California Employment Law Update

Los Angeles Jury Awards $17.4 Million to Sanitation Bureau Employee

Continuing an alarming recent pattern of multi-million dollar jury awards (see our earlier post), a Los Angeles jury panel recently awarded $17.4 million to a former employee of the Bureau of Sanitation.  The employee claimed he had been retaliated against because he had taken part in “protected activities” and because he had filed a complaint with the California Department of Fair Employment and Housing.  Although his employment was terminated by the Bureau, he successfully appealed the termination and was reinstated.  After he was reinstated, he claimed he was the subject of “rampant insults and slurs, verbally and in drawings, that implied he is gay.”  The employee was so distraught that he collapsed at work, went to the hospital and never returned to the job.  He sued the employer for sexual orientation discrimination, hostile work environment and retaliation, all of which allegedly caused depression, hypertension, vertigo, weight loss, heart damage and emotional distress.  The jury awarded the employee $15 million in past and future emotional distress damages and approximately $2.4 million in economic damages for lost wages and benefits.  In addition, the Court awarded the employee another $1.55 million in prevailing-party attorney’s fees.

We’ve said it before… We’ll say it again:  Arbitrate, arbitrate, arbitrate.  Lose no time in carefully considering and possibly implementing a mandatory pre-dispute arbitration regime.

Tax Reform Act Denies Deductions for Some Sexual Harassment Settlements

In a little-noticed provision buried deep inside the new Tax Cuts and Jobs Act (signed into law on Dec. 22) is the following “denial of deduction”:

Payments related to sexual harassment and sexual abuse – No deduction shall be allowed under this chapter for –

  • any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement; or
  • attorney’s fees related to such a settlement or payment.”

The statute adds a new Section 162(q) to the Internal Revenue Code, effective for amounts paid or incurred after December 22, 2017.  Where applicable, it may require taxpayers to choose between non-deductibility of the payment and non-disclosure of the settlement.

The Conference Report accompanying the statute does not include any guidance as to the scope of the key statutory text: “related to sexual harassment or sexual abuse.”  Because many cases involve multiple claims, only some of which may be “related to sexual harassment or sexual abuse,” careful planning and drafting of settlement and other agreements may be necessary to minimize the impact of this broad proscription.  Where factually supportable, litigants may want to allocate settlement payments to claims other than sexual harassment or sexual abuse, possibly creating opportunities to deduct at least portions of settlement payments to claimants with multiple claims.  Such allocations also may allow the deductibility of at least a portion of the attorney’s fees incurred in connection with the claims.

Also of interest is that the deductibility of attorney’s fees is not limited to fees incurred by defendants. Read literally, new Section 162(q)(2) would deny a deduction for all attorney’s fees related to “such a settlement or payment,” which presumably would include the fees paid by a plaintiff/settlement recipient as well, which may further complicate settlement negotiations. However, until and unless a statutory change is made (for example, in a technical corrections bill) or the Treasury or IRS releases interpretive guidance otherwise, litigants should carefully consider the effect of the statute’s plain text in their planning.

Labor Commissioner Issues New Guidance On Breaks

The California Labor Commissioner recently issued a Frequently Asked Questions (FAQ) memo regarding breaks and lactation accommodation. The FAQ memo contains no new concepts, but emphasizes the following longstanding principles:

  • California employers must authorize and permit a net 10-minute paid rest period for every four hours worked (or major fraction thereof). To the extent practicable, the rest period should be in the middle of the work period. An employee is entitled to one hour of pay at the employee’s regular rate for each workday that a rest period is not provided;
  • A “net” of 10 minutes means that the rest period begins when the employee reaches an area away from the work area that is appropriate for rest;
  • Employers are required to provide suitable resting facilities that shall be available to employees during working hours in an area separate from toilets;
  • If the nature and circumstances of the employee’s work prevent the employer from giving the break as close as possible to the middle of the four-hour period, the employee must still be given the break but at another point in the work period;
  • Working through rest periods does not entitle an employee to leave work early or arrive late;
  • An employer may not require an employee to remain on premises during a rest period;
  • An employer may not require that an employee remain in radio communication during a rest period;
  • Smokers are not entitled to additional rest breaks;
  • The 10-minute rest periods are not designed to be exclusively for use of toilet facilities. The Labor Code and Industrial Welfare Commission Wage Orders contemplate that employees also will be permitted to limited breaks to use toilet facilities, and allowing employees to use such facilities does not satisfy the employer’s obligation to provide required rest breaks;
  • Employers are required to provide a reasonable amount of break time to accommodate an employee desiring to express milk for the employee’s infant child. If possible, the break time is to run concurrently with any break time provided to the employee. Break time that does not run concurrently with rest breaks need not be paid. An employer is not required to provide an employee break time for purposes of lactating if doing so would seriously disrupt the operations of the employer;
  • The employer is to make reasonable efforts to provide the employee with the use of a room or other location, other than a toilet stall, in close proximity to the employee’s work area for the employee to express milk in private.  (Note, however, that federal law prohibits employers with 50 or more employees from requiring employees to express breast milk in a bathroom.)

The Labor Commissioner advises employees that they may file claims if their employers fail to meet their break obligations.

