California Employment Law Update

Another Gargantuan California Verdict… This Time for $18.6 Million

A San Diego jury awarded that amount to a former employee who claimed he was wrongfully terminated based on his arrest record and then defamed.

Michael Tilkey worked for Allstate Insurance for 30 years and was fired from his job as a field sales leader after he admitted to Allstate that he was arrested for domestic violence against his then-girlfriend.  Although Tilkey was not convicted of the charges, the company investigated the matter and concluded that Tilkey violated its policy against physical harm or violence and terminated his employment.

Tilkey filed suit in San Diego Superior Court, claiming, among other things, that Allstate impermissibly considered his arrest record when deciding to terminate his employment and that he was forced to defame himself when telling prospective employers about the reason he was terminated – a so-called “self-published defamation” claim.  He additionally sought damages for lost past and future wages, emotional distress, and reputational harm.

After a week-long trial, a jury sided with Tilkey and awarded him nearly $2.7 million in compensatory damages, consisting of approximately $960,000 for wrongful termination and $1.7 million for defamation.

The jury then awarded Tilkey an additional $16 million in punitive damages, for a total verdict exceeding $18.6 million.

Not to sound like a broken record—but arbitration agreements, anyone?

New California Statute Shields Victims/Employers from Defamation Claims

California Governor Jerry Brown has signed Assembly Bill 2770 (Assembly Member Irwin; D-Thousand Oaks), an act to amend Section 47 of the Civil Code.  The bill should protect both sexual harassment victims and employers against defamation claims from alleged harassers.

The bill was sponsored by the California Chamber of Commerce and passed the Legislature with unanimous, bipartisan support—presumably in recognition that victims and employers are facing defamation lawsuits with growing regularity from harassers who claim they have been falsely accused.

If the alleged harasser later resigns or is terminated, employers encounter a different but equally precarious problem with regard to reference checks: risk a defamation claim by advising a prospective employer about the harassment allegations or remain silent and potentially enable the harasser to harass more employees in a new work environment.

Now, harassment victims and employers will be able to breathe a little easier knowing that Civil Code Section 47(c), as amended, will broaden the definition of “privileged publication or broadcast” to include:

  1. A complaint of sexual harassment by an employee (without malice) to an employer based upon credible evidence; and
  2. Communications between the employer and interested persons (without malice) regarding complaints of sexual harassment. This includes current or former employers’ communications regarding whether the employer would not rehire the alleged harasser due to a determination that he or she engaged in sexual harassment.

Although the amendment is a step in the right direction, its impact should not be overstated.  This new protection is merely a qualified privilege, which means that harassers can (and probably will) still sue victims and employers for what they will rather effortlessly claim were “false statements” made “with malice.”  Such claims may be difficult to get dismissed even at the summary judgment stage.

July 2018 California Employment Law Notes

We invite you to review our newly-posted July 2018 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

Some California “Sanctuary State” Employer Obligations Are Struck Down

On July 4th, U.S. District Judge John A. Mendez issued an order enjoining California from enforcing parts of the California Immigration Workers Protection Act (Assembly Bill 450), a new state law that restricted private employers from cooperating with federal immigration enforcement. See our previous blog post regarding the lawsuit here.

Among other things, the law imposed fines on private employers of up to $10,000 per violation if they “voluntarily consent” to giving federal immigration authorities access to nonpublic areas of a “place of labor” and/or to employee records, and it mandated that the employer insist that the authorities obtain a judicial warrant or subpoena before such information would be turned over. Cal. Gov’t Code §§ 7285.1 and 7285.2. The court sided with the U.S. Department of Justice in finding that several provisions of AB 450 discriminate against private employers who cooperate with the federal government.

In his Order, Judge Mendez stated that “these fines inflict a burden on those employers who acquiesce in a federal investigation but not on those who do not.” Thus, the court found that “a law which imposes monetary penalties on an employer solely because the employer voluntarily consents to federal immigration enforcement’s entry into nonpublic areas of their place of business or access to their employment records impermissibly discriminates against those who choose to deal with the federal government.”

