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

Grinzi v. San Diego Hospice Corp., 120 Cal. App. 4th 72 (2004)

Joan Grinzi worked as a case manager for San Diego Hospice Corporation for 13 years before her employment was terminated allegedly because of her membership in Women’s Garden Circle, an investment group that the Hospice believed to be an illegal pyramid scheme. (The Hospice told Grinzi that she was being terminated for her wrongful use of its email system — an explanation that Grinzi said was a pretext.) In her lawsuit, Grinzi alleged wrongful termination in violation of public policy, and the trial court sustained without leave to amend the Hospice’s demurrer to the complaint. The Court of Appeal affirmed dismissal of Grinzi’s lawsuit on the ground that the First Amendment does not support a public policy on which a tortious discharge claim can be premised because the Constitution does not regulate the activities of private (as opposed to public) employers. Similarly, the Court held that neither Labor Code § 96(k) nor § 98.6 could save Grinzi’s claim because the former does not independently express a public policy and the latter only protects employees who have exercised rights “otherwise protected by the Labor Code.”

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Le Francois v. Goel, 119 Cal. App. 4th 425 (2004)

Philip Le Francois and Eric Herald sued their former employer, Duet Technologies, Inc., and three Duet officers for wrongfully withheld sales commissions and allegedly injurious misrepresentations and false promises associated with commissions they claimed were owed to them on a deal between Duet and Motorola. Although defendants had filed an earlier, unsuccessful motion for summary judgment, the Court of Appeal held that plaintiffs had waived any objection to the second (successful) motion’s being heard by a different judge by failing to raise the issue in the trial court. Further, the Court held that the second judge had the inherent power to reconsider a prior interim ruling and to correct an error of law on a dispositive issue. Regarding the substance of the motion, the Court held that plaintiffs had failed to show they had changed their position in reliance upon defendants’ alleged fraud and that they were damaged as a result of such a change of position. To the contrary, plaintiffs’ evidence showed they continued to do the jobs they had been hired to do and had not relied to their detriment upon any allegedly fraudulent representations from Duet or its officers concerning their eligibility for commissions. Finally, the Court held the trial court had not abused its discretion in refusing to allow plaintiffs to present additional evidence (after summary judgment was already granted) of detrimental reliance in the form of their refraining from seeking employment elsewhere as a result of the alleged misrepresentations.

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Jordan v. Northrop Grumman Corp., 370 F.3d 869 (9th Cir. 2004)

Vicki Jordan worked as a senior administrative secretary for Northrop from 1984 to 1995 at which time she applied for long-term disability benefits following her diagnosis with fibromyalgia — a syndrome whose cause is unknown and symptoms are entirely subjective. Northrop’s plan administrator denied Jordan’s disability claim after determining that her “condition is not of such severity as to preclude [her] ability to work at [her] sedentary occupation” as a secretary. The Ninth Circuit affirmed the district court’s judgment, holding that Northrop’s ERISA plan administrator is entitled to deferential review and, in any event, did not arbitrarily deny benefits to Jordan. The Court held that the administrator did not have a “serious conflict of interest” sufficient to breach its fiduciary duty to Jordan even though it had demanded “objective” proof of a medical condition that cannot be objectively established. Of particular importance to the Court’s determination was the fact that Jordan’s physicians had failed to respond to repeated requests for explanations of why her fibromyalgia disabled her from working.  Cf. Aetna Health Inc. v. Davila, 542 U.S. 200, 124 S. Ct. 2488 (2004) (statelaw claims against HMOs for failure to exercise ordinary care when making health-care treatment decisions were completely preempted by ERISA and removable to federal court).

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Pennsylvania State Police v. Suders, 542 U.S. 129, 124 S. Ct. 2342 (2004)

Nancy Drew Suders alleged sexual harassment by her supervisors, officers of the Pennsylvania State Police (PSP), of such severity that she was forced to resign. The question before the U.S. Supreme Court in this case was whether the PSP could avail itself of the Ellerth/Faragher affirmative defense first enunciated by the Court in 1998 in a case such as this where the employee has resigned her employment arguably before suffering a “tangible employment action.” The Supreme Court held for the first time that an employee may state a claim under Title VII for constructive discharge if the abusive working environment becomes so intolerable that a reasonable person in the employee’s position would have felt compelled to resign. However, the Court reversed the decision of the U.S. Court of Appeals for the Third Circuit and held that the affirmative defense may be asserted unless the employee quit in response to an adverse action officially changing her employment status or situation, such as, for example, a humiliating demotion, an extreme cut in pay, or a transfer to a position in which the employee would face unbearable working conditions.

