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

Casa Herrera, Inc. v. Beydoun, 32 Cal. 4th 336 (2004)

After Nasser Beydoun's complaint against Casa Herrera for breach of a commercial contract and fraud was dismissed based on the parol evidence rule (barring evidence of prior oral promises that are inconsistent with a written agreement), Casa Herrera filed suit against Beydoun for malicious prosecution. Beydoun argued that termination of the previous lawsuit based on the parol evidence rule did not satisfy the "favorable termination" element of a malicious prosecution claim; the Supreme Court held that it did on the ground that the parol evidence rule "is not a rule of evidence but is one of substantive law."

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Brigham v. Eugene Water & Elec. Bd., 357 F.3d 931 (9th Cir. 2004)

James Brigham and other employees of the Eugene Water & Electric Board (EWEB) were stationed at the Carmen Smith Hydroelectric Project, a power generation facility straddling the upper McKenzie River, 70 miles east of Eugene, Oregon, in the Willamette National Forest. Four EWEB employees worked and were required to live on-site in housing provided by EWEB. The employees worked four-day weeks, which consisted of three "maintenance" shifts (10 hours per shift) and one "duty" shift (24 hours). During the duty shifts, the employees worked approximately six hours, were paid for 10 hours, but were on call for the full 24 hours. On-duty employees were compensated at a double-time rate for any call-out time lasting more than 15 minutes. The employees alleged a violation of the Fair Labor Standards Act, claiming they were owed unpaid overtime for the duty shifts. The district court granted EWEB's motion for summary judgment, but the Ninth Circuit reversed, holding that the employees were not completely free to pursue personal activities during their on-call shifts. The Court remanded the case to the district court "to craft a workable mechanism for determining how many hours each employee worked in each week he was employed... and how much overtime compensation he is entitled to receive."
 

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Childress v. Darby Lumber, Inc., 357 F.3d 1000 (9th Cir. 2004)

Darby Lumber, Inc. (DLI) operated as a lumber mill and manufactured, marketed, and sold finished lumber. DLI owned 100 percent of the stock of Bob Russell Construction (BRC). During the 12 months prior to BRC's closure, DLI employed 88 employees, each with more than 1,000 hours of employment with the company, and BRC employed 18 employees with more than 1,000 hours of employment. On September 24, 1998, DLI's general manager placed a written statement in the paychecks of all DLI employees, advising them that due to the financial difficulties of the company, there would be a "major layoff." The next day, DLI shut down the mill and laid off all of its employees; the employees of BRC were laid off over the next several months. When the former DLI employees filed this lawsuit, alleging a violation of the WARN Act (since fewer than 60 days' notice of the layoff had been given to them), DLI asserted that the Act did not apply because the company had fewer than 100 full-time employees and in any case one of the statute's affirmative defenses spared it from liability. The district court granted the employees 60 days of wages in the amount of $60,345.45 and $123,033.44 in attorney's fees; the Ninth Circuit affirmed, holding that DLI and BRC were a single employer for purposes of the WARN Act since they had common ownership, management, centralized control of labor relations and interrelation of operations. The Court further held that none of the affirmative defenses under the Act (i.e., good faith, business circumstances, faltering company) protected DLI from liability in this case.
 

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Grafton Partners LP v. Superior Court, 115 Cal. App. 4th 700 (2004)

Grafton Partners and related parties (Grafton) retained PricewaterhouseCoopers (PwC) to perform an independent audit on their accounting records. The parties' engagement letter contained a predispute jury waiver whereby both parties agreed not to demand a trial by jury "in the unlikely event" that differences should arise between them and result in litigation. When a dispute did arise between the parties, resulting in Grafton's suing PwC for breach of contract, professional negligence and other alleged wrongdoing, Grafton demanded a jury trial, and PwC filed a motion to strike the demand based on the parties' agreement. Relying upon Trizec Properties, Inc. v. Superior Court, 229 Cal. App. 3d 1616 (1991), the trial court enforced the jurytrial waiver agreement. In response, Grafton filed a petition for a peremptory writ of mandate, which the Court of Appeal granted, holding that the agreement was barred by the California Constitution's guarantee of a right to a trial by jury and refusing to follow Trizec.
 