November 2017 California Employment Law Notes

We invite you to review our newly-posted November 2017 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include:

Newly Enacted California Statutes

New Case Law

California Enacts “Ban the Box” Legislation

On Saturday, October 14, 2017, California Gov. Jerry Brown signed Assembly Bill 1008 into law, which is set to take effect on January 1, 2018.  Known as the “Ban the Box” legislation, in reference to the box applicants are asked to check if they have any prior criminal convictions, the new law prohibits employers with five or more employees from inquiring about or considering a job applicant’s conviction history prior to an offer of employment.

Specifically, the new law amends California’s Fair Employment and Housing Act (FEHA) by making it unlawful for employers in California with five or more employees to include on any application for employment any question that seeks the disclosure of an applicant’s conviction history, to inquire into or consider the conviction history of an applicant until that applicant has received a conditional offer, and, when conducting a conviction history background check, to consider, distribute, or disseminate information related to specified prior arrests, diversions, and convictions.  The law expands existing “Ban the Box” legislation currently in effect in fifteen local jurisdictions, including Los Angeles and San Francisco, to California generally.

Moreover, the new law also requires an employer who intends to deny an applicant a position of employment solely or in part because of the applicant’s conviction history to make an individualized assessment of whether the applicant’s conviction history has a direct and adverse relationship with the specific duties of the job.  In making the assessment, the employer must consider the nature and gravity of the offense or conduct, the time that has passed since the offense or conduct and completion of the sentence, and the nature of the job sought by the applicant.

If the employer, after making this assessment, decides to deny employment, the employer must provide the applicant with written notification of this decision consisting of notice of the disqualifying conviction, a copy of the conviction history report, if any, and an explanation of the applicant’s right to respond to the notice.  The applicant would then have five business days to respond to the notification before the employer may make a final decision.  The employer’s final decision must be issued in writing to the applicant and must contain the final denial or disqualification, any existing procedure the employer has for the applicant to challenge the decision, and notice of the right to file a complaint with the Department of Fair Employment and Housing.

Employer’s Victory In Workers’ Compensation Proceeding Leads To Dismissal Of Discrimination Claims

A recent California Court of Appeal opinion reminds employers of the need to carefully monitor parallel workers’ compensation proceedings involving litigants who also have civil claims pending against the employer. Ly v. County of Fresno, 2017 WL 4546059 (Cal. Ct. App. Sept. 15, 2017).

Three Laotian correctional officers filed Fair Employment and Housing Act (“FEHA”) charges alleging they had been subjected to racial and national origin discrimination, harassment and retaliation. At the same time, they pursued claims before the Workers Compensation Appeals Board (“WCAB”) in which they alleged compensable psychiatric work-related injuries as a consequence of the claimed discrimination. The workers’ compensation judge found for the employer, concluding that the challenged conduct was lawful, non-discriminatory and done in good faith.

After the completion of the WCAB proceedings, the employer filed a motion for summary judgment in the civil discrimination suit the plaintiffs had filed. The trial court granted summary judgment for the employer, finding the civil claims were barred by the doctrines of res judicata and collateral estoppel, as those claims had been fully litigated before the WCAB. The Court of Appeal affirmed dismissal of the civil case. In both the WCAB and civil proceedings, the plaintiffs sought redress for the same psychiatric injuries caused by the employer’s discriminatory, harassing and retaliatory acts in the workplace.

This case happened to result in a win for the employer, but it could just as easily have resulted in a loss if the WCAB had ruled in favor of the employees. And that is the most important practical lesson for employers, which is the need to carefully monitor parallel workers’ compensation proceedings. Such proceedings are not uncommon, but their defense usually proceeds very differently. In the workers’ compensation realm, the workers’ compensation insurer, not the employer, generally controls the defense of the claim. The matter proceeds under more informal rules of procedure and evidence and is tried to an administrative law judge whose sympathies often lie with the employee.

Consequently, at the outset of any employment litigation, it is critical that an employer determine if there is a pending workers’ compensation proceeding; if so, the employer should carefully monitor that proceeding by proactively engaging with the insurer and its counsel to determine what issues are to be tried and to participate, to the extent possible, in any proceedings on the merits. Otherwise, the employer may find that its fate in the parallel civil proceeding—which carries with it a much greater cost of defense and potential damages—will have been decided by its workers’ compensation insurer and the WCAB.  Similarly, if the WCAB proceeding results in a “win,” the employer should lose no time in filing a motion for summary judgment in the pending civil action in order to take advantage of the victory.

New Mandatory California Training on Gender Identity Harassment

On Oct. 15, 2017, California Gov. Jerry Brown signed Senate Bill 396 into law, expanding the scope of mandatory sexual harassment training employers must provide to their supervisory employees.  Currently, California’s Fair Employment and Housing Act (“FEHA”) requires employers with 50 or more employees to provide at least two hours of prescribed training and education regarding sexual harassment to all supervisory employees within six months of their assumption of a supervisory position, and then once every two years thereafter.  This new law expands the scope of FEHA’s requirements by mandating that the training must also cover harassment based on gender identity, gender expression, and sexual orientation.  Such training must be conducted by individuals with knowledge and expertise in these topics and must include practical examples.

California employers also will be required to post a new poster developed by the Department of Fair Employment and Housing regarding transgender rights in a prominent and accessible location in the workplace.