The court also struck down a provision of the law limiting an employer’s ability to re-verify an employee’s employment eligibility unless otherwise required by federal law on the ground that it “frustrates the system of accountability that Congress designed.” Cal. Lab. Code § 1019.2. The court left standing an employer obligation to warn employees in writing of an imminent inspection of I-9 forms by federal immigration authorities. Cal. Lab. Code § 90.2(a)(1).

This decision means that private sector employers may not be prosecuted for: (i) consenting to a federal immigration enforcement agent’s request to enter nonpublic areas in the workplace; (ii) granting federal immigration enforcement agents access to employee records; or (iii) re-verifying an employee’s eligibility to work in the United States. The decision will likely be appealed, which means there may be more twists in store.

Another Day, Another $31 Million Employee Verdict From a Los Angeles Jury

On Tuesday, a Los Angeles jury did what L.A. juries do so often these days — they awarded tens of millions of dollars to an ex-employee who claimed she had been the victim of discrimination, wrongful termination and retaliation.  Codie Rael, who worked as a materials buyer for a dental supply company, claimed that she was subjected to comments such as you are “outdated,” “a dumb female,” and that she was allegedly told “we need younger workers here.”

At the conclusion of an 8-week trial and following four days of deliberations, the jury awarded Rael $5,282 for past economic losses; $3 million for past and future emotional distress damages; and $28 million in punitive damages.  Rael worked for the company for 36 years and was 54 years old at the time of her resignation/termination.  Rael’s lawyer contended that the employer’s actions were part of a deliberate plan to replace her entire department with younger, cheaper labor.  Although Rael had given the employer notice of her resignation, the company fired her before her employment actually ended.

Does anyone still need convincing that arbitration agreements are the way to go?  See our earlier post about that.

 

Supreme Court Bars Mandatory Union Dues For Public Employees

In a highly anticipated decision, the United States Supreme Court today held that it is a violation of the First Amendment to require public sector employees who are not members of a union to pay any union dues, even when a portion of those dues is attributable to the costs of collective bargaining on behalf of all employees.  Janus v. AFSCME Council 31, 585 U.S. ___, 2018 WL 3129785 (2018).

Petitioner Mark Janus, an employee of the state of Illinois, refused to join the union because he opposes many of its positions, including those arguably taken on his behalf in collective bargaining activities.  Janus challenged the requirement that he pay any fees to the union, including that portion of the union dues attributable to collective bargaining activities (“agency fees”), arguing that such fees represent “coerced political speech” and that “the First Amendment forbids coercing any money from the nonmembers.”  In a 5-4 decision, the Court overruled its prior opinion on this issue and determined that the state’s “extraction of agency fees from nonconsenting public-sector employees violates the First Amendment.”

 

Takeaways

Importantly, this ruling applies only to public sector unions, and therefore unions operating in the private sector may still collect agency fees from non-members.  The impact of this decision on the public sector is sure to be significant.  As the majority points out, unions may experience “unpleasant transition costs,” and as Justice Kagan predicts in dissent, this also means that state and local governments that previously operated with agency fees will have to find new ways of managing their workforces.  Negotiations between parties that have a continuing relationship may become particularly contentious, as the parties can no longer rely on long-settled terms, such as agency-fee provisions, when bargaining over future agreements.

This development also may have a significant impact on political contributions across the country.  In 2016, public employee unions contributed $65 million to political candidates, 90% of which went to Democrats.

The California state legislature already has taken several affirmative steps to cushion the blow of the Janus decision for its allies in the labor movement.  Last year, the California Legislature enacted and Gov. Brown signed Assembly Bill 119, which requires public employers to provide union representatives exclusive access to new employee orientation meetings so that the union can try to convince employees that it is in their interest to join the union and pay union dues.  The new statute does not indicate whether employee attendance at such sessions is mandatory nor does it acknowledge the existence of Cal. Gov’t Code § 3502, which specifically guarantees that “Public employees also shall have the right to refuse to join or participate in the activities of employee organizations and shall have the right to represent themselves individually in their employment relations with the public agency.”