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Coleman v. Standard Life Ins. Co., 288 F. Supp. 2d 1116 (E.D. Cal. 2003)

Floyd Coleman, who was employed as a probation officer for the County of Sacramento, sued Standard Life Insurance Company after it denied him long-term disability benefits for his knee condition and chronic back pain. Coleman sued for a violation of ERISA and under state law for breach of contract and breach of the implied covenant of good faith and fair dealing. Standard moved to dismiss the state law claims on the ground that they were preempted by ERISA. The District Court denied the motion on the ground that Coleman was permitted under Federal Rule of Civil Procedure 8(e)(2) to allege a breach of contract as an alternative to the ERISA violation claim.
 

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Oxy Resources Cal. LLC v. Superior Court, 115 Cal. App. 4th 874 (2004)

Oxy Resources and EOG Resources entered into a complex transaction whereby they exchanged interests in a number of oil and gas producing properties. Oxy and EOG anticipated that Calpine Natural Gas LP might sue them as a result of the transaction and, therefore, they entered into a joint-defense agreement before finalizing their negotiations. Once Calpine sued Oxy and EOG, it sought production of 202 documents reflecting communications between the defendants prior to the filing of the lawsuit. The trial court granted in part Calpine's motion to compel production, ordering Oxy and EOG to turn over 172 documents that post-dated the transaction; the trial court denied Calpine's motion as to the remaining 30 documents that predated the transaction. The Court of Appeal issued a peremptory writ of mandate and ordered the trial court to review each of the documents at issue to determine whether it was protected by the attorney-client privilege or the work-product doctrine regardless of the date of the document.
 

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Los Angeles County Professional Peace Officers' Ass'n v. County of Los Angeles, 115 Cal. App. 4th 866 (2004)

William Kupper and Bennie Layne worked as investigators for the Los Angeles County District Attorney's Office before becoming temporarily disabled after being injured on the job. Kupper and Layne both retired after their disabilities became permanent. Under the applicable County ordinances, DA investigators could accumulate up to 320 hours of vacation time before the excess accrual would be cashed out; any amounts that are cashed out are added to the employee's salary figure that is used to calculate retirement benefits. When Kupper and Layne retired, they were paid for all accumulated vacation hours; however, because the vacation time was cashed out after retirement, it was not included in the calculation of their pension benefits. The Court of Appeal affirmed the trial court's judgment, holding that Kupper and Layne were not entitled to have their accrued vacation benefits cashed out prior to their retirement under either the California Labor Code or the 14th Amendment to the United States Constitution.
 

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Kotla v. The Regents of the Univ. of Cal., 115 Cal. App. 4th 283 (2004)

Dee Kotla, a former computer support technician, sued the Lawrence Livermore Laboratory (the Lab) for retaliation under the Fair Employment and Housing Act (FEHA) after she testified at a deposition in support of another employee's claim of sexual harassment. The Lab contended that it had terminated Kotla's employment as a result of her misuse of the Lab's computers for outside business activities. At trial, the jury awarded Kotla $325,000 in economic damages and $675,000 in emotional distress damages (reduced following a remittitur by the Court to $420,000). On appeal, the Lab contended that the trial court had erred in permitting Kotla's human resources expert (an industrial psychologist) to testify that certain facts were "indicators" that the Lab had discharged Kotla for retaliatory reasons. The Court of Appeal agreed with the Lab, reversed the judgment that had been entered in favor of Kotla and held that the expert's testimony improperly invaded the province of the jury.
 

