California Supreme Court Holds, Contrary to Federal Law, That Unauthorized Workers Can Recover Back Pay Even for the Post-Termination Time Period When They Did Not Perform Work and Could Not Legally Earn Wages

Today the California Supreme Court issued its decision in Salas v. Sierra Chemical Co., holding that an employee who fraudulently obtained employment through use of someone else’s social security number, may still pursue employment discrimination claims stemming from termination and recover damages against the employer, including post-termination back pay for the period when the employee was not authorized to work and did not actually perform work.  The Court held that federal immigration law does not preempt this result.

Salas applied for employment with Sierra Chemical in 2003 and was hired.  In compliance with its legal obligations, Sierra Chemical required Salas to complete an I-9 form as well as a W-4.  Salas completed these forms by providing a resident alien card and a social security card.  From 2003 to 2005, Salas was subject to seasonal layoffs on a few occasions, but was later recalled to work.  Each time he was recalled to work, Salas provided the same social security number he had provided upon hire.  In 2006, Salas injured his back in the course of his work.  He sought medical treatment and returned to work with temporary modified work restrictions, with Sierra Chemical accommodated.  A few months later, Salas was released to full duty.

Later the same year, Salas injured his back again and filed a workers’ compensation claim.  He performed modified duties, which Sierra Chemical accommodated, until the winter of 2006, when he was subject to another seasonal layoff along with Sierra Chemical’s other production workers.  In May 2007, Sierra Chemical notified Salas and other production workers that it was recalling them for work and directing them to make arrangements to return to work.  Salas’ supervisor told Salas to also bring a doctor’s note indicating he was released to return to work.  Salas contacted his supervisor and told him that he had not been released to return to full duty but that he had an appointment in June to obtain the release.  Salas’ supervisor agreed to hold his job open for him until that time.  Salas’ supervisor never heard from him again.

In August 2007, Salas sued Sierra Chemical, alleging claims for failure to accommodate a disability in violation of FEHA, and for unlawful refusal to rehire him in retaliation for filing a workers’ compensation claim.  Salas sought lost wages, emotional distress damages, punitive damages, and attorneys’ fees.  Two years into the litigation, Sierra Chemical learned that Salas had falsified his employment eligibility documentation and that he was not authorized to work in the United States.  Sierra Chemical filed a motion for summary judgment, arguing that it was entitled to judgment as a matter of law on Salas’ claims based on the doctrines of after-acquired evidence and unclean hands.  The trial court denied Sierra Chemical’s motion, but was then directed by the court of appeal (by writ of mandate) to grant the motion.  After judgment was entered for Sierra Chemical, Salas appealed.  The court of appeal again held that Salas’ claims were barred by the doctrines of after-acquired evidence and unclean hands and affirmed the judgment in favor of Sierra Chemical.  The California Supreme Court granted review and reversed the judgment in favor of Sierra Chemical, holding that the doctrines of after-acquired evidence and unclean hands did not operate to completely bar Salas’ claims.

The Court (in an opinion authored by Justice Kennard and joined by Justices Cantil-Sakauye, Werdegar, Corrigan, and Liu) held that the doctrines of after-acquired evidence and unclean hands may operate to reduce an employee’s damages and/or preclude reinstatement, but that they are not a complete defense to an employee’s claims.  The court held that where lost wage damages are at issue, these doctrines generally preclude recovery of lost wage damages from the point of the employer’s discovery of the employee’s misconduct forward, but that the doctrines do not bar recovery of damages for the period of time prior to the employer’s discovery of the information.  In the case of an employee who is fired and later sues, and during the litigation the employer discovers that the employee fraudulently obtained employment through use of someone else’s social security number, the employee would still be entitled to recover lost wages for the time period from termination until the employer discovered the fraud (typically years later during the litigation process).  In other words, the employee who wasn’t even authorized to hold employment in the first instance and did not perform any work for the employer during the post-termination time period could still recover lost wages for being denied employment during that time period.  Really?

