. Superior Court, the plaintiff sued her former employer alleging failure to pay overtime and minimum wages or reimburse business expenses, among other claims. The lawsuit contained a single cause of action under the Private Attorneys General Act for an alleged Labor Code section 558 violation giving the Labor Commissioner authority to issue overtime violation citations for a civil penalty.
PAGA enables California employees to bring suit in court on behalf of themselves and other aggrieved employees to recover civil penalties previously recoverable only by the Labor Commissioner. The decision to assert only one cause mimics a growing tactic employed by plaintiffs to avoid compelled arbitration following the U.S. Supreme Court’s 2018 Epic Systems Corp. v. Lewis decision.
The lower court ordered the parties to arbitrate the claim as a class action for the unpaid wages of all aggrieved employees. The California Supreme Court disagreed, holding the amount referenced in section 558 for unpaid wages was not a civil penalty recoverable through a PAGA action but rather functions as compensatory relief for employees in addition to civil penalties. As such, the plaintiff was not entitled to pursue a claim for underpaid wages on behalf of other employees under section 558.
McDonald’s Not a Joint Employer of Franchisee Workers
Workers at various McDonald’s franchises filed suit against their franchise owners and McDonald’s claiming both were liable as joint employers for alleged meal, rest break and overtime violations under the state’s Labor Code and IWC wage orders. In Salazar v. McDonald’s Corp, the U.S. Ninth Circuit Court of Appeals rejected the plaintiff’s argument, holding McDonald’s was not a joint employer because it did not have direct, or indirect, control over the plaintiffs’ hiring, firing, wages, hours and working conditions.
McDonald’s involvement with franchisee workers, the court held, was simply incidental to maintain its brand standards. The burger giant was therefore not responsible for preventing IWC wage order violations by the franchisees. This case, however, is still subject to appeal and further clarification is needed.
Varying standards nationwide for joint employer liability are a cause of confusion. Without a standard for claims affecting franchisors and franchisees, this ruling should be narrowly interpreted. Still, franchisors should ensure franchisees are in charge of hiring, firing, discipline, wages, hours and scheduling. Learn more in the BB&K Legal Alert “Super-Sized” Win Delivered to California Franchisors.
Harassment, Retaliation & Discrimination
Employment Relationship Could be Established with a Temporary Staff Employee
The plaintiff in Jimenez v. U.S. Continental Marketing, Inc. was placed with U.S. Continental Marketing, Inc., a manufacturing company that relies on temporary employees for much of its workforce and contracts for employees’ services with Ameritemps. While the plaintiff was supervised by a USCM employee, Ameritemps paid her salary and benefits and also tracked her time by using a clock it provided.
USCM’s handbook, however, applied to temporary and direct employees, who interchangeably trained one another, and the company maintained the ability to terminate services of its temporary employees. The day-to-day work experience for temporary and direct employees at USCM was virtually identical.
While working for USCM, USCM investigated the plaintiff for bullying complaints made against her and issued a warning. During the investigation, the plaintiff raised allegations of harassment against a co-worker to USCM and Ameritemps. An investigation concluded the plaintiff’s allegations could not be corroborated. The plaintiff’s services were terminated by USCM and Ameritemps later terminated her employment.
She followed with a lawsuit against USCM and her co-worker alleging various Fair Employment and Housing Act claims. At trial, the jury returned a verdict finding that Jimenez was not an employee of USCM. The Second District Court of Appeal held that a contracting employer's status as employer must be considered individually, and not in relation to that of the direct employer. While FEHA requires a claimant to demonstrate — as a threshold matter — an employment relationship with an alleged employer, the relationship need not be direct.
Rather, the employment relationship must show the employer’s exercise of direction and control over the employee. Although USCM did not hire the plaintiff, pay her, provide her benefits or track her time, it did exercise considerable direction and control of the terms, conditions and privileges of her employment.
“Comparator” Evidence Admissible in Retaliation Case
The plaintiff in Gupta v. Trustees of the California State University is a tenure-track assistant professor in San Francisco State University’s School of Social Work, who, along with other women of color, discussed abuse of power and hostile work environment concerns with the school’s dean.