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Crown Appliance v. WCAB, 115 Cal. App. 4th 620 (2004)

Crown Appliance petitioned the Court of Appeal for a writ of review, following a determination by the Workers' Compensation Appeals Board (WCAB) that Crown had discriminated against its employee, Morton Wong, for filing a workers' compensation claim. Wong sustained an industrial injury to his left elbow and back while employed as a delivery driver and appliance installer for Crown. Wong testified at the WCAB hearing that his rapport with Mary Sanchez, the owner of Crown, changed after he returned to light duty at Crown due to his injuries. Among other things, Sanchez complained about Wong's performance, excluded him from monthly employee meetings and fired him for allegedly using "bad language" in front of a customer. Sanchez testified that Wong's work performance while he was on light duty was unsatisfactory, but she believed that she could not fire him until he returned to regular duty. The WCAB affirmed the workers' compensation judge's determination that Crown had violated Labor Code Section 132a, which was based on the judge's critical assessment of Sanchez's testimony that Wong had been terminated as a result of his poor performance and customer complaints about him. The Court of Appeal found Crown's petition for writ of review "indisputably without merit" and, therefore, remanded the matter back to the WCAB so that it could make a supplemental award of reasonable attorney's fees to Wong's attorneys.
 

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Pacific Gas & Elec. Co. v. WCAB, 114 Cal. App. 4th 1174 (2004)

Clifford Bryan filed a workers' compensation claim against Pacific Gas & Electric Company (PG&E) after he was forced to leave work in October 2001 due to the stress of his job in interacting with customers who did not like the company and due to the financial problems affecting PG&E during that time, including its filing of a Chapter 11 bankruptcy petition in April of 2001; as of that time, Bryan owned approximately $200,000 in PG&E stock. The workers' compensation judge denied Bryan benefits after concluding that work-related stress was not the predominant cause of his alleged psychiatric injury. The Workers' Compensation Appeals Board (WCAB) reversed the judge and concluded that Bryan was entitled to benefits. The Court of Appeal reversed the WCAB and held that Bryan was not entitled to benefits due to his alleged anxiety over PG&E's downsizing, his stock losses or the "future of PG&E and his retirement funds." However, the Court remanded the action to the WCAB to determine whether the stress of Bryan's confrontations with "angry, threatening or deceitful customers of PG&E" caused him specific and identifiable work-related stress.
 

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Blitz v. Fluor Enterprises, Inc., 115 Cal. App. 4th 185 (2004)

Mr. Blitz had been employed in a financial position at Raytheon in New Jersey for 12 years before he was contacted by a member of Fluor's management team and offered a job in California. Before resigning his position with Raytheon and moving to California, Blitz told Fluor that he was interested only in "permanent, rather than project-based employment"; Fluor responded by telling Blitz that he was being hired on a "long-term, rather than a project-specific basis." Only after Blitz had orally committed to employment with Fluor and had resigned his position with Raytheon did Fluor present Blitz with an at-will employment agreement, which Blitz signed after being told that the provision would not be enforced. Approximately two years later, Blitz's employment with Fluor was terminated, and Blitz filed a lawsuit for violation of Labor Code Section 970 (prohibiting an employer from fraudulently inducing an employee to relocate for employment), fraud and negligent misrepresentation. Fluor contended that Blitz was an at-will employee (relying upon the parties' agreement) and thus could not have justifiably relied upon any alleged representations of long-term employment. Fluor also argued that the parol evidence rule precluded evidence of the alleged false promises that preceded the execution of the at-will agreement. The Court of Appeal reversed the summary judgment that had been entered in favor of Fluor on the ground that there was sufficient evidence to demonstrate a triable issue of fact concerning Fluor's being estopped from relying upon the at-will agreement.
 

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Roe v. City of San Diego, 356 F.3d 1108 (9th Cir. 2004)

While working as a San Diego police officer, John Roe videotaped himself stripping off a generic police officer's uniform and engaging in acts of masturbation. Roe sold the videos on the adults-only section of eBay - under the username "Code3stud@aol.com." After one of Roe's supervisors discovered the videos online and recognized Roe, Roe was fired. Roe sued under 42 U.S.C. Section 1983, alleging that his off-duty, non-work-related activities were protected by the First Amendment. The district court dismissed Roe's claim after concluding that the videos did not address a matter of "public concern" and, therefore, were not protected by the First Amendment. The Ninth Circuit disagreed and reversed the judgment, holding that the district court erred by not balancing the San Diego Police Department's interest in promoting "the efficiency of the public services it performs through its employees" against Roe's freespeech interests.
 