Employers shaking their heads have good reason to do so.  The United States Supreme Court does not seem to agree with the result reached today by the California Supreme Court.  Indeed, in 2002, in Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137, the United States Supreme Court held that a worker who fraudulently obtained employment in violation of immigration laws was not entitled to backpay from the period of time from termination through the employer’s discovery of the fraud.  Reversing an award of backpay to an employee for a four and one-half period of time from his termination through his employer’s discovery of his undocumented status, the Court held that “awarding backpay to illegal aliens runs counter to policies underlying” the Immigration Reform and Control Act of 1986, and that it was improper to “award backpay to an illegal alien for years of work not performed, for wages that could not lawfully have been earned, and for a job obtained in the first instance by criminal fraud.”  Makes sense, right?  The California Supreme Court apparently does not think so.  In an effort to get around Hoffman Plastics, the California Supreme Court held that Hoffman Plastics did not apply because it dealt with NLRB proceedings and that somehow made it materially different.  The Court held that because this case involves California law and, more specifically, discrimination claims brought under FEHA, there are different public policy considerations at issue.  The Court also emphasized the fact that in 2002, the California legislature, which also did not like the Hoffman Plastics decision, enacted a state law specifically designed to render Hoffman Plastics inapplicable to state law employment claims.  That 2002 California state law specifically provided that all state-provided worker protections, rights, and remedies (except reinstatement prohibited by federal law) were equally available and applicable to all individuals regardless of immigration status.

Hmmm.  Doesn’t federal immigration law preempt state laws to the contrary?  Not so, according to today’s California Supreme Court ruling.  The Court held that there was no direct conflict between federal immigration law and California law permitting unauthorized workers to recover lost wages for a period of time when the employer did not know of the employee’s fraud and unauthorized status.  The Court also held that California law was not in conflict with the policy and purpose of federal immigration law.  According to the Court:

“Even if permitting [unauthorized aliens who have used false documents to secure employment] to obtain state remedies for violations of the state labor and employment laws provides an incentive for such federal law violations, the practical effect of such incentive is minimal because the typical unauthorized alien wage earner is not familiar with the state law remedies available for unlawful termination and because job seekers rarely contemplate being terminated in violation of the law.  Thus, it is highly unlikely that an unauthorized alien’s decision to seek employment in this country would be based in any significant part on the availability of lost wages as a remedy for unlawful discharge. . . . Furthermore, not allowing unauthorized workers to obtain state remedies for unlawful discharge, including prediscovery period lost wages, would effectively immunize employers that, in violation of fundamental state policy, discriminate against their workers on grounds such as disability or race, retaliate against workers who seek compensation for disabling workplace injuries, or fail to pay the wages that state law requires.”

Based on this and other reasoning, the California Supreme Court held that California’s 2002 law and its holding were not preempted by federal immigration law.

In sum, the California Supreme Court held that a worker who fraudulently obtains employment through false immigration documents and is later terminated for reasons unrelated to the employee’s fraud may pursue claims for employment discrimination and that those claims are not completely barred by the employee’s fraudulent conduct.  The employee loses the right to reinstatement as a remedy if the employee was not actually authorized to work in the United States in the first place and also loses the right to recover lost wages for any time AFTER the employer discovers the employee’s fraud.  However, the employee can still recover lost wages from the time of termination until the time the employer discovers the fraud, even though the employee was not authorized to work and did not actually perform any work for the employer during that time period.  Of course, the employee can also still seek emotional distress damages, punitive damages, and attorneys’ fees as well.

Justice Baxter, joined by Justice Chin, dissented from the majority’s holding, stating that in their view, Hoffman Plastics and federal immigration law preempt and preclude a state law award of back pay during the time period from an employee’s termination through the employer’s discovery of the fraudulent conduct.  Perhaps Sierra Chemical will seek review by the United States Supreme Court.  Stay tuned.  Today’s decision is available in full here.

Ninth Circuit Approves $700,000 Attorney Fee Award In FEHA Case Even Though Jury Awarded Plaintiff Damages of Only $27,000

Last week, the Ninth Circuit issued its decision in Muniz v. UPS, holding that the trial court did not abuse its discretion in awarding the plaintiff close to $700,000 in attorneys' fees, even though the plaintiff's damages recovery was only $27,000 and the defendant defeated the majority of plaintiff's claims prior to trial.  This result is an unpleasant example of how an employer can be largely victorious in defending an employment suit yet still lose big on attorneys' fees.

