California Employment Law Update : Labor and Employment Lawyers & Attorneys : Proskauer Rose Law Firm : Wage & Hour Laws, Disability, Workplace Safety

Ali v. L.A. Focus Publication, 112 Cal. App. 4th 1477 (2003)

Najee Ali, who worked as the community affairs columnist for L.A. Focus Publication, was terminated after he expressed support while a guest on a local radio program for Antonio Villaraigosa, a candidate for mayor of Los Angeles, and criticized United States Representative Maxine Waters for supporting another candidate, James Hahn, in the upcoming election. Ali alleged that Waters was upset by Ali's public criticism of her on the radio and that Waters prevailed upon Jheryl Busby, a part owner of L.A. Focus, to terminate Ali. In response to Ali's claim of wrongful termination in violation of public policy, L.A. Focus successfully moved for summary judgment on the ground that Ali was a freelance/independent contractor without standing to assert employment-related claims. The Court of Appeal reversed the summary judgment, holding that there were triable issues of material fact as to whether the articles Ali submitted to L.A. Focus were written under the direction and control of the publication, whether he was provided the instrumentalities of doing the work and whether he was required to attend regular staff meetings. Additionally, the Court held that L.A. Focus did not have the right to terminate Ali for contravening the publication's editorial policy since Labor Code § 1101 prohibits employers from terminating an employee for engaging in political activity. Finally, the Court affirmed summary adjudication of Ali's claims for breach of contract and breach of the implied covenant of good faith and fair dealing since Ali himself conceded that his employment relationship with L.A. Focus was terminable at will.
 

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Liu v. Amway Corp., 347 F.3d 1125 (9th Cir. 2003)

Xin Liu lost her job as a scientist in the Concentrate Development Department of the Nutrilite Division of Amway approximately 18 months after she was hired. Liu, who was on a leave of absence following her pregnancy, was informed that her position had been eliminated during a downsizing that followed a merger of her department and another. The Ninth Circuit held that the district court had erroneously granted summary judgment to Amway on Liu's claims of violation of the Family Medical Leave Act (FMLA), the California Family Rights Act (CFRA) and public policy. However, the Court affirmed summary judgment in Amway's favor with respect to Liu's claims for breach of contract and breach of the implied covenant of good faith and fair dealing on the ground that she was a short-term employee whose employment was explicitly defined in writing as having been terminable at will. Additionally, the Ninth Circuit held that in any event there was good cause to terminate her employment since there was "no evidence in the record to suggest that Amway's reduction in force was invalid."
 

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Wal-Mart Stores, Inc. v. WCAB, 112 Cal. App. 4th 1435 (2003)

Velta Elaine Garcia suffered an orthopedic injury to her back while employed by Wal-Mart. At the time of the injury, Garcia had worked at Wal-Mart for fewer than six months. Four years after the incident, Garcia amended her workers' compensation claim to assert that she had suffered damage to her psyche resulting from the disability caused by the orthopedic injury. The workers' compensation judge ruled that Garcia was not entitled to benefits for the alleged psychiatric injury because she had not been employed for at least six months at the time of the underlying physical injury as required by Labor Code § 3208.3(d). The Workers' Compensation Appeals Board (WCAB) reversed that decision, and the Court of Appeal annulled the WCAB's decision. Among other things, the Court of Appeal held that Garcia was not "employed" for more than six months as required by the statute since she had not actually performed services for Wal-Mart for at least that period of time - though more than six months had passed from the time she was hired until she was provided a workers' compensation form.
 

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Taylor v. Lockheed Martin Corp., 113 Cal. App. 4th 380 (2003)

Charles Taylor filed suit against Lockheed Martin Corporation alleging, among other things, wrongful termination in violation of Labor Code §§ 1102.5 and 6310 (prohibiting retaliation against an employee who has complained about unsafe working conditions in the workplace). Taylor, a member of the International Association of Machinists, also filed a grievance with the union. After an arbitrator ruled that Taylor had been terminated for just cause, Lockheed successfully moved for summary judgment of Taylor's civil claim based on the doctrine of collateral estoppel. The Court of Appeal reversed the judgment, holding that since Lockheed had failed to submit the collective bargaining agreement (CBA) as part of its motion for summary judgment, there was no evidence before the Court that the CBA contained a clear and unmistakable waiver of a union member's individual right to sue for retaliatory discharge under Labor Code § 6310.
 