Soon after, the plaintiff received a review critical of her performance in all areas used to evaluate tenure. She then sent emails to a colleague stating her workplace was hostile toward women of color and was confronted by the dean at a staff meeting. While she was later denied tenure, SFSU granted tenure to another professor in the School of Social Work who had lower teaching effectiveness evaluation scores than the plaintiff and hadn’t met the minimum publication requirements. The plaintiff was later terminated and filed suit claiming she was discriminated and retaliated against. The trial court agreed.
The Court of Appeal affirmed, rejecting SFSU’s argument that the trial court erred in allowing the plaintiff to present “comparator professors” evidence without establishing her qualifications were “clearly superior.” The appellate court noted that, for the evidence to be admissible, all that is required is for the more favorably treated comparator to be “similarly situated” to the plaintiff “in all relevant respects.”
Control Test Determines Joint Employers Status for Title VII Liability
In EEOC v. Global Horizons, two agricultural growers retained a labor contractor to hire temporary workers for their orchards. The labor contractor recruited workers from Thailand and brought them to the United States under the H-2A guest worker program.
Two workers later filed Equal Employment Opportunity Commission charges against the growers and labor contractor alleging poor and unsafe working conditions based on their race and national origin.
After an investigation, the EEOC brought this action under Title VII of the Civil Rights Act of 1964.
The district court entered a default judgment against the labor contractor after it became insolvent and discontinued its defense — leaving the case focused solely on the growers’ liability. The court granted the growers’ motion to dismiss, drawing a distinction between orchard-related matters (managing and supervising workers) and non-orchard-related matters (housing, transporting and paying workers).
The Ninth Circuit reversed, holding the EEOC plausibly alleged the growers’ liability as a joint employer for the discriminatory conduct of the labor contractor. The panel applied the common law test and concluded the growers’ employment relationship with the workers included non-orchard matters.
Frivolous, Unreasonable, Groundless Suits Deem Section 998 Non-Applicable
The defendant in Huerta v. Kava Holdings, Inc. terminated two restaurant servers after they were involved in an altercation during work. One of the fired employees later sued.
While most of the plaintiff’s claims were dismissed before or during trial, the court granted the defendant’s motion for nonsuit as to the plaintiff’s claim for retaliation under the FEHA. The court allowed the jury to decide the plaintiff’s FEHA causes of action for harassment based on a hostile work environment, discrimination and failure to prevent harassment and/or discrimination.
The jury returned a verdict for the defendant, and the trial court found that the plaintiff’s action was not frivolous and denied the defendant’s motion for attorney fees, expert fees and costs. However, based on the plaintiff’s rejection of the defendant’s pretrial Code of Civil Procedure section 998 settlement offer, the court awarded the defendant $50,000 in costs and expert witness fees under the statute.
The plaintiff appealed. The appellate court reversed, noting, effective Jan. 1, 2019, section 998 has no application to costs and attorney and expert witness fees in a FEHA action unless the lawsuit is found to be “frivolous, unreasonable or groundless” or the plaintiff continued to litigate after it clearly became so.
Discrimination, Harassment Claims Against Employer Move Forward Based on Supervisor’s Conduct
Following her resignation, the plaintiff in Ortiz v. Dameron Hospital Association sued her former employer and supervisor for harassment and national origin and age discrimination. The trial court granted the employer and supervisor’s motions for summary judgment on the grounds the defendant couldn’t make a prima facie showing of discrimination because she cannot show she suffered an adverse employment action.
The Second District Court of Appeal reversed, finding there were triable issues of material fact as to her discrimination and retaliation causes of action.
The court held that, despite the plaintiff’s resignation, she presented evidence that her supervisor intentionally created, or knowingly permitted, working conditions that were so intolerable or aggravated at the time of her resignation that she was effectively forced to resign. The plaintiff was not required to show that the hospital knew of the supervisor’s conduct to establish constructive termination.
Further, the court found the supervisor acted with a discriminatory motive, as evidence showed the supervisor focused her repeated criticisms of both the plaintiff’s (and her colleagues’) age, accents and supposed poor English-language skills. Since she was a supervisory employee, it was sufficient for the plaintiff to show the supervisor held a discriminatory motive for the action to proceed against the hospital.
As to harassment, the court found the plaintiff submitted sufficient evidence of the supervisor’s constant criticism of the plaintiff and colleagues, assuming they could not speak English and that they didn’t know what they were doing. The plaintiff also provided evidence that her supervisor transferred her to a unit where she had little or no experience and withheld training knowing that she would fail.