In Muniz, the plaintiff was given a performance improvement plan and later demoted, based on unsatisfactory performance. Plaintiff sued, alleging "kitchen sink" discrimination based on age and gender, and also alleged retaliation and negligent supervision and training.  Plaintiff's age discrimination, retaliation, and negligent supervision claims (as well as plaintiff's claim for punitive damages) were defeated and/or voluntarily dismissed prior to trial (meaning UPS prevailed on these claims).  The only claim that was actually tried was plaintiff's claim for gender discrimination based on being given a performance improvement plan and later demoted. The jury determined that plaintiff's demotion was motivated by gender discrimination but awarded plaintiff damages of only $27,000 (much less than plaintiff's plea to the jury to award her $700,000).  The jury also concluded that plantiff's performance improvement plan was motivated in part by gender discrimination, but that UPS would have taken the same action for legitimate, non-discriminatory reasons.  As such, the plaintiff was not permitted to recover damages (alleged emotional distress) associated with the performance criticism.

In sum, the defense largely prevailed in the case, having defeated all but one of plaintiff's claims and substantially limiting plaintiff's recovery.  That is, until plaintiff filed a motion for recovery of attorneys' fees for prevailing on one FEHA discrimination claim.  Plaintiff outrageously sought $1.9 million in fees for her limited success, including a claimed lodestar (number of hours expended times hourly rates) of $1.3 million (which included time spent litigating the claims that were defeated) and a requested 1.5 upward enhancement.  The trial court denied the requested 1.5 multiplier and limited its analysis to the reasonableness of the $1.3 lodestar.  In this regard, the trial court found that plaintiff's counsel's proffered hourly rates were unreasonable and reduced them slightly.  The trial court also found that plaintiff's counsel had not sufficiently proven the number of hours expended on the litigation and, therefore, reduced the compensable total hours by 20 percent, bringing the fee award down to $773,000.  At that point, the court considered UPS' argument that the fee award needed to be substantially reduced to account for plaintiff's very limited success and the extreme disproportion between the plaintiff's damages and the amount of fees sought.  The trial court reduced the fees by only 10 percent and awarded plaintiff nearly $700,000 in fees.

UPS appealed to the Ninth Circuit, arguing primarily that the fee award should have reduced more than 10 percent to account for plaintiff's limited success.  The Ninth Circuit disagreed, relying heavily on the deferential standard of review which gives a trial court broad discretion to set the amount of fees awarded.  The Ninth Circuit held that the trial court could have reduced the fee award more, but that it could not be said that it was an abuse of discretion for the trial court not to do so. The court reasoned that a reduction for time spent on unsuccessful claims is proper only to the extent it can be demonstrated that certain hours were spent exclusively on the unsuccessful claims.  Time spent, for example in discovery, on both successful and unsuccesful claims should not be reduced from a fee award.  The Ninth Circuit concluded that the trial court properly considered these issues and did not abuse its discretion in determining the amount of fees to award. 

The Muniz case is another one for the plaintiffs' bar arsenal.  It will make it more difficult for employers fighting FEHA claims in California federal courts to successfully limit any award of attorneys' fees to a prevailing plaintiff, thereby effectively increasing the incentive to settle such claims early on.  The full decision is here.

Employer Sues to Stop Overly Aggressive EEOC Investigatory Efforts

Employers should be aware that, according to a recent lawsuit filed by an employer, the EEOC has engaged in a shocking new tactic as part of its “investigatory” power.  Specifically, under the guise of its “investigation” into a claim of alleged unlawful conduct on the part of the employer, the EEOC, without any advance notice, directly emailed over 1100 of the employer’s employees (at their employer’s email address) in an attempt to develop class members for a potential class action against the employer.

In response to the EEOC’s conduct, Case New Holland Inc. and CNH America LLC sued the EEOC on August 1, 2013 seeking injunctive relief and attorneys’ fees, claiming that the mass email interfered with its business operations, constituted contact with represented parties in violation of the Rules of Professional Conduct, and denied CNH the right to be present during communications with its employees.  The lawsuit further alleges that (1) no rule or regulation authorized the mass email, (2) the investigation was biased and violated statutory and constitutional rights, (3) the missive constituted a violation of the EEOC compliance manual, (4) violated the Fourth Amendment of the Constitution of the United States, and (5) violated the Fifth Amendment of the Constitution of the United States.