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Bell v. Farmers Ins. Exchange, 115 Cal. App. 4th 715 (2004)

Following a jury trial, Farmers Insurance Exchange was ordered to pay a class consisting of 2,402 current and former claims representatives over $90 million in unpaid overtime and over $32 million in prejudgment interest. The claims representatives contended that Farmers had improperly classified them as exempt administrative employees and had unlawfully deprived them of the overtime they had worked for the three years preceding the filing of the lawsuit. In affirming the judgment, the Court of Appeal rejected Farmers' assertion that the Court's earlier opinion in Bell v. Farmers Ins. Exchange, 87 Cal. App. 4th 805 (2001), was wrongly decided and reaffirmed that the claims representatives were non-exempt employees since they were "production workers within the meaning of the administrative/production worker dichotomy and, on that ground… were not employed in an administrative capacity." The Court further held that the trial court had not abused its discretion in certifying the class of claims representatives since there was an ascertainable class and a well-defined community of interests in the questions of law and fact. The Court did reverse the award of $1.2 million as compensation for unpaid double-time hours on the ground that the flawed statistical methodology that had been used presented "an issue of constitutional dimension."
 

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Miller v. Yokohama Tire Corp., 358 F.3d 616 (9th Cir. 2004)

Christopher Miller, who worked for Yokohama Tire Corporation for 11 years before his termination, alleged that he was denied overtime pay as a result of a "fraudulent scheme" on the part of his employer. Miller further alleged that Yokohama mailed him and other improperly paid employees their paychecks or pay stubs twice monthly and their W-2 Forms annually; employees who received direct deposit of their wages received their compensation via "wire transfers." Based on these "predicate acts of mail and wire fraud," Miller alleged that Yokohama and its managers violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Miller filed his 22-count complaint in state court, and Yokohama removed the action to federal court based upon the two RICO claims. The district court granted Yokohama's motion to dismiss the RICO claims and remanded the remaining claims to the Los Angeles Superior Court; Miller appealed to the Ninth Circuit. In affirming dismissal of the RICO claims against Yokohama, the Court of Appeals held that an employer cannot be held vicariously liable for its employees' alleged violations of the statute. Further, the Court held that the managers could not be liable under RICO because there were no facts alleged that indicated any actionable fraud on their part. Cf. Diaz v. Parks, 354 F.3d 1169 (9th Cir. 2004) (loss of employment as a result of illegal arrest and incarceration does not constitute an injury to "business or property" under RICO).

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McKesson HBOC, Inc. v. Superior Court, 115 Cal. App. 4th 1229 (2004)

After McKesson publicly disclosed that its auditors had discovered improperly recorded revenues at a McKesson subsidiary, it became the subject of shareholder lawsuits and investigations by the United States Attorney's Office and the SEC. McKesson retained an outside law firm to represent it in the shareholder lawsuits and to perform an internal review of the matter. McKesson's attorneys subsequently disclosed the results of their investigation to the United States Attorney and the SEC after entering into confidentiality agreements with the government, reflecting the attorneys' belief that the documents were protected by the attorney-client privilege and the work-product doctrine. Meanwhile, in the civil actions that were pending in San Francisco Superior Court, Merrill Lynch asserted that McKesson had waived the privilege and work-product protection by disclosing the documents to the government, since disclosure of the documents to the government was not required in order for the attorneys to provide legal advice to McKesson. The trial court and Court of Appeal agreed with Merrill Lynch and ordered McKesson to produce to Merrill Lynch the documents that McKesson had provided to the government.

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Krupnick v. Duke Energy Morro Bay, 115 Cal. App. 4th 1026 (2004)

John Krupnick filed this personal injury action against Duke Energy Morro Bay on January 8, 2003 for injuries allegedly sustained on January 26, 2001. Duke filed a demurrer on the ground that the action was barred by the one-year statute of limitations of former California Code of Civil Procedure Section 340(3). Krupnick argued in response that the applicable statute of limitations was two years rather than one, based upon California Code of Civil Procedure Section 335.1, which was enacted in 2002 and became effective on January 1, 2003. Relying upon the express language of the statute, the Court of Appeal held that the two-year statute of limitations was not retroactively applicable except to victims of the terrorist attacks of September 11, 2001.