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RUI One Corp. v. City of Berkeley, 371 F.3d 1137 (9th Cir. 2004)

In 2000, the City of Berkeley enacted its living wage ordinance, which mandated minimum hourly wages and employee benefits be provided by private employers located within the Berkeley Marina or that received some form of financial benefit from the City (e.g., City contract awardees, lessees of City property, City financial aid recipients) and that met specified criteria (i.e., number of employees and amount of annual revenues). The City mandated that employers meeting the relevant criteria be required to pay their employees a minimum of $9.75 per hour, unless they failed to provide health benefits to their employees, in which case they were required to pay their employees a minimum of $11.37 per hour. (At the time of the enactment of the ordinance, the California minimum wage was $5.75 per hour.) The ordinance also required covered employers to provide a minimum of 22 days off of work per year for vacation, sick leave or personal necessity, of which at least 12 days were to be paid. RUI One Corporation, which was the assignee of a lease within the Marina, challenged the ordinance on grounds that it violated the Contract Clause, Equal Protection Clause and Due Process Clause of the United States Constitution. Over a year after the challenge was filed, the district court permitted the Hotel Employees & Restaurant Employees Union, Local 2850, to intervene on behalf of the City. The district court ruled that the ordinance did not violate the Constitution, and the Ninth Circuit affirmed in this 2-to-1 decision.

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Janik v. Rudy, Exelrod & Zieff, 119 Cal. App. 4th 930 (2004)

Plaintiffs’ attorneys, who produced a class action recovery of more than $90 million for their clients, were sued by those same clients for malpractice because the attorneys had failed to allege a claim for Unfair Competition (Business & Professions Code § 17200) along with the single claim they did assert for unpaid overtime. Plaintiffs in this case are more than 2,400 claims representatives of Farmers Insurance Exchange who proved in a jury trial that they were owed more than $90 million in unpaid overtime because they had been misclassified as exempt employees. In this malpractice lawsuit, plaintiffs alleged that their lawyers had negligently failed to assert a § 17200 claim, which could have resulted in plaintiffs’ recovering one more year’s worth of unpaid overtime wages. The trial court dismissed the malpractice action on demurrer, but the Court of Appeal reversed, holding that the Court was “in no position to decide as a matter of law that class counsel fulfilled its duties to the class by foregoing their claim for an additional year of recovery.”

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Dukes v. Wal-Mart Stores, Inc., 222 F.R.D. 137 (N.D. Cal. 2004) (Jenkins, J.)

Plaintiffs in this Title VII class-action lawsuit alleged that women employed in Wal-Mart stores are paid less than men in comparable positions, despite having higher performance ratings and greater seniority, receive fewer promotions to in-store management positions, and those who are promoted must wait longer than their male counterparts to advance. The class, the largest ever certified in an employment case, includes over 1.5 million women who have been employed by Wal- Mart over the past five years at roughly 3,400 stores across the United States. The Court certified the class with respect to plaintiffs’ equal pay and promotion claims, but denied certification on unmanageability grounds of that portion of the promotion claim seeking lost pay and punitive damages for class members for whom there was no data available about their interest in the challenged promotions.

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Sinatra v. Chico Unified School Dist., 119 Cal. App. 4th 701 (2004)

Charles F. Sinatra, a former assistant principal at Chico High School, alleged wrongful termination in violation of the public policy purportedly embodied in California Education Code § 44922, which permits a school district to allow older, full-time employees to work part time without jeopardizing their retirement and health care benefits. Sinatra alleged that the school district had violated the public policy represented by the statute by failing to offer him a part-time position. The Court of Appeal affirmed summary judgment in favor of the school district on the ground that the statute “does not embody the kind of universal and important right recognized as fundamental to the public good.” Cf. Central Laborers’ Pension Fund v. Heinz, 541 U.S. 739 (2004) (ERISA’s “anticutback” provision prohibits an amendment to a pension plan that expands the categories of post-retirement employment that would trigger suspension of previously accrued early-retirement benefits).

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Prince v. CLS Transp., Inc., 118 Cal. App. 4th 1320 (2004)

Ronald Prince and two other employees filed a classaction complaint against CLS Transportation, Inc., seeking unpaid wages on behalf of more than 500 CLS drivers. CLS demurred on the ground that there was no well-defined community of interest and that a class action was not superior to other methods of adjudicating these particular claims. The trial court sustained the demurrer to the class allegations without leave to amend, but the Court of Appeal reversed, holding that only in mass tort actions should class suitability be determined at the pleading stage. “In other cases, particularly those involving wage and hour claims, class suitability should not be determined by demurrer.”
 