Disability Discrimination and Medical Leaves
Mistaken Application of Valid Employer Policy Could Lead to Disability Discrimination Liability
The Second District Court of Appeal found that there was direct evidence of disability discrimination in Glynn v. Superior Court when an employer, through a temporary benefits staffer, had terminated an employee because the staffer mistakenly believed that the plaintiff was totally disabled and unable to work with or without accommodation.
The plaintiff tried to correct the misunderstandings without success and sued. The court concluded the employee had sufficiently communicated to his employer that he believed the way he was treated (i.e. ignored and not accommodated for his alleged disability) was discriminatory and that the employer could not state a legitimate nondiscriminatory reason for the plaintiff's termination.
Ninth Circuit Doesn’t Determine if Obesity is Protected Under the ADA
In Valtierra v. Medtronic Inc., a terminated employee claimed that his obesity was a disability under the Americans with Disabilities Act and that his termination was illegal discrimination. The plaintiff had taken time off for joint pain caused by his weight but returned to work without any medical restrictions. He was later terminated for falsifying records stating he completed work he had not.
The trial court found that the employee could not prove his obesity was caused by an underlying medical condition and therefore was not a protected disability. The Ninth Circuit affirmed.
While the Ninth Circuit did not decide whether obesity is or is not a protected disability under the ADA, it determined that, even if the employee was disabled, he could not establish ADA disability discrimination because he could not prove a causal relationship between his obesity and his termination. Because the employee admitted he marked assignments as completed when he had not done the work, and because he had been severely overweight throughout his employment, there was no basis to conclude that the company terminated him for any reason other than falsifying records.
In a similar case, Shell v. Burlington Northern Santa Fe Railway Company, the Seventh Circuit Court of Appeals found that an obese job applicant could not prove a case of ADA discrimination based on the potential employer’s concerns over his possible future health conditions related to the applicant’s obesity (based on BMI) when the applicant was presently healthy with only a potential to become disabled.
It should be noted that under California law, the decisions could have a different outcome because obesity may be a disability if there is a physiological cause or if an employer regards the obesity as a disability.
Reasonable Accommodations Not Required After Employee is Release to Full Duty
An employer is not obligated to provide reasonable accommodation or engage in the interactive process once an employee is released to full duty, the Ninth Circuit held in Garcia v. Salvation Army.
The plaintiff, a social services coordinator for the Salvation Army, an evangelical ministry, decided to “leave the church” and stopped attending religious services. She did, however, continue to work for the Salvation Army, but her relationship with her supervisor began to deteriorate. The situation worsened when a customer lodged a complaint against the plaintiff. The plaintiff then took a lengthy leave of absence.
After she exhausted her leave under the federal Family Medical Leave Act and California Family Rights Act, her employer extended her leave as an accommodation under the ADA. Following a doctor’s release to return to full duty, the plaintiff failed to return to work. Her employment was terminated, and she sued.
The Ninth Circuit upheld summary judgment for the Salvation Army. The court found that once Garcia was found capable of returning to full duty, the Salvation Army was no longer obligated to provide an accommodation or engage in the interactive process.
Employee Can Require Accommodation Even Without a Medical Diagnosis
In 2013, the plaintiff in Ross v. County of Riverside, a deputy district attorney for the County of Riverside, informed his supervisor that he might be “seriously ill with a neurodegenerative disease.”
The plaintiff took time off for testing at an out-of-state clinic and requested accommodations, including a reduced caseload and transfer to a different unit. The County placed him on leave and requested a fitness for duty examination as well as medical documentation of his condition as part of the interactive process.
When the plaintiff did not produce the requested information, the County ordered him to return to work. The employee refused, claiming constructive termination. He then sued for disability-related theories.
The trial court granted summary judgment for the employer, however the Fourth District Court of Appeal reversed.
The appellate court held that the plaintiff had provided sufficient evidence to show the County was aware of his potentially disabling condition, and a question of fact existed as to whether the employee had, or was perceived to have, a qualifying disability.
Also in this Series:
If you have any questions about these new laws or how they may impact your agency, please contact the authors of this Legal Alert listed to the right in the Labor & Employment practice group, or your BB&K attorney.
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