AB 119 also requires public employers to provide the union with exclusive access to the name, job title, department, work location, work and home address, personal cellular telephone number and personal email address of all newly hired employees within 30 days of their hire – and every 120 days thereafter.

More recently, the state legislature passed Senate Bill 866, which requires that state employees who wish to reduce or eliminate their mandatory union dues payments in the wake of Janus must make such a request exclusively to the union rather than their employer, and the employer must rely upon the union’s representation as to which employees have chosen to pay or not pay union dues.  Further, a public employer may not send mail or email to its employees about their right to join or refrain from joining a union unless the employer facilitates the delivery of similar messages from the union.

The California State Assembly also passed Assembly Bill 2577 (Assembly Member Adam Gray, D-Merced), which allows union members to deduct the amount they pay in union dues from their income taxes.  This statute is obviously designed to reduce the cost of paying union dues, and it is estimated that it will cost California taxpayers more than $600 million over the next three years alone.

Multiple Minimum Wage Increases and Salary-Related Ordinances Scheduled to Take Effect on July 1, 2018

In the immortal words of Mao Zedong:  “Let a hundred flowers blossom!”

Multiple cities and hamlets throughout California have enacted slightly differing and, of course, maddeningly confusing non-uniform minimum wage laws.  Not surprisingly, no one in Sacramento seems at all concerned about the administrative burden to California employers in having to monitor and comply with so many different rules.

For those of you keeping track at home, here’s the current state of affairs:

Minimum Wage Increases

The following cities’ and county minimum wages are slated to increase:

City # of Employees Minimum Hourly Wage Beginning July 1, 2018 Minimum Hourly Wage Before July 1, 2018
Emeryville 56 or more employees

55 or fewer employees

$15.69

 

$15.00

$15.20

 

$14.00

Los Angeles (city) 26 or more employees

25 or fewer employees

$13.25

 

$12.00

$12.00

 

$10.50

Los Angeles (county) (unincorporated areas only) 26 or more employees

25 or fewer employees

$13.25

 

$12.00

$12.00

 

$10.50

Malibu 26 or more employees

25 or fewer employees

$13.25

 

$12.00

$12.00

 

$10.50

Milpitas $13.50 $12.00
Pasadena 26 or more employees

25 or fewer employees

$13.25

 

$12.00

$12.00

 

$10.50

San Francisco $15.00 $14.00
San Leandro $13.00 $12.00
Santa Monica** 26 or more employees

25 or fewer employees

$13.25

 

$12.00

$12.00

 

$10.50

** Hotel workers’ minimum wage will be indexed, meaning that their rates will be adjusted annually based on changes in the Consumer Price Index (CPI).

Most of these jurisdictions’ minimum wages are slated to increase again on July 1, 2019.

Belmont adopted an ordinance to establish its own minimum wage at $12.50/hour beginning July 1, 2018, with another increase set to go into effect on January 1, 2019.

Salary History Ordinance

San Francisco’s new Consideration of Salary History ordinance (also known as the Parity in Pay ordinance) will go into effect on July 1, 2018, and will prohibit employers from considering applicants’ current or past salaries when determining whether to extend an offer of employment and what salary to offer.  The ordinance also prohibits employers from asking applicants about their current or past salary, or disclosing a current or former employee’s salary history without that employee’s authorization (assuming that salary history is not publicly available).

However, it is important to remember that salary inquiry prohibitions are not unique to San Francisco – California recently enacted its own slightly different, statewide legislation that went into effect on January 1, 2018.

Employers should take care to review whether these ordinances impact their work force and ensure that they are compliant by the beginning of next month.

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