Kelly v. Inc., 135 Cal. App. 4th 1088 (2006)

Megan Kelly was discharged as the vice president of marketing of when she was seven months’ pregnant as part of a company-wide reorganization and reduction in force. Within a year of Kelly’s hire in October of 1999, the company suffered a precipitous 93 percent reduction in its stock value and, in order to reduce expenses, laid off 240 of its 540 employees. Although Kelly was not terminated during the October 2000 RIF (in fact, she was given stock options and paid a retention bonus to induce her to remain employed), she was ultimately terminated by different decision-makers in February 2001 along with 150 other employees. The trial court granted the employer’s motion for summary judgment, but the Court of Appeal reversed, holding that Kelly had established that the legitimate non-discriminatory business reasons offered by (elimination of Kelly’s job as part of a restructuring) may have been false and, therefore, could have been pretext for pregnancy discrimination. Among other things, the Court focused on a comment from the company’s CEO that Kelly had mentally “checked out” as she was approaching her pregnancy leave date. The Court affirmed dismissal of Kelly’s contract claim for the second installment of her retention bonus, but reversed the dismissal of Kelly’s statutory and public policy claims for prompt payment of earned wages.