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 Murphy v. Schneider Nat'l, Inc., 349 F.3d 1224 (9th Cir. 2003)

Charles E. Murphy was injured on premises owned by Trane Company while he was working as a long-haul trucker for Schneider National, Inc. Murphy filed a personal injury action against Schneider (which had failed to maintain a workers' compensation policy) and Trane in the United States District Court for the District of Oregon based on diversity of citizenship. Invoking a forumselection clause that was contained in the 31-page employment contract between Schneider and Murphy, Schneider moved to dismiss the action based on improper venue; Trane moved to dismiss the action based on the doctrine of forum non conveniens. In opposition to Schneider's motion, Murphy presented evidence that because of his financial and physical limitations, enforcement of the forum-selection clause would deprive him of his day in court. The district court granted both defendants' motions. The Ninth Circuit vacated the judgment in part, holding that the district court had abused its discretion by failing to accept the non-moving party's (Murphy's) allegations as true and failing to resolve all disputed facts in his favor. The Court further held that the district court should, if in its discretion it deemed it necessary, conduct an evidentiary hearing to determine the facts in dispute.
 

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2,022 Ranch, LLC v. Superior Court, 113 Cal. App. 4th 1377 (2003)

A purchaser of land (2,022 Ranch, LLC) sued its title insurer (Chicago Title) for breach of contract and bad faith. During the course of the litigation, 2,022 Ranch sought documents from Chicago Title's claims file and also to depose claims handlers and their supervisors concerning Chicago Title's handling of and refusal to pay 2,022 Ranch's claim. Chicago Title asserted the attorney-client privilege and attorney work product on the ground that some of the information sought would reveal confidential communications between its in-house claims adjusters (who were also attorneys) and Chicago Title concerning 2,022 Ranch's claim. The trial court adopted the discovery referee's recommendation, which was to deny 2,022 Ranch's motion to compel production of all but two of the documents and all of the deposition questions in dispute. The Court of Appeal issued a peremptory writ of mandate ordering the trial court to vacate its order denying the motion to compel and further ordering the trial court to conduct a particularized review of the deposition questions and documents at issue to determine whether the dominant purpose of each communication was to reflect a factual investigation (i.e., not privileged) or to render legal advice and/or memorialize an attorney's legal impressions, conclusions and opinions (i.e., privileged/work product).
 

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Varian Med. Sys., Inc. v. Delfino, 113 Cal. App. 4th 273 (2003)

Varian and two of its executives, George Zdasiuk and Susan B. Felch, sued two former employees, Michelangelo Delfino and Mary Day, after Delfino and Day used Internet bulletin boards to post more than 13,000 derogatory messages about Varian and the two executives. Among other things, Delfino (whose employment Varian terminated) posted derogatory messages about Varian's stock price and its products, accused Felch of being a "manipulative liar" or a "neurotic hallucinator" and accused both Zdasiuk and Felch of being "incompetent" and "chronic liars." Many of Delfino's messages contained sexual implications, including messages implying that Felch had attained her position by having sex with a supervisor. At trial, the jury found Delfino and Day liable for defamation (libel), invasion of privacy, breach of contract and conspiracy and also determined that Delfino and Day had acted with malice, fraud or oppression. The jury awarded $425,000 in general damages and $350,000 in punitive damages. The Court of Appeal affirmed the judgment except with respect to the trial court's entry of an injunction prohibiting certain future communications by Delfino and Day on the ground that such a prohibition was an unconstitutional prior restraint on speech.
 

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Barbee v. Household Auto. Fin. Corp., 113 Cal. App. 4th 525 (2003)

Household Automotive Finance Corporation (HAFC) terminated the employment of its national sales manager, Robert Barbee, after learning that Barbee had a "special relationship" with one of his subordinate employees and after giving Barbee the choice of either ending the relationship or effecting his or the subordinate employee's resignation. Barbee sued HAFC for violation of his right to privacy and wrongful termination in violation of the public policy contained in Labor Code § 96(k), which prohibits employers from taking adverse action against an employee for any "lawful conduct occurring during nonworking hours away from the employer's premises." The trial court granted HAFC's motion for summary judgment, and the Court of Appeal affirmed. The Court held that although Barbee may have had a legally protected right to privacy in pursuing an intimate or sexual relationship (relying upon Lawrence v. Texas, 123 S. Ct. 2472 (2003)), Barbee had failed to establish that he had a reasonable expectation of privacy in this instance given HAFC's express policy requiring a supervisor to disclose to the company the existence of a "consensual intimate relationship" with a subordinate employee. Further, the Court held that Labor Code § 96(k) could not support a public policy claim because (at least prior to its amendment in 2001) it did not create any new public policy, but merely provided a procedure by which the Labor Commissioner could vindicate existing public policies in favor of individual employees.
 