Employers should be concerned that even long after an investigation appears to have concluded, the EEOC could undertake such a tactic.  The Complaint alleges that the EEOC investigation of CNH commenced in 2011 and that over the course of the investigation, CNH cooperated by providing, among other things, approximately 5,707 pages of documents and over 600,000 electronic records to the EEOC.  The vast information was provided to the EEOC in January 2012 and, without any warning, about 18 months later on the morning of June 5, 2013, the EEOC made its direct contact with hundreds of CNH’s employees.  

If you are being investigated by the EEOC this could happen to you.  So once you learn of a potential investigation, engage counsel and press regularly for the termination of the investigation and conclusions reached by investigator.

Supreme Court Issues Two Employer-Friendly Decisions Addressing Liability for Supervisor Harassment and the Standard for Proving Retaliation Under Title VII

Yesterday the United States Supreme Court issued two decisions important for employers litigating harassment and retaliation claims under Title VII.  In the first case, Vance v. Ball State University, the Court decided an important issue relating to an employer's liability for harassment of an employee by a "supervisor."  More specifically, the Court decided a dispute concerning what it means to be a "supervisor"--i.e. does the employee need to have authority to hire and fire and make similar decisions or is it enough if the employee directs the daily work of others(the latter approach being the approach endorsed by the EEOC)?  This issue is significant because employer liability for harassment under Title VII varies depending on whether the alleged harasser is a supervisory employee or a co-worker.  If the harasser is a supervisor, the employer generally is vicariously liable for the harassment.  If the harasser is not a supervisor but a co-worker of the victim, then the employer generally only is liable if it knew or should have known of the harassment and failed to take prompt and effective remedial action.  Prior to yesterday's decision, courts disagreed over the meaning of the term "supervisor" and thus parties to harassment suits under Title VII generally had to litigate whether the alleged harasser qualified as a supervisor (with Plaintiffs' attorneys of course arguing broadly for supervisor status, and employers urging a narrow view of supervisor status). 

In yesterday's 5-4 decision, the Supreme Court provided the needed clarification and guidance on this issue, defining the term "supervisor" narrowly in a way that benefits employers.  The Court held that to be considered a supervisor, the employee must be empowered by the employer to take "tangible employment actions against the victim."  This means that the employee must have the power to effect "a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits."  The Court rejected as "nebulous" the EEOC's (and many circuit court's) definition of a supervisor to include anyone with the ability to significantly direct another's daily work.

The Supreme Court's decision is a favorable one for employers because it narrows the circumstances under which employers can be held vicariously liable for harassment, and should reduce litigation costs that previously had to be expended litigating whether the alleged harasser was a supervisor or not.  The full decision in Vance is available here.

In another employer-friendly Title VII decision issued yesterday, University of Texas Southwestern Medical Center v. Nassar, the Court (also in a 5-4 decision) decided a split among the circuits concerning the standard for proving retaliation claims under Title VII (meaning claims that an employee was retaliated against for complaining about discriminatory practices in violation of Title VII).  Prior to yesterday's decision, some courts had held that an employee need only prove that a retaliatory motive was "a motivating factor" behind the adverse employment action.  Other courts held that an employee, in order to prevail, has a higher burden of proving that a retaliatory motive was the "but for" cause of the adverse employment action. The Supreme Court has now spoken and held that the standard for proving a retaliation claim under Title VII is "but for" causation.  This decision similarly is favorable for employers litigating Title VII retaliation claims because it makes it more difficult for the plaintiff to prove and prevail on the claim.  The full decision in Nassar is available here.

It has been a good week for employers on the United States Supreme Court front.

EEOC Steps Up Enforcement Actions Based on Employer Use of Criminal Background Checks

Employers probably recall that last year the EEOC published guidance on the use of criminal background checks in the hiring process.  This led many to forecast that the EEOC would be stepping up its enforcement efforts in this area.  Well, earlier this month the EEOC filed lawsuits against two different companies, BMW Manufacturing and Dollar General, alleging that their criminal background check policies discriminated against black applicants in violation of Title VII.  According to the lawsuit against BMW, BMW had a policy that barred employment to applicants with certain criminal convictions regardless of how old the conviction was, the nature or gravity of the offense, or the nature of the employment position sought.  The EEOC charged that BMW's policy had a disparate impact on blacks and constituted unlawful employment discrimination.

