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Employer is Denied Enforceability of Arbitration Agreement Found in Employee Handbook

September 27, 2012 Leave a comment

In the California Court of Appeals case of Sparks v. Vista Del Mar Child and Family Services, the employee filed a wrongful termination complaint against the company after he complained of various employment practices he believed violated state and federal reporting and compensation laws. The defendant, intendant to compel arbitration based on a provision found in its employee handbook. The court denied enforceability stating that, in general, arbitration agreements in employee handbooks are non-enforceable. This is because they should be signed as a separate document, employee handbooks often state that they are not contracts, that they can be unilaterally changed, etc.

In California and elsewhere, employers are having greater and greater difficulty enforcing arbitration agreements to the point where you have to ask if it is worse than the fight before the fight. What sense does it make to try and compel arbitration if losing costs you $50,000 to do so?

If you have an arbitration agreement, remember to make sure:

  1. It is signed as a stand-alone document.
  2. It is specific to coverage rights waived and any process to follow.
  3. Get it reviewed by a lawyer. It may cost you a few hours of their time, but you are doing it to save many thousands if you do get sued.

No Wrongful Termination Claim for Failure to Renew Employment Contract

September 18, 2012 Leave a comment

Touchstone Television Productions v. Nicolette Sheridan Court of Appeals, State of California Second Appellate District

In a recent case decided by the California Appellate Court, actress Nicolette Sheridan who appeared as Edie Britt in the program Desperate Housewives did not have her contract renewed because she had complained about a battery allegedly committed upon her by Desperate Housewives creator, Mark Cherry. Not only did they not renew her contract for a sixth season, in one of the episodes, they had her die off in a car accident. Then in a subsequent episode she returned as a ghost! Due to earn $4.2 million for a sixth season, when her contract was not renewed, she cried foul and filed suit.

The court ruled that Ms. Sheridan was not entitled to sue for wrongful termination in violation of public policy because of the fixed contract nature of her employment. The court did, however, allow her to amend her complaint under Labor Code §6310(d) which permits “an action for damages if the employee is discharged, threatened with discharge, or discriminated against by his or her employer because of the employee’s complaints about unsafe work conditions.” Here it is alleged that the defendant discriminated against the plaintiff by not renewing her employment contract. To prevail on the claim, she must prove that, but for her complaints about unsafe work conditions, the defendant would have renewed the contract. Damages, however, are limited to ‘lost wages and work benefits caused by the acts of the employer.’”

Looks like Hollywood doesn’t just produce dramas for us, it creates their own too!

NLRB Places Confidentiality of Investigations at Risk

September 6, 2012 Leave a comment

In a 2-1 decision, the National Labor Relations Board in the case of Banner Health System v. James Navarro, ruled that an employer violated the National Labor Relations Act by asking the employee not to discuss the details of his complaint with other employees while it was under investigation. The NLRB ruled that the company’s generalized concern with protecting the integrity of its investigation was insufficient to outweigh the employee’s Section 7 rights, which allows the employee to engage in concerted activities for their mutual aid and protection. The Board did indicate that there were circumstances where a request for confidentiality may be legitimate, including:

  1. Where witnesses may need protection
  2. Where evidence is in danger of being destroyed
  3. Where testimony is in danger of being fabricated
  4. Where the is a need to prevent a cover-up

It made no difference to the court whether or not the “rule” was merely a suggestion or whether it had the potential of discipline attached to it. Simply requesting the confidentiality was enough to violate the Act.

As one of its penalties, the company was required to post the following notice:

The National Labor Relations Board has found that we violated Federal labor law and has ordered us to post and obey this notice.

FEDERAL LAW GIVES YOU THE RIGHT TO:

  • Form, join, or assist a union
  • Choose representatives to bargain with us on your behalf
  • Act together with other employees for your benefit and protection
  • Choose not to engage in any of these protected activities

WE WILL NOT maintain or apply the provision in our confidentiality agreement that contains the following language “Private employee information (such as salaries, disciplinary action, etc.) that is not shared by the employee.”

WE WILL NOT maintain or apply a rule prohibiting employees from discussing ongoing investigations of employee misconduct.

WE WILL NOT in any like or related manner interfere with, restrain, or coerce employees in the exercise of the rights set forth above.

BANNER HEALTH SYSTEM D/B/A BANNER ESTRELLA MEDICAL CENTER

Note: The Board also reminded employers that companies cannot restrict information such as salaries, disciplinary action, etc. without also violating Section 7. Employers are also advised to document and analyze why it may need to request confidentiality in any investigation. Finally, there is a possibility that this determination by the NLRB can be reversed by one of the circuit courts, or if things change after the November election.

Banner Health System d/b/a Banner Estrella Medical Center (28‑CA‑023438, 358 NLRB No. 93) Phoenix, AR, July 30, 2012.

Recruiters Deemed Overtime Exempt Salespeople

February 24, 2012 Leave a comment

In this California case “consulting service managers” who were primarily engaged in selling recruitment services for Surrex, filed claims for overtime and missed meal periods. The court dismissed their case claiming the fit under the Sales exemption The most important language in the case is as follows:

“We conclude Labor Code section 204.1 sets up two requirements, both of which must be met before a compensation scheme is deemed to constitute ‘commission wages.’ First, the employees must be involved principally in selling a product or service, not making the product or rendering the service. Second, the amount of their compensation must be a percent of the price of the product or service.”  http://www.courtinfo.ca.gov/opinions/documents/D057955.PDF

Note in the CarMax case the court ruled a flat fee commission satisfies the requirement.