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American Airlines, Inc. v. Superior Court, 114 Cal. App. 4th 881 (2003)
During the course of his discrimination and wrongful termination lawsuit against American Airlines, Jawad Alamad, a former aircraft mechanic, identified Richard DiMarco, another American employee and Vice President of Local 564 of the Transport Workers Union of America, as having knowledge supporting his claims. During his deposition, DiMarco refused to identify employees of the airline who allegedly told DiMarco that they had been coerced to provide favorable testimony on behalf of the airline, that they had been retaliated against and who allegedly had made racially derogatory remarks about Alamad. The trial court denied American's motion to compel answers to the deposition questions on the ground that there "should be" a privilege as to communications between a union officer and the union's members. The Court of Appeal issued a peremptory writ of mandate directing the trial court to vacate its order denying American's motion to compel and to issue a new order granting the motion to compel on the ground that "courts are not free to create new evidentiary privileges" that do not otherwise exist as a result of legislative action.

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Snider v. Superior Court, 113 Cal. App. 4th 1187 (2003)

Quantum Productions, Inc. sued its former sales manager, David Snider, for misappropriation of trade secrets, breach of contract, interference with contractual relations and unfair competition after Snider resigned his employment with Quantum and formed a competing company. Quantum filed a motion to disqualify Snider's attorney, Dale Larabee, after it learned that Larabee had contacted two current employees of Quantum following the trial readiness conference that was held in the case. The trial court granted Quantum's motion on the ground that Larabee had violated Rule of Professional Conduct 2-100, which prohibits a lawyer from having ex parte communications with a party the lawyer knows to be represented by another lawyer in the matter. The Court of Appeal issued a writ of mandate directing the trial court to vacate its order disqualifying Larabee on the ground that the two employees whom Larabee contacted were not managing agents of Quantum (since they did not "exercise substantial discretionary authority over significant aspects of [Quantum's] business") nor were they officers or directors of Quantum. The Court of Appeal further held that Quantum had not satisfied the other requirements of Rule 2-100, including proof of the binding effect on Quantum of any statements from the two employees and actual knowledge on Larabee's part that the employees were "represented parties."

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Albillo v. Intermodal Container Services, Inc., 114 Cal. App. 4th 190 (2003)

In this class action, the plaintiff-independent contractors (truck owners and owner-operators) sued Intermodal Container Services, Inc. and other freight transportation companies (the companies) for violation of Business & Professions Code § 17200, among other things, arising out of the companies' charging the truckers for workers' compensation coverage. Under the lease agreement between the truckers and the companies, the truckers were required to maintain workers' compensation coverage but were given the option of obtaining such coverage from the companies under their group policy. The truckers alleged that the companies' practice of deducting and receiving funds from the truckers to cover the cost of workers' compensation insurance violated Labor Code § 3751, which prohibits employers from receiving from employees any contribution to cover the whole or any part of the cost of workers' compensation insurance. Although the trial court (a panel of retired judges) held that the companies had not violated Section 3751 because there was no employer-employee relationship, the Court of Appeal reversed the judgment, holding that the Labor Code restriction applied nonetheless since the parties had elected to come within the provisions of the workers' compensation law. Accordingly, the Court of Appeal remanded the matter to the trial court to determine whether the companies were liable to the truckers under the Business & Professions Code and, if so, to determine the appropriate remedy.

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Biehl v. CIR, 351 F.3d 982 (9th Cir. 2003)

Frank Biehl brought suit against his former employer, North Coast Medical Center, Inc. (NCMI), and won a jury verdict in his wrongful termination action against the company. NCMI agreed to settle the case for $1.2 million, of which $401,000 was paid directly to Biehl's attorney. Biehl reported only $799,000 of the $1.2 million (i.e., his share of the settlement) on his tax return. The IRS issued a notice of deficiency for the portion of the settlement that was paid directly to Biehl's attorney. The Tax Court determined that Biehl could not deduct the attorneys' fees as a miscellaneous itemized deduction because the fees were not "paid or incurred by the employee in connection with the performance of services as an employee" as required by Internal Revenue Code § 62. The Ninth Circuit Court of Appeals affirmed the judgment in favor of the Commissioner.

