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

Ellis v. Costco Wholesale Corp., 657 F.3d 970 (9th Cir. 2011)

In this appeal, Costco challenged the district court's order granting class certification in an action in which Costco's promotional practices were alleged to have discriminated against female employees. The district court's order granting class certification preceded the United States Supreme Court's opinion in Wal-Mart Stores v. Dukes, 131 S. Ct. 2541 (2011). In this opinion, the Ninth Circuit recognized that the Wal-Mart opinion "altered existing law" and, accordingly, vacated the lower court's order granting class certification. Specifically, the Court: (i) vacated and remanded the district court's ruling as to commonality under Fed. R. Civ. P. 23(a) because the lower court had failed to conduct the required "rigorous analysis" to determine whether there were common questions of law or fact among the class members' claims; (ii) vacated and remanded the district court's ruling as to "typicality" under Fed. R. Civ. P. 23(a) because the district court failed to consider the effect that defenses unique to the named plaintiffs' claims might have on that question; (iii) affirmed the district court's ruling as to the adequacy of the one class representative who was a current employee allegedly being denied promotion; and (iv) vacated and remanded the district court's certification of the class pursuant to Rule 23(b)(2) based upon the Supreme Court's unanimous rejection of the predominance test for determining whether monetary damages may be included in a 23(b)(2) class certification.

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In Ellis v. Costco Wholesale Corp., 2011 U.S. App. LEXIS 19060 (9th Cir. Sept. 16, 2011), the Ninth Circuit reviewed the standards for class certification in an employment class action following the U.S. Supreme Court’s decision in Dukes v. Walmart. In Ellis,three named plaintiffs sought injunctive relief, compensatory damages, and backpay on behalf of a nationwide class of female employees who the plaintiffs claimed had been denied promotion because of their gender. The district court granted class certification. In reviewing the certification order, the court provided guidance for class action litigation in the Ninth Circuit following Walmart.

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The number of protected classes under California’s Fair Employment and Housing Act (“FEHA”), Cal. Gov’t Code § 12900 et seq., has risen by one. The FEHA, together with the Unruh Civil Rights Act, Cal. Civ. Code § 51, currently prohibit discrimination in employment, housing, public accommodation, and services provided by business establishments on the basis of various personal characteristics such as sex, race, color, national origin, religion, and disability. Additional protections have been added over time to include within the purview of these anti-discrimination statutes medical condition, marital status, and sexual orientation. Earlier this month, Governor Jerry Brown signed into law Senate Bill 559 (“SB 559”) (pdf), which adds genetic discrimination to the list of prohibited practices in California. “Genetic information” is defined by the bill as (1) the individual’s genetic tests; (2) the genetic tests of family members of the individual; and (3) the manifestation of a disease or disorder in family members of the individual. The bill’s proponents insist that because many genetic disorders are associated with particular racial, social, or ethnic groups, the new law will prevent genetic information from being used to stigmatize or unfairly discriminate against these groups. SB 559 augments the federal Genetic Information and Nondiscrimination Act of 2008, Pub. L. No. 110-233, whose range of protections was deemed by the California Legislature to be “incomplete for Californians.” SB 559, § 1(j). The practical effect of the law on employers remains to be seen, but for now we note that SB 559 touches not only the areas of housing and employment generally, but also licensing boards, life insurance coverage, and state-administered and funded programs.

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The plaintiff was an Australian citizen working as an associate attorney for the law firm of O'Melveny & Myers LLP on a work visa. In October 2009, Paramount extended to her a conditional offer of employment to serve as its Vice President, IT Legal, the offer being contingent upon the completion of a background investigation to Paramount’s satisfaction and the successful transfer of her work visa. The conditional offer indicated that a separate employment agreement would follow. When the plaintiff countersigned the conditional offer letter in late October, she told Paramount, for the first time, that she would not be able to start work until January 2010 because of a previously undisclosed secondment to a client of O'Melveny and because she needed to travel to Australia during the first week of January.

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In Wal-Mart Stores, Inc. v. Dukes, No. 10-277 (U.S. June 20, 2011), the Supreme Court vacated class certification of a gender discrimination lawsuit brought by 1.5 million current and former Wal-Mart employees because the plaintiffs failed to identify a specific, company-wide policy or practice of discrimination. Additionally, the Court held unanimously that the employees’ backpay claims could not be certified as a class action because Wal-Mart was entitled to individual proceedings so that it could present defenses as to each claim.