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SEC v. Gemstar-TV Guide Int’l, 367 F.3d 1087 (9th Cir. 2004)

As part of its announced plans to restructure its management and corporate governance, Gemstar-TV Guide entered into negotiations for termination agreements with its CEO and CFO. The CEO’s termination agreement provided for a “termination fee” of $22.45 million, an additional $7.03 million in unpaid salary, bonuses, and unused vacation and millions of shares of restricted stock; the CFO’s agreement provided for a termination fee of $7 million, an additional $1.21 million in unpaid salary, bonuses, and unused vacation and shares of common and restricted stock (collectively, the “Payments”). Shortly before the SEC ordered a formal investigation into the announced overvaluation of the revenue and profits from some of Gemstar’s sectors, the Commission requested that the Payments be placed in escrow. Hours before the restructuring agreements were to be executed, Gemstar informed the CEO and CFO that the Payments were to be placed in escrow for six months and that the escrow provision was non-negotiable. Although the executives acceded to the six-month escrow in “side letters,” they subsequently unsuccessfully challenged the escrow in an action filed in the district court. The SEC later filed an application to place the Payments in a 45-day escrow account pursuant to Section 1103 of the Sarbanes-Oxley Act (involving “extraordinary payments”). Although the district court determined that the Payments were “extraordinary payments” subject to involuntary retention in an escrow account pursuant to Section 1103, the Ninth Circuit reversed and held that in the absence of objective evidence of what an “ordinary payment” might be, the Payments in question could not be subject to involuntary retention under the Act.
 

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Soukup v. Stock, 118 Cal. App. 4th 1490 (2004)

Peggy Soukup, a former employee of the Law Offices of Herbert Hafif, sued Ronald C. Stock for abuse of process and malicious prosecution based upon Stock’s prosecution of an earlier lawsuit against Soukup on behalf of the Hafifs and their law firm. The underlying lawsuit, which involved Soukup’s alleged disclosure to a third party of confidential information that Soukup obtained during her employment with the Hafifs, was itself dismissed in response to Soukup’s filing a special motion to strike under the anti-SLAPP provisions of the Code of Civil Procedure. Although the trial court denied Stock’s special motion to strike this subsequent lawsuit, the Court of Appeal reversed, holding that the present action arose out of Stock’s exercise of his free expression rights on behalf of his clients, the Hafifs. Further, the Court held that Soukup had not established the probability of her prevailing in the instant lawsuit. Cf. The Traditional Cat Ass’n, Inc. v. Gilbreath, 118 Cal. App. 4th 392 (2004) (trial court should have granted anti-SLAPP motion to strike defamation claim based on statute of limitations defense).
 

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Siebel v. Mittlesteadt, 118 Cal. App. 4th 406 (2004)

Thomas M. Siebel, the CEO of Siebel Systems, Inc. (SSI), sued Carol L. Mittlesteadt and E. Rick Buell, II (the Lawyers), for malicious prosecution based on their representation of Debra Christoffers, a former SSI employee. Through the Lawyers, Christoffers sued Siebel (individually) as well as SSI for wrongful termination, fraud, unpaid compensation and discrimination. Most of Christoffers’ claims were dismissed before trial, but she did obtain a verdict against SSI in the amount of $193,000 for unpaid commissions and was awarded costs and attorneys’ fees attributable to that portion of the action. Because Christoffers had failed to recover from Siebel personally, he was awarded his litigation costs. In the settlement agreement that followed, Siebel expressly preserved any claims that he might have against the Lawyers. In this malicious prosecution action, Siebel alleged that the Lawyers “willfully and purposely prosecuted” baseless discrimination claims against him in order to coerce a settlement. Among other things, Siebel argued that he was immune to many of Christoffers’ claims because SSI, not Siebel, was her employer. Although the trial court granted the Lawyers’ motion for summary judgment, the Court of Appeal reversed, holding that Siebel could establish a “favorable termination” because the parties had not agreed to modify the underlying judgment, which encompassed a disposition entirely in Siebel’s favor. Further, in that there was no legal foundation for at least three of Christoffers’ claims against Siebel (since Siebel was indisputably not her employer), there was no probable cause to prosecute them.
 

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Mitchell v. The Union Central Life Ins. Co., 118 Cal. App. 4th 1331 (2004)

Dorothy Wimberly Mitchell worked for The Union Central Life Insurance Company for 27 years before she allegedly became physically ill as a result of harassment and discrimination that she suffered at work. In December 1999, Mitchell filed a civil lawsuit for, among other things, discrimination and harassment under the California Fair Employment and Housing Act. In January 2000, Mitchell filed a claim for workers’ compensation benefits with the Workers’ Compensation Appeals Board. After its motion for summary judgment was denied, Union Central served Mitchell with an offer to compromise in the amount of $1.1 million. Around the same time, the workers’ compensation claim was settled for $57,500. (The parties were represented by different counsel in the two proceedings.) Union Central subsequently moved for summary judgment in the civil action on the ground that the workers’ compensation release barred the action. The trial court granted the motion, but the Court of Appeal reversed, holding that there was sufficient extrinsic evidence (including the then-outstanding $1.1 million settlement offer) to establish a triable issue of fact as to whether the parties intended the workers’ compensation release to bar the civil action.
 