In the case against Dollar General, the EEOC similarly alleges that Dollar General's criminal conviction policy disparately impacts black applicants.  That lawsuit arose out of two administrative charges filed with the EEOC by rejected applicants.  In one case, the applicant had a six-year old drug conviction.  Dollar General's policy was to consider this type of conviction a bar to employment if the conviction was less than 10 years old.  As such, the applicant was not hired.  In the other case, the applicant's background check revealed a felony conviction but the applicant insisted that the report was wrong. Although she informed Dollar General of the mistake, she still was not hired.  The EEOC is now challenging Dollar General's criminal convictions policy as a whole.  In both cases, the EEOC seeks back pay as well as injunctive relief.  The EEOC's press release regarding these two lawsuits is available here

The EEOC's increased attention and enforcement efforts in this area serve as a reminder to employers of the need to review their criminal background check policies (as well as similar questions on employment applications) to try to ensure the policies pass muster under the EEOC's guidance.  Our prior post on that guidance is available here.  California employers must also be mindful that California has some additional restrictions on the scope of criminal background checks used for employment purposes (e.g. California Labor Code section 432.8, which prohibits employers from considering certain marijuana-related convictions in making employment decisions).  Thus, California employers need to ensure that their policies and procedures comply with both federal EEOC guidance and California law.

Make Way for Ducklings (and other assistive animals) in the California Workplace

California’s newest regulations pertaining to the rights of the disabled in the workplace require employers to allow “assistive animals” in the workplace as a reasonable accommodation to certain disabled employees.  See CCR 7293.6 & 72940(k).
While service dogs for the visually and hearing impaired have become a more common sight in California’s workplaces, the regulations specifically permit other animals that provide “emotional or other support to a person with a disability….”

An employer need not play “possum” when confronted with an employee’s request to bring an assistive animal to the office.  First, an employer may require the employee to provide medical certification from the employee’s health care provider (which, broadly defined, now includes therapists, acupuncturists, dentists, physicians, clinical social workers, nurse practitioners, midwives, chiropractors, optometrists, psychologists, and podiatrists) certifying that the employee has a disability and that explains why the assistive animal provides an accommodation.

Still got your goat?  An employer may also require a certain level of training, namely that the assistive animal

  • is free from offensive odors and displays habits appropriate to the work environment, for example, the elimination of urine and feces;
  • does not engage in behavior that endangers the health or safety of the individual with a disability or others in the workplace; and
  • is trained to provide assistance for the employee’s disability.

But an employer must act jackrabbit quick, because it is only within the first two weeks that the assistive animal is reporting to the workplace that an employer is expressly permitted to challenge the animal, based on objective evidence of offensive or disruptive behavior.   (It is not clear what happens if an animal becomes violent, dangerous or its toilet training breaks down after the first two weeks).  Thereafter, annually, the employer may (and should) require annual recertification of the employee’s continued need for the support animal.

As assistive animals become more common in the workplace, employers will increasingly be confronted by the potential conflict and disruptions that service animals will provide.  Not only the distraction from the getting the job done, but other employees’ claims of allergy and other reactions to the animals which may then require additional accommodations.  It is not clear how the courts will react to these cases as there is no precedent.

New Decision Serves as Reminder of Pregnancy Disability Accommodation Requirements

Yesterday a California Court of Appeal issued its decision in Sanchez v. Swissport, Inc., addressing whether an employee fired after exhausting her 16 weeks of pregnancy disability leave could assert valid claims against the employer for pregnancy discrimination and failure to accommodate a disability.  The court said yes. 

In Sanchez, the plaintiff employee only worked for Swissport for about a year and one-half when she learned she was pregnant and that she had a high-risk pregnancy requiring bed rest.  She informed her employer that she needed a leave of absence from February through at least her due date in October.  Her employer provided her with the full 16 weeks of pregnancy disability leave required under California's pregnancy disability leave law.  The employer also allowed her to use an additional three weeks of accrued vacation, bringing the employee's total leave to 19 weeks.  The employee was unable to return to work at the end of that 19 weeks, as it was only July and she was not due to give birth until October.  Swissport terminated her employment.  Can you guess what happened next? 