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Scotch v. Art Inst. of Cal.-Orange County, Inc., 173 Cal. App. 4th 986 (2009)

Carmine Scotch sued his former employer, the Art Institute of California-Orange County, Inc. (“AIC”) for discrimination based on his disability (HIV), failure to make reasonable accommodation, failure to engage in the required interactive process, failure to maintain a workplace free of discrimination, and retaliation. The Court of Appeal affirmed summary judgment in favor of AIC on all counts, holding that Scotch had failed to prove a causal link between his revelation that he was HIV-positive and the challenged adverse employment decision (assigning him to teach fewer than five course sections during an academic term). The Court further held the accommodation that Scotch sought (giving him priority in assignment of courses to ensure that he would teach five courses during the term) was not reasonable. Finally, the Court held that Scotch had failed to identify a reasonable accommodation that would have been available at the time the interactive process should have occurred, so any failure on AIC’s part to engage in that process was not “material.” The Court also found no evidence of constructive termination of Scotch’s employment or illegal retaliation. Cf. Knappenberger v. City of Phoenix, 566 F.3d 936 (9th Cir. 2009) (plaintiff failed to allege facts which, if true, would establish his early retirement from police department was involuntary and a violation of 42 U.S.C. § 1983).

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Gross v. FBL Fin. Servs., Inc., 557 U.S. ___, 129 S. Ct. 2343 (2009)

Jack Gross worked for FBL as a claims administration director until he was reassigned to the position of claims project coordinator. At the time of his reassignment, many of Gross’s job responsibilities were transferred to a newly created position (claims administration manager) that was filled by Lisa Kneeskern, one of Gross’s former subordinate employees who was then in her early 40’s. Gross was 54 years old at the time. Although Gross and Kneeskern received the same compensation after the reassignment, Gross considered the job action to be a demotion because of FBL’s reallocation of some of his job responsibilities to Kneeskern. At trial, the jury returned a verdict for Gross in the amount of $46,945 in lost compensation after receiving a “mixed motive” instruction from the judge (i.e., that Gross was required to prove that “age was a motivating factor” in FBL’s decision to demote him). The Supreme Court vacated the lower court opinion and held that under the Age Discrimination in Employment Act the plaintiff must prove by a preponderance of the evidence that age was the “but-for” cause of the challenged adverse employment action, and the burden of persuasion does not shift to the employer to show that it would have taken the action regardless of age, even when a plaintiff has produced some evidence that age was one motivating factor in the employer’s decision. Compare Browning v. United States, 567 F.3d 1038 (9th Cir. 2009) (district court did not err in failing to give jury instruction explicitly addressing pretext in race discrimination case).

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Ricci v. DeStefano, 557 U.S. ___, 2009 WL 1835138 (2009)

One hundred eighteen firefighters took written examinations administered by the city of New Haven, Connecticut in order to qualify for promotion to the rank of lieutenant or captain. When the examination results showed that white candidates had outperformed minority candidates, the mayor and other local politicians opened a public debate that “turned rancorous.” Some firefighters argued the tests should be discarded because the results proved the tests were discriminatory; others argued the exams were neutral and fair. The City sided with those who protested the results and threw out the examinations. Several white and Hispanic firefighters challenged that decision under Title VII of the Civil Rights Act of 1964 and the Equal Protection Clause of the Constitution, asserting they had been discriminated against on the basis of their race. In reversing the United States Court of Appeals for the Second Circuit, the Supreme Court held that the City had violated Title VII: “We conclude that race-based action like the City’s in this case is impermissible under Title VII unless the employer can demonstrate a strong basis in evidence that, had it not taken the action, it would have been liable under the disparate-impact statute.” Cf. AT&T Corp. v. Hulteen, 556 U.S. ___, 129 S. Ct. 1962 (2009) (employer did not violate Pregnancy Discrimination Act by paying pension benefits calculated in part under an accrual rule that gave less retirement credit for pregnancy than for medical leave generally).

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Yesterday, in a highly anticipated 5-4 decision, the U.S. Supreme Court held in Ricci v. DeStefano that the City of New Haven engaged in unlawful intentional race discrimination in violation of Title VII of the Civil Rights Act of 1964 (“Title VII”) when it discarded a firefighter promotional test because of the racial makeup of the successful test takers. The City claimed that the test had a disparate impact on minorities and that, if it certified the test results and proceeded with promotions, it would have been sued for discrimination by minority test takers. The Court held that the City had to show a strong basis in evidence that it would be liable in such a suit – something more than the statistical results of the test – in order to justify throwing out the test and discriminating against the successful test takers, most of whom were white. It further held that, upon its review of the factual record, the City could not meet this burden. Reversing the Second Circuit (which had affirmed the trial court decision), it found that summary judgment should be entered against the City. The factual background of the case, opinion of the Court and the implications of the case for employers are discussed below.

