The California Supreme Court has issued a number of recent decisions of significance to employers, as set forth below. You may click on each of the following links in order to be directed to a brief discussion of the following topics:
In addition, there are a number of cases presently pending before the Court that will impact employers. You can learn more about these pending matters by clicking here.
Bystander Employees Can State A Claim For Sexual Harassment Based On Supervisor's Consensual Sexual Affairs With Other Employees
In Miller v. Department of Corrections, the Court held that an employee may state a sexual harassment claim under the California Fair Employment and Housing Act ("FEHA") by demonstrating that widespread sexual favoritism is severe or pervasive enough to alter working conditions and create a hostile working environment.
Plaintiffs were employees at the Department of Corrections working under the supervision of a warden who was having concurrent consensual sexual affairs with three other subordinate employees. The warden ensured the transfer of each of his paramours to a new facility with him, and he awarded them special workplace privileges. He also assisted in securing the promotion of one the paramours to a position that one of the plaintiffs sought to fill. Plaintiffs complained and asserted that they were subjected to retaliation by the warden and the paramour supervisor. Plaintiffs resigned and sued the Department of Corrections.
A Sacramento trial court entered summary judgment in favor of defendants. The Court of Appeal affirmed.
The California Supreme Court reversed. The Court found that Plaintiffs had established a prima facie case of sexual harassment, emphasizing that much more than an isolated act of favoritism towards a paramour had occurred. The Court concluded that the evidence collectively created an issue of triable fact as to whether the message was implicitly conveyed that management viewed women as "sexual playthings," noting that "it is clear under California law that a plaintiff may establish a hostile work environment without demonstrating the existence of coercive sexual conduct directed at the plaintiff or even conduct of a sexual nature." The Court also found that Plaintiffs could have reasonably believed that they were making a claim of sexual harassment in violation of the FEHA when they complained of sexual favoritism in the workplace.
Refusing Instruction To Terminate Employee Deemed Not Attractive Enough Is Protected Activity
In Yanowitz v. L'Oreal USA, Inc., a regional sales manager sued L'Oreal, asserting that she had been subjected to heightened scrutiny and increased hostility from her employer after she refused to follow her male supervisor's order to terminate a female subordinate who the supervisor believed was not attractive enough. The supervisor instructed the sales manager to fire her subordinate and to get him someone "hot." The sales manager repeatedly asked for justification for terminating the subordinate; the supervisor failed to provide her with any reason to terminate the employee. The sales manager did not express to human resources or to others that she viewed the supervisor's instruction to be discriminatory. After she continued to refuse to terminate the employee, the supervisor began to criticize her job performance and to solicit criticism about her from her subordinate employees. She went out on a stress leave, and L'Oreal terminated her employment during that time period. She sued L'Oreal, alleging unlawful retaliation under the FEHA.
The trial court granted the employer's motion for summary judgment. The Court of Appeal reversed, holding that the male executive's order to fire the female employee because she failed to meet his standards for sexual attractiveness was an act of sex discrimination since no similar standards were applied to men. The court further held that the manager's refusal to carry out such an order was protected activity for purposes of the anti-retaliation provisions of the FEHA.
The California Supreme Court affirmed the Court of Appeal's opinion, concluding that an employee’s refusal to follow a supervisor’s order that "she reasonably believes to be discriminatory constitutes protected activity under the FEHA and that an employer may not retaliate against an employee on the basis of such conduct when the employer, in light of all the circumstances, knows that the employee believes the order to be discriminatory, even when the employee does not explicitly state to her supervisor or employer that she believes the order to be discriminatory." The Court also held that the proper standard for defining an adverse employment action is the “materiality” test, a standard that requires an employer’s adverse action to materially affect the terms and conditions of employment. The Court noted that in determining whether an employee has been subjected to treatment that materially affects the terms and conditions of employment, it is appropriate to consider the totality of the circumstances (including a series of collective actions such as unwarranted negative evaluations and unfair criticisms), and to apply the “continuing violation” doctrine so that an employee may rely on retaliatory actions outside of the limitations period when such actions are related to other actions within the limitations period.
Court Invalidates Pre-Dispute Jury Trial Waivers
In Grafton Partners L.P. v. Superior Court, the California Supreme Court invalidated pre-dispute agreements to waive a jury trial in the event of future litigation. The Court held that under the California Constitution, jury trials may only be waived as expressly provided for by the Legislature, and that the language adopted by the Legislature in Code of Civil Procedure Section 631, subdivision (d), could not be interpreted to authorize waivers entered into before a lawsuit has been filed. The Court indicated that its decision would not impact the ability of contracting parties to enter into pre-dispute agreements to arbitrate future disputes, since arbitration agreements are specifically authorized by the Legislature.