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Espinoza v. Classic Pizza, Inc., 114 Cal. App. 4th 968 (2003)

Pedro Espinoza, a non-exempt employee, worked at Classic Pizza from August of 1995 until June of 1999. He testified that he worked 62 hours per week until approximately June or August of 1998, and, thereafter, he worked 60 hours per week. Prior to January 1, 1998, Espinoza was owed overtime pay for any workweek exceeding 40 hours or any workday exceeding eight hours. However, because of a temporary change in the applicable wage order (which was only in effect in 1998 and 1999), after January 1, 1998, Espinoza was owed overtime pay only for hours worked in excess of 40 hours per week. The Court of Appeal held that from 1995 through 1997, Espinoza's hourly rate of pay should have been calculated by dividing his weekly salary by 40, and, after January 1, 1998, the rate should have been calculated by dividing his weekly salary by 60 (i.e., the "fluctuating workweek method"). The parties' "vague understanding" that Espinoza's weekly salary was to include compensation to him for overtime that he worked did not render him ineligible for overtime pay. The Court further held that Espinoza was entitled to prejudgment interest from each day on which his right to accrue overtime vested. Finally, the Court upheld the award of $923 in sanctions against Espinoza's attorney for his refusal to abide by the trial court's order quashing a subpoena for defendants' checking account records.

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Thompson v. Impaxx, Inc., 113 Cal. App. 4th 1425 (2003)

David Thompson's employment was terminated after he refused to sign a customer non-solicitation agreement that his employer, Impaxx, required him to sign. The covenant in question stated that "[f]or a period of one year following the termination of employment, I will not call on, solicit, or take away any of [my employer's] customers or potential customers with whom I have had any dealings as a result of my employment." Thompson alleged that his termination violated public policy because he was retaliated against for refusing to sign what was in essence an unenforceable covenant not to compete. Impaxx successfully moved for judgment on the pleadings on the ground that a non-solicitation covenant (as distinguished from a covenant not to compete) does not violate Business & Professions Code § 16600. The Court of Appeal reversed the trial court and held that customer non-solicitation covenants, although less restrictive than covenants not to compete, are also "void as unlawful business restraints except where their enforcement is necessary to protect trade secrets" (relying upon Moss, Adams & Co. v. Shilling, 179 Cal. App. 3d 124 (1986)). Since the covenant was unenforceable in that it was not limited to protecting Impaxx's trade secrets, the Court held that Thompson could proceed with his wrongful termination lawsuit.

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Noel v. River Hills Wilsons, Inc., 113 Cal. App. 4th 1363 (2003)

Brandon J. Noel sued his former employer, River Hills Wilsons, Inc. (Wilsons), and a Wilsons manager, Shelly Santillan, for defamation arising from Santillan's erroneous statements to a background investigator (Choice- Point) retained by Noel's new employer (GTE) that Noel left Wilsons because of "loss prevention issues" and that his "rehire status" was "unfavorable." In fact, Noel actually had no "loss prevention issues" with Wilsons; Santillan mistakenly believed that ChoicePoint was inquiring about another former Wilsons employee who did have "loss prevention issues." ChoicePoint provided the erroneous information that it had received from Santillan to GTE, along with information that ChoicePoint had discovered in its criminal records search on Noel - i.e., that five years before, Noel had been convicted of carjacking, three counts of attempted robbery, two counts of exhibiting a weapon other than a firearm, two counts of residential burglary and four counts of robbery. (As for his criminal past, Noel had previously disclosed to GTE that he had been convicted of a felony that he described as "aiding and abetting [sic]/not fully involved.") After GTE received the results of ChoicePoint's investigation, it terminated Noel's employment. The trial court granted summary judgment to Wilsons and Santillan on the ground that the conditional common-interest privilege of Civil Code § 47(c) barred the claim because the statements were made by a former employer to a prospective employer without malice. The Court of Appeal affirmed summary judgment on the ground that no reasonable jury could find malice to be a motivating cause of Santillan's statements about Noel since she had established that she sincerely (though erroneously) believed ChoicePoint was inquiring about another employee.

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