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In an important ruling that increases the burden on plaintiffs in cases under the federal Age Discrimination in Employment Act (ADEA), the United States Supreme Court held on June 18, 2009 that plaintiffs in age discrimination cases always bear the burden of proving that an adverse employment action would not have been taken against them “but for” their age. Gross v. FBL Financial Services, Inc., No. 08-441. This ruling draws a distinction between the ADEA and Title VII, under which plaintiffs need only show that their membership in a protected class was a “motivating factor” in an employer’s action, and eliminates any shifting of the burden of persuasion in so-called “mixed motive” cases under the ADEA.

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Over the last few years, caregiver discrimination has become an emerging issue in employment law. A pair of recent court decisions and the potential impact of the Lilly Ledbetter Fair Pay Act of 2009, as well as signals from the Obama Administration, in particular the Equal Employment Opportunity Commission, suggest that the issue of discrimination because of a worker’s family caregiving responsibilities is gaining recognition and momentum. In March, both the First and Ninth Circuit found in favor of employees who had alleged that they had been discriminated against based on their caregiving responsibilities. In April, the EEOC issued a new technical assistance document on the subject. This recent activity serves as an important reminder to employers that the EEOC, plaintiffs’ attorneys and the courts are scrutinizing employment decisions that adversely affect caregivers more closely than ever to determine whether unlawful discrimination might be afoot. As such, employers would be wise to take proactive steps to avoid allegations of discrimination against caregivers.

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In a 7-2 decision, the United States Supreme Court has held that AT&T did not violate the Pregnancy Discrimination Act (“PDA”) when it based its calculation of employees’ pensions in part on a pre- PDA accrual rule that treated pregnancy leave less favorably than other forms of disability leave. AT&T Corp v. Hulteen, No. 07-543 (May 18, 2009). The Court’s decision reversed the Ninth Circuit and confirmed the presumption that discrimination statutes will not be applied retroactively.

Background

Plaintiffs were Noreen Hulteen and three other AT&T employees who had taken pregnancy leave before April 29, 1979, the effective date of the PDA. At the time they took leave, AT&T based employee pension benefits on a seniority system (i.e., a system based on length of service) that provided less service credit for pregnancy leaves than it did for other forms of temporary disability leave. When the PDA took effect, AT&T changed its system and began to provide full service credit for pregnancy leaves. It did not, however, retroactively adjust the accrued service credits of Plaintiffs or any other employees who previously had taken pregnancy leave. Therefore, when those employees retired, they received an overall pension amount that was less than it would have been if AT&T had afforded full service credit to their pre-PDA pregnancy leaves.

Plaintiffs and their union filed suit against AT&T in the Northern District of California alleging discrimination on the basis of sex and pregnancy in violation of Title VII of the Civil Rights Act of 1964, as amended by the PDA. Plaintiffs argued that it was unlawful for AT&T, in the present day, to apply a seniority-based pension system that incorporated antiquated pre-PDA accrual rules that had differentiated on the basis of pregnancy. Doing so, Plaintiffs contended, carried forward the old service credit differential so as to produce a disparate effect in the amount of the pension benefits of employees who had taken pre-PDA pregnancy leave. The district court agreed, holding that AT&T had engaged in unlawful pregnancy discrimination, and the Ninth Circuit, en banc, affirmed. Because the Ninth Circuit’s decision directly conflicted with rulings from other circuits, the Supreme Court granted certiorari to resolve the circuit split.

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Proskauer Prevails As The Court Holds That Collectively Bargained Agreements for The Arbitration of Statutory Discrimination Claims are Enforceable

On April 1, 2009, the United States Supreme Court, in a 5-4 decision, ruled in favor of Proskauer Rose’s client 14 Penn Plaza LLC, holding that a collective bargaining agreement (“CBA”) that clearly and unmistakably requires union members to arbitrate Age Discrimination in Employment Act (“ADEA”) claims is enforceable as a matter of federal law. The Court’s decision validates the right of an employer and a union to negotiate about the way disputes can be resolved, even when those disputes involve individual statutory rights. Accordingly, 14 Penn Plaza LLC. v. Pyett, is significant to all employers who have collective bargaining relationships.

Proskauer negotiated the CBA at issue on behalf of the Realty Advisory Board on Labor Relations, Inc., (“RAB”) and handled this litigation on behalf of 14 Penn Plaza — from the district court through argument of the matter before the Supreme Court by Paul Salvatore, co-chair of Proskauer’s Labor and Employment Law Department.