You guessed it.  The employee sued.  Swissport promptly moved to dismiss the case, arguing that because it provided the maximum leave (16 weeks) required for pregnancy disability in California, the employee's claims for pregnancy discrimination, gender discrimation, and failure to accommodate a disability were invalid as a matter of law.  The trial court agreed and threw out the case.  Not so fast, though...the employee successfully appealed.

In yesterday's decision, the California Court of Appeal held that the trial court should not have thrown out the case at the motion to dismiss stage.  The court held that an employer's providing of the 16 weeks of leave for pregnancy disability does not automatically shield the employer from claims for failure to accommodate a disability or for gender/pregnancy discrimination under FEHA.  The court reasoned that an extended leave of absence (beyond 16 weeks of pregnancy disability leave) may be a "reasonable accommodation" for a disability required under FEHA, and that Swissport may have been required to provide the additional leave time absent a showing of undue hardship.  The case was, therefore, remanded to the trial court level so that the employee's FEHA claims could be litigated.

The Sanchez v. Swissport case (available here) is a good reminder for employers that simply complying with maximum leave entitlements provided under laws such as California's pregnancy disability leave law and/or FMLA/CFRA does not necessarily satisfy an employer's obligation to a disabled employee.  Employers who terminate disabled employees simply because they have exhausted statutory leave entitlements are likely to face claims for failure to accommodate and disability discrimination.  Employers should always engage in an interactive process with the employee at or near the expiration of the leave to assess how much additional leave time (or other accommodations) the employee needs and determine whether additional leave can be provided as a reasonable accommodation and without undue hardship to the employer.

California Supreme Court Splits the Baby on Mixed Motive Defense to Discrimination Claims

Today the California Supreme Court issued its decision in Harris v. Santa Monica, addressing the “mixed motive” defense to discrimination claims under FEHA.  This case addresses whether a discrimination plaintiff suing under California law must prove that a discriminatory motive was (1) the "but for" cause for the adverse employment decision, (2) a lesser standard, that the discriminatory motive was a motivating factor behind the decision, even if not the dispositive factor, or (3) something in between.  The California Supreme Court went with  "something in between."  In short, the Court held that in mixed motive cases, if an employee proves that an employment action was substantially motivated by discrimination (but also motivated in part by legitimate, non-discriminatory reasons), the burden shifts to the employer to prove that it would have made the same decision for legitimate, non-discriminatory reasons.  If the employer succeeds in proving this, then the employer wins, right?  Not so fast.  The Court today held that if the employer proves that it would have made the same decision for legitimate reasons, the employee may not recover back pay, reinstatement, or emotional distress damages.  However, the Court held that the employee may still be entitled to declaratory relief (a court declaration that the employer engaged in unlawful discrimination), injunctive relief (a court order requiring the employer to refrain from similar acts of discrimination in the future) and—the real kicker—attorneys’ fees.

In the Harris case, the plaintiff-employee was a bus driver for the City of Santa Monica.  Harris had a less than stellar performance record, to put it nicely.  Shortly into her initial 40-day training period, she had an accident determined to be her fault and which caused minor damage to the bus.  She then had a second at-fault accident within her first three months and while still a probationary employee.  In addition to these accidents, within the first few months of her employment (also while she was still a probationary employee) she reported late to her shift twice and failed to give the dispatcher at least one hour’s notice as required by policy.  Applicable policies clearly indicated that these circumstances warranted termination of employment.  Indeed, following these incidents, the transit services manager and the assistant director concluded that Harris did not meet the standards for continued employment.  However, prior to any termination decision actually being made and communicated to Harris, Harris had a chance encounter with her immediate supervisor (not the transit manager or assistant director), who noticed Harris’ uniform shirt sloppily hanging loose and he told her to tuck it in.  At that time, Harris informed the supervisor that she was pregnant.  Harris claims her supervisor looked displeased at the news.  He asked her to get a doctor’s note clearing her to continue to work, which she did.  A few days later, Harris’ supervisor was called to a meeting at which time he was given a list of probationary employees who were not meeting the performance standards for continued employment.  Harris was on the list.  Her employment was then terminated.