California Code of Civil Procedure Section 638 may provide a lawful and cost-efficient way for those who disfavor arbitration to avoid the uncertainty associated with jury trials. The statute authorizes parties to agree in a written contract or lease that any claim filed in the California Superior Court arising from that written contract or lease will be heard by a referee rather than by a judge. This procedure may be advantageous to parties since the referee's decision will be analogous to a Superior Court decision and will be subject to judicial review by the Court of Appeal.
Corporate Officers Are Not Personally Liable For Wage Claims
In Reynolds v. Bement, the California Supreme Court held that corporate officers and directors are not "employers" and thus cannot be held personally liable for wage claims under Labor Code Section 1194. But the Reynolds Court explained that corporate officers and directors could be subject to a claim pursued by the Labor Commissioner. The Court further appeared to indicate that corporate officers and directors could be subject to Labor Code Section 558 penalties for failure to pay wages.
Other Cases to Watch
The California Supreme Court has granted review of a number of decisions of interest to California employers. You may click on each of the following links in order to be directed to a particular topic of interest.
Is Proposition 64 Retroactive?
The California Supreme Court will clarify this issue in one or more of the following pending appeals: Californians for Disability Rights v. Mervyn's, LLC (Case No. S131798), Benson v. Kwikset (Case No. S132443), Bivens v. Corel Corp. (Case No. S132695), Branick v. Downey Savings & Loan Ass'n (Case No. S132433), and Lytwyn v. Fry's Electronics, Inc. (Case No. S133075). In addition, the parties in Kids Against Pollution v. California Dental Ass'n (Case No. S117156), a case which was pending prior to Proposition 64's passage, have filed supplemental briefs addressing the applicability of Proposition 64.
Are the 2003 Amendments To FEHA Retroactive?
The Court will offer guidance in Carter v. Department of Veterans Affairs (Case No. S127921) and Adams v. Los Angeles Unified School District (Case No. S127961).
Is Extrinsic Evidence Admissible To Prove At-Will Status?
The California Supreme Court will consider whether the introduction of extrinsic evidence about an employee's at-will status is appropriate in Dore v. Arnold Worldwide, Inc. (Case No. S124494), and it will consider a similar issue in State Farm Automobile Insurance Co. v. Wier (Case No. S131445).
Can Vulgar Language Be A Business Necessity?
The California Supreme Court will consider whether the use of coarse and vulgar language in the workplace constitutes sexual harassment under the FEHA, and whether the imposition of FEHA liability based on such speech infringes on a defendant's constitutional free speech rights, in Lyle v. Warner Brothers Television Productions (Case No. S125171).
When Is An Employee Hired For A Fixed Term Legally "Discharged"?
The California Supreme Court will consider in Smith v. Superior Court (L'Oreal, USA) (Case No. S129476) whether an employee hired for a fixed term is "discharged" at the end of the term within the meaning of the California Labor Code so that payment of her wages would be immediately due.
What Caution Should Be Exercised When Drafting Settlement Agreements?
The California Supreme Court will clarify the propriety of certain settlement agreement terms in Fair v. Bakhtiari (Case No. S129220) and Siebel v. Mittlesteadt (Case No. S125590).
Does An Employee Who Is Unable To Perform Certain Work For An Employer But Who Is Able To Perform A Similar Job For Another Employer Qualify Under The CFRA?
In Lonicki v. Sutter Health Central (Case No. S130839), the California Supreme Court will consider whether an employee who has a serious health condition that makes the employee unable to perform the functions of his or her position, but who is able to perform a similar job for another employer, is entitled to a leave of absence under the California Family Rights Act.
Are Bonus Plans That Reduce Payments By A Store's Expenses, Including The Cost Of Workers' Compensation Insurance, Legal?
The California Supreme Court will consider the legality of an employee bonus plan based on a profit figure reduced by a store's expenses, including the cost of workers' compensation insurance and cash and inventory losses, in Prachasaisoradej v. Ralphs Grocery (Case No. S128576).
Gibson, Dunn & Crutcher LLP will provide updates of significant developments as they occur. For more information on the California Supreme Court's recently decided employment cases or the pending employment cases, please contact the Gibson Dunn employment lawyer with whom you regularly work or Deborah J. Clarke in the Los Angeles office at (213) 229-7000.
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