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Wilson v. County of Orange, 169 Cal. App. 4th 1185 (2009)

Julie Ann Wilson worked as a radio dispatcher for the Orange County Sheriff’s Department’s emergency communications system. Wilson sued the County for disability discrimination under the Fair Employment and Housing Act (“FEHA”) on the ground that it allegedly had failed to make reasonable accommodation for her medical condition (antiphospholipid antibody syndrome or “thick blood”) that necessitated she avoid the most stressful aspects of her job. Although the County accommodated Wilson in precisely the manner she sought, she contended it had violated the FEHA by not providing her the accommodation earlier and by not initiating an “interactive process” with her sooner. The case was tried to a jury, and the jury returned a verdict for the County. The Court of Appeal affirmed the judgment in favor of the County, holding that “the record demonstrates the County engaged in a process aimed at trying to accommodate Wilson. Indeed, the success of its process is borne out by the fact that in the end, Wilson got exactly what she wanted – albeit after a series of temporary accommodations.”

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Dominguez v. Washington Mut. Bank, 168 Cal. App. 4th 714 (2008)

Yoko Dominguez, a former temporary employee of Washington Mutual assigned to processing outgoing mail, alleged that a co-worker (Javier Gutierrez) had made crude and offensive comments to her after learning that Dominguez was a lesbian. Dominguez complained about Gutierrez’s comments to her supervisor’s supervisor (who was also a lesbian) as well as to her direct supervisor who “might have given” Gutierrez verbal warnings about his conduct. Shortly thereafter, Dominguez’s supervisor invited her to apply to become a full-time, regular employee, but two days after she applied, she was fired because she was “frequently late for work.” In her lawsuit, Dominguez alleged discrimination, harassment and retaliation in violation of the Fair Employment and Housing Act; the trial court granted defendants’ summary judgment motions on statute of limitations grounds and because Dominguez had no evidence to rebut WaMu’s claim that it fired Dominguez for a legitimate nondiscriminatory reason (her tardiness). The Court of Appeal reversed in part, holding that Dominguez timely filed her administrative complaint with the California Department of Fair Employment and Housing (“DFEH”). Although Gutierrez’s verbal taunts ceased in May of 2002 and Dominguez did not file her DFEH complaint until August of 2003, Gutierrez’s post-May 2002 conduct (e.g., jamming the wheels of Dominguez’s pallet jack, blocking her access to her work stations with heavy boxes and otherwise interfering with the performance of her job) may have constituted a continuing violation that extended through August of 2002 (when her employment was terminated). Further, the Court held that triable issues of fact existed as to whether Gutierrez’s conduct was sufficiently hostile and pervasive and whether the stated reason for terminating Dominguez was a pretext (given the almost contemporaneous invitation to apply for full-time employment with WaMu). Finally, the Court held that Dominguez had waived her punitive damages claim against WaMu by failing to properly address it on appeal and that her retaliation claim against Gutierrez was improper in light of Jones v. The Lodge at Torrey Pines P’ship, 42 Cal. 4th 1158 (2008). Cf. Young v. Exxon Mobil Corp., 168 Cal. App. 4th 1467 (2008) (supervisor whose defense was paid by employer was entitled to recover only $1.00 in attorney’s fees even though employee’s claims against supervisor were frivolous and brought in bad faith).
 

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Westrec Marina Mgmt., Inc. v. Arrowood Indemn. Co., 163 Cal. App. 4th 1387 (2008)

Westrec sued its insurance carrier, Arrowood, after the carrier refused to provide a defense to an employment discrimination lawsuit on the ground that Westrec had failed to timely report the third-party claim as required under the terms of two successive directors and officers liability insurance policies issued by Arrowood. Bette Clark filed a complaint with the California Department of Fair Employment and Housing on April 14, 2003, alleging gender bias by Westrec and requesting a right-to-sue letter. On June 23, 2003, Clark’s attorney sent a letter to Westrec “alleging discriminatory and demeaning treatment by male employees based upon sex.” Westrec failed to notify Arrowood of the DFEH filing or the attorney’s letter within 30 days after the expiration of the policy. Clark filed her lawsuit on December 19, 2003, and Westrec notified Arrowood of the action on January 30, 2004, tendered its defense and requested indemnity. Arrowood declined to defend or indemnify on the ground that Westrec had not timely notified it of the “claim,” which it deemed to be the DFEH filing and/or the attorney’s letter. Arrowood prevailed following a nonjury trial on Westrec’s breach of contract claim. The Court of Appeal affirmed, holding that Westrec had failed to timely report the claim to its insurance carrier and thereby waived coverage.
 

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