Harris sued for pregnancy discrimination, and the claim managed to survive summary judgment and get to trial.  At trial, the City requested that the jury be instructed on the “mixed motive” defense and, more specifically, that even if the jury concluded that pregnancy discrimination was a motivating factor in the termination decision (along with legitimate reasons), the City would not be liable if it proved that it would have terminated Harris for the legitimate business reasons even without pregnancy discrimination as a motivating factor.  The trial court refused to give this instruction to the jury.  The trial court instead instructed the jury that the City was liable if Harris proved simply that pregnancy discrimination was “a motivating factor” in the termination decision.   The jury thereafter concluded that discrimination was a motivating factor and awarded Harris about $150,000 for emotional distress and $25,000 for wage loss.  In addition, because a prevailing employee is entitled to recover attorneys’ fees incurred to successfully litigate a discrimination claim, the court awarded Harris some $400,000 in attorneys’ fees.

The City appealed, and the court of appeal reversed the judgment, holding that the trial court should have given the jury instruction requested by the City.  Harris then petitioned for review to the California Supreme Court, which granted review. 

Today the Supreme Court issued its decision, agreeing with the court of appeal in part.  The Court held that an employer is entitled to assert the mixed motive defense but that successful proof of the defense does not absolve the employer of all liability.  The Court reasoned that if an employee proves that discrimination was a substantial factor behind an adverse employment action, it would be contrary to public policy and the purpose of FEHA to allow the employer to escape all liability.  However, the Court held that where an employer proves that it would have made the same decision for legitimate business reasons irrespective of any partly discriminatory motive, the employee may not recover damages or reinstatement.  In such instances, though, the trial court could still award declaratory and/or injunctive relief against the employer and also award attorneys’ fees to the employee as the prevailing party. 

Given that the attorneys’ fees often exceed the damages awarded to a prevailing plaintiff in a discrimination case (such as was the case here), this still provides significant exposure to employers litigating this type of claim, even if successful in their defense.  To be clear, however, an employer will not be liable for declaratory relief, injunctive relief, or attorneys’ fees in a FEHA case unless the employee proves that discrimination was a “substantial” motivating factor behind the adverse employment action.  There is no bright line rule for what type of evidence will suffice, but the evidence of discriminatory motive must be substantial, not slight (e.g. a stray or isolated discriminatory remark likely would not be considered “substantial” evidence).  The full Harris decision is here.

Employer Wins Summary Judgment on Discrimination and Defamation Claims

Yesterday a California court affirmed a summary judgment win for the employer on an employee's claims of gender discrimination, retaliation, and defamation.  The case, McGrory v. Applied Signal Technology, Inc., contains a lot of favorable language for employers litigating these types of claims in California courts, particularly in the context of seeking summary judgment on the claims.

McGrory was a male department manager who issued performance discipline to a subordinate female employee who was gay.  The female employee refused to accept the discipline and instead lodged a complaint with HR that the discipline was motivated by McGrory's discriminatory bias against lesbians.  The complaint prompted the company to retain an outside investigator to conduct an investigation.  The investigator later issued a report finding that McGrory did not discriminate against the female employee and that the female employee did have performance issues that needed to be addressed.  However, the investigation revealed that McGrory had engaged in inappropriate conduct in the workplace, including regularly making inappropriate sexual and racial/ethnic remarks in violation of the employer's policies.  The investigator also concluded that McGrory (and one other male employee who was interviewed during the investigation) was not truthful in responding to all of her questions during the interview and was not fully cooperative in the interview process.  Based on the investigation report, the employer terminated McGrory's employment.

McGrory sued for wrongful termination in violation of public policy, arguing that his termination was because he was male and that it was also against public policy for an employee to be terminated based on his participation in an investigation.  Finally, the employee alleged that he was defamed as a result of HR telling one or more employees that he was terminated for not cooperating with the investigation (McGrory disputed he was uncooperative and claimed this conclusion was false).

The trial court granted the employer's motion for summary judgment, finding that McGrory's claims had no legal merit.  McGrory appealed, but the appellate court agreed with the trial court's decision.

First, the court held that there was no evidence to support McGrory's claim that his termination was somehow motivated by the fact that he was a man.  There was no direct evidence of any gender bias on the part of the decisionmakers, and the fact that McGrory0 disagreed with the conclusions of the investigation report was not sufficient to establish a discriminatory motive.  The court reiterated the principle that discrimination cannot be proven simply by establishing that the employer's actions were unwise, unsound, or even incorrect.  The actions must be more than wrong; there must also be evidence that the actions were motivated by discriminatory intent.  McGrory had no such evidence.