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Vine v. Bear Valley Ski Co., 118 Cal. App. 4th 577 (2004)

Charlene Vine suffered a broken back, resulting in paraplegia, when she fell while attempting a snowboard jump at an employee party hosted by her employer, Bear Valley Ski Company. A Bear Valley employee had reshaped the jump, using a snow cat, for use by guests at the party. In her lawsuit, Vine contended that the reshaped jump was a dangerous condition that increased the risks to snowboarders beyond those inherent in the sport itself. A jury awarded Vine $3.727 million in special damages and $713,000 in noneconomic damages. Bear Valley appealed and contended, among other things, that the trial court had erred in refusing to rule that workers’ compensation was Vine’s exclusive remedy. The Court of Appeal affirmed that ruling, holding that Labor Code § 3352(f) exempts from workers’ compensation an employee of a ski-lift operator who is injured while not performing any prescribed duties and while participating in recreational activities on his or her own initiative. However, the appellate court held that the trial court had erred in refusing to allow Bear Valley to raise as a defense Vine’s assumption of risk and reversed the judgment. Cf. Waste Management Inc. v. Superior Court, 119 Cal. App. 4th 105 (2004) (parent corporation of employer could not be liable for employee’s wrongful death based on parent’s control of employer’s budget).
 

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Plancarte v. Guardsmark, LLC, 118 Cal. App. 4th 640 (2004)

Eveilia Plancarte alleged that Toufik Kadah, a Guardsmark security guard, was responsible for assault, battery, false imprisonment and intentional infliction of emotional distress, all of which allegedly occurred while she was working as a janitor in a building in which Kadah was working as a guard. Plancarte also alleged “respondeat superior,” negligent hiring and negligent supervision against Guardsmark. Guardsmark filed a motion for summary judgment on the ground that the alleged assault was not related to Kadah’s employment and there was no evidence of negligent hiring or supervision. The Court of Appeal affirmed summary judgment in favor of Guardsmark on the ground that Kadah had not acted within the scope of his employment with Guardsmark: “[Kadah’s] assault of Plancarte cannot fairly be deemed attributable to any particular aspect of Guardsmark’s business of providing security services. In fact, it was directly contrary to the job he was hired to perform.” Furthermore, there was no evidence that the facts known to Guardsmark before the alleged assault made its decision to hire Kadah as an unsupervised security guard unreasonable. Finally, the Court found there to be no error in the trial court’s refusal to grant Plancarte a new trial based on newly-discovered evidence that Guardsmark had paid for Kadah’s defense in this action.
 

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Ballaris v. Wacker Siltronic Corp., 370 F.3d 901 (9th Cir. 2004)

Plaintiff-employees worked in Wacker’s cleanrooms where silicon wafers were manufactured. All employees who work in the cleanrooms must wear gowns to help maintain the clean environment. Ballaris alleged in this FLSA class-action lawsuit that Wacker had a policy or practice of failing to pay its workers overtime wages for the time spent on gowning activities and putting on and taking off plant uniforms. In response, Wacker asserted that it need not provide any pay for the time its employees spent on the activities identified by plaintiffs because it was entitled to credit their paid lunch hour compensation against all such hours of work. The Ninth Circuit held that the employees were entitled to be compensated for the time spent “donning and doffing” the uniforms on company premises and that the company was not entitled to offset the paid lunch period against any compensation otherwise due. Cf. Snyder v. The Navajo Nation, 371 F.3d 658 (9th Cir. 2004) (FLSA does not apply to tribal law enforcement officers because such enforcement is an intramural matter of tribal self-government); Mortensen v. County of Sacramento, 368 F.3d 1082 (9th Cir. 2004) (FLSA does not require sheriff’s department to provide deputies with compensatory time off on a specifically requested date if all leave openings on that date are full).
 

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IBM Corp., 341 NLRB No. 148 (June 9, 2004)

In this far-reaching decision, the National Labor Relations Board overruled its own recent decision in Epilepsy Found. of N.E. Ohio, 331 NLRB 676 (2000), and held that employees who are not represented by a union are not entitled to have a coworker present during investigatory interviews. In this decision, the Board held that IBM had not violated Section 8(a)(1) of the National Labor Relations Act when it denied the requests of three of its employees who asked to have a coworker or attorney present in interviews the company was conducting in response to allegations of harassment that had been made by a former employee. The Board wrote that “our consideration of ... the contemporary workplace leads us to conclude that an employer must be allowed to conduct its required investigations in a thorough, sensitive, and confidential manner. This can best be accomplished by permitting an employer in a nonunion setting to investigate an employee without the presence of a coworker.”
 

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