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Hagan Eng'g, Inc. v. Mills, 115 Cal. App. 4th 1004 (2003)

Hagan Engineering, Inc., sued several of its former employees in state court, including Daniel G. Mills (collectively, "Mills"), for misappropriation of its trade secrets and related claims; Mills sued Hagan in federal court, alleging violations of ERISA. Eventually, the parties entered into a global settlement and dismissed both lawsuits with prejudice. Within two years, Hagan filed a motion in state court to enforce the settlement agreement pursuant to California Code of Civil Procedure Section 664.6; Mills opposed the motion on the ground that the court lacked jurisdiction since the underlying case had been dismissed with prejudice. Although the trial court granted Hagan's motion to enforce the settlement agreement, the Court of Appeal reversed the judgment, holding that the dismissal of the lawsuit had deprived the trial court of subject matter jurisdiction.

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People v. Laiwala, 115 Cal. App. 4th 850 (2004)

Sadrudin Laiwala, a former engineer of Odeum Microsystems, a division of Hyundai Electronics America, allegedly copied and took with him a "DVD copy protection system" immediately prior to his departure from the company. Laiwala was criminally prosecuted for violation of California Penal Code Section 499c, which prohibits the theft of trade secrets. The Court of Appeal reversed the conviction on the ground that the prosecution had failed to prove that the "master key" (as opposed to the "DVD copy protection system") that Laiwala had taken from Odeum was a trade secret because of the lack of evidence that the "master key" derived actual or potential "independent economic value" from "not being generally known to other persons who can obtain economic value from its disclosure." Because the "master key" could have been deactivated by the licensor, there was no evidence that anyone other than Odeum could obtain any economic value from its use. The Court of Appeal declined to reduce the offense to an attempted theft of trade secret since there was no finding in the record that Laiwala had the specific intent to steal information that he believed to be a trade secret. Cf. DVD Copy Control Ass'n, Inc. v. Bunner, 31 Cal. App. 4th 864 (2004) (information that was widely known before preliminary injunction was granted was no longer a "trade secret").

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Lathrop v. HealthCare Partners Med. Group, 114 Cal. App. 4th 1412 (2004)

Terry Lathrop and her husband sued HealthCare Partners, among others, for their failure to diagnose her breast cancer. The jury apportioned 58% of the fault to HealthCare Partners, which argued that it was subject to the $250,000 cap on noneconomic damages that is set forth in the Medical Injury Compensation Reform Act (MICRA) since it is an employer that had been held vicariously liable for the negligent acts of its licensed physician employees. The Court of Appeal agreed, holding that since the parties had stipulated that the allegedly negligent physicians had all acted within the scope of their agency with HealthCare Partners, HealthCare Partners was vicariously (not directly) liable, based upon the negligence of its physician employees. Therefore, HealthCare Partners was subject to the non-economic damages cap of MICRA.
 

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Moreau v. Air France, 356 F.3d 942 (9th Cir. 2003)

Stephane Moreau worked as the Assistant Station Manager for Air France at San Francisco International Airport (SFO). Moreau requested a 12-week leave of absence under the Family Medical Leave Act and the California Family Rights Act to assist his ill father in France. Air France denied Moreau's request on the ground that it employed fewer than 50 employees within 75 miles of SFO and thus was exempt from the statutes. Moreau alleged violations of the statutes and breach of contract and of the implied covenant of good faith and fair dealing. The Ninth Circuit affirmed summary judgment in favor of Air France, holding that the airline was not the joint employer of the employees of the ground handling service companies with which it worked because it lacked authority to control those workers. The Court further held that there was no public policy violation (since there was no statutory basis for the claim) and no breach of contract since there was good cause to terminate Moreau (even if he was not terminable at will) given his insubordination and failure to return to work.
 

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