Second, the court rejected McGrory's claim that his participation in the investigation was "protected activity" and that he should not have been terminated based on that particpation.  The court rationally explained that while it is true that California's anti-discrimination law, FEHA, protects participation in investigatory interviews, it does not protect dishonesty during an investigation or failure to fully cooperate in an investigation.  McGrory's termination was based in part on the employer's belief that McGrory was not truthful during the investigation and refused to provide certain information requested by the investigator.  This is not protected activity.

Finally, the court rejected McGrory's defamation claim.  In this regard, McGrory claimed that after he was terminated, HR told a co-worker that McGrory was terminated for not cooperating with the investigation.  McGrory claimed this was a false statement (because he cooperated) and that it defamed him.  The employer argued that it could not be liable for defamation because its statements were protected by the "common interest privilege."  The common interest privilege protects statements made in the employment context by one interested party to another, as long as those statements are not made "maliciously."  Malice generally means that the allegedly defamatory statement must have been motivated by hatred or ill will or with no reasonable grounds for believing the statement to be true. McGrory argued that there was no reasonable ground for the employer to believe that he failed to cooperate with the investigation.  The court held that this argument was not supported by the evidence and that the investigator (and hence, the employer who relied on the investigator's report) had grounds for believing McGrory was less than cooperative. The court explained that it did not really matter whether this conclusion was correct or fair. Thus, McGrory's defamation claim could not succeed.

The full text of this decision is available here.

California Adopts New Disability Regulations

We recently posted about California's adoption of new pregnancy disability regulations, which took effect December 30, 2012.  On December 18, California further adopted general disability regulations governing accommodation requirements for non-pregnancy related disabilities.  The disability regulations took effect December 30, 2012 and are available here.  The new regulations are 23 pages in length and contain definitions of mental and physical disabilities, explain essential versus non-essential job functions, and provide detail on employer and employee responsibilities in engaging in the interactive process and providing reasonable accommodation.  The new regulations incorporate the broad disability definitions and standards set forth under the recent amendments to the federal ADA, making the analysis of whether an employee is disabled much more similar under California and federal law than it used to be.  In simplest terms, it is rather easy to qualify as "disabled" under California (and federal) law.  Thus, in disability discrimination cases, the pivotal liability analysis will focus on the employer's response to the disability, not whether the employee qualifies as disabled.  In short, almost any condition (save and except very minor conditions, such as a common cold or scrape) qualifies as a disability as long as it limits a major life activity in some way.  The California regulations make clear, like the recent amendments to the ADA, that mitigating measures (such as glasses or contact lenses) may not be considered when determining whether a condition limits a major life activity.  Additionally, where the major life activity of working is considered, a condition can be determined to limit an employee's ability to work even if the condition only limits the employee's performance of one particular job (as opposed to an entire class of jobs). 

While the new regulations are too lengthy to summarize in their entirety in this post, there are some interesting points worth noting.  First, the regulations contain a lot of discussion about considerations of transferring a disabled employee to a vacant alternative position as a reasonable accommodation.  This concept is not new in and of itself.  However, what is new is that the regulations expressly state that employers are required to give preference to disabled employees when filling a vacant position.  The only exception is that the employer is not required to ignore a bona fide seniority system.

The regulations also discuss the circumstances under which employers may require medical documentation to support a request for reasonable accommodation.  Interesting in this regard is that the regulations imply that an employer is not entitled to request medical documentation in every circumstance.  The regulations instead say that the employer may request medical documentation "when the need for reasonable accommodation is not obvious."  Furthermore, in situations where the employer seeks medical documentation, the employer must communicate its requests (whether initial or supplemental) through the employee (not directly to a medical provider).  California (unlike federal law) continues to disallow employers from seeking diagnosis information or any medical information not necessary to determine the need for reasonable accommodation.  Finally, where the employee needs reasonable accommodation for over a year, the employer may request further medical certification on a yearly basis.  The regulations do not allow requests for recertification at earlier or more frequent intervals. 

All California employers (in particular, their Human Resources or other personnel responsible for managing leave requests or accommodation requests) should review the new disability regulations to ensure that their practices comply with the standards set forth therein.