The Federal standard for sales exemptions can be found here. There are exemptions for auto sales, retail sales and outside sales. Here’s an advisor on the Outside Sales

Outside Sales Employee section
This section helps you in determining whether a particular employee who is an outside sales person meets the tests for exemption from the minimum wage and overtime pay requirements of the FLSA.
Review the Fact Sheet
Start Outside Sales Employee section

 

The US Supreme Court Enforces Church’s Absolute Right to Fire Minister

February 16, 2012 Leave a comment

In a case brought by a Minster/teacher against a church, the Court made it very clear that “The purpose of the exception is not to safeguard a church’s decision to fire a minister only when it is made for a religious reason. The exception instead ensures that the authority to select and control who will minister to the faithful is the church’s alone.”

Here’s the Court’s summary of the case:

1. The Establishment and Free Exercise Clauses of the First Amendment bar suits brought on behalf of ministers against their churches, claiming termination in violation of employment discrimi­nation laws. Pp. 6–15.

(a) The First Amendment provides, in part, that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” Familiar with life under the established Church of England, the founding generation sought to foreclose the possibility of a national church. By forbidding the “establishment of religion” and guaranteeing the “free exercise thereof,” the Religion Clauses ensured that the new Federal Government—unlike the Eng­lish Crown—would have no role in filling ecclesiastical offices. Pp. 6–10.

 (b) This Court first considered the issue of government interfer­ence with a church’s ability to select its own ministers in the context of disputes over church property. This Court’s decisions in that area confirm that it is impermissible for the government to contradict a church’s determination of who can act as its ministers. See Watson v. Jones, 13 Wall. 679; Kedroff v. Saint Nicholas Cathedral of Russian Orthodox Church in North America, 344 U. S. 94; Serbian Eastern Orthodox Diocese for United States and Canada v. Milivojevich, 426 U. S. 696. Pp. 10–12.

(c) Since the passage of Title VII of the Civil Rights Act of 1964 and other employment discrimination laws, the Courts of Appeals have uniformly recognized the existence of a “ministerial exception,” grounded in the First Amendment, that precludes application of such legislation to claims concerning the employment relationship be­tween a religious institution and its ministers. The Court agrees that there is such a ministerial exception. Requiring a church to accept or retain an unwanted minister, or punishing a church for failing to do so, intrudes upon more than a mere employment decision. Such ac­tion interferes with the internal governance of the church, depriving the church of control over the selection of those who will personify its beliefs. By imposing an unwanted minister, the state infringes the Free Exercise Clause, which protects a religious group’s right to shape its own faith and mission through its appointments. According the state the power to determine which individuals will minister to the faithful also violates the Establishment Clause, which prohibits government involvement in such ecclesiastical decisions.

The EEOC and Perich contend that religious organizations can de­fend against employment discrimination claims by invoking their First Amendment right to freedom of association. They thus see no need—and no basis—for a special rule for ministers grounded in the Religion Clauses themselves. Their position, however, is hard to square with the text of the First Amendment itself, which gives spe­cial solicitude to the rights of religious organizations. The Court cannot accept the remarkable view that the Religion Clauses have nothing to say about a religious organization’s freedom to select its own ministers.

The EEOC and Perich also contend that Employment Div., Dept. of Human Resources of Ore. v. Smith, 494 U. S. 872, precludes recogni­tion of a ministerial exception. But Smith involved government regu­lation of only outward physical acts. The present case, in contrast, concerns government interference with an internal church decision that affects the faith and mission of the church itself. Pp. 13–15.

2. Because Perich was a minister within the meaning of the minis­terial exception, the First Amendment requires dismissal of this em­ployment discrimination suit against her religious employer. Pp. 15–21.

(a) The ministerial exception is not limited to the head of a reli­gious congregation. The Court, however, does not adopt a rigid for­mula for deciding when an employee qualifies as a minister. Here, it is enough to conclude that the exception covers Perich, given all the circumstances of her employment. Hosanna-Tabor held her out as a minister, with a role distinct from that of most of its members. That title represented a significant degree of religious training followed by a formal process of commissioning. Perich also held herself out as a minister by, for example, accepting the formal call to religious ser­vice. And her job duties reflected a role in conveying the Church’s message and carrying out its mission: As a source of religious in­struction, Perich played an important part in transmitting the Lu­theran faith.

In concluding that Perich was not a minister under the exception, the Sixth Circuit committed three errors. First, it failed to see any relevance in the fact that Perich was a commissioned minister. Alt­hough such a title, by itself, does not automatically ensure coverage, the fact that an employee has been ordained or commissioned as a minister is surely relevant, as is the fact that significant religious training and a recognized religious mission underlie the description of the employee’s position. Second, the Sixth Circuit gave too much weight to the fact that lay teachers at the school performed the same religious duties as Perich. Though relevant, it cannot be dispositive that others not formally recognized as ministers by the church per­form the same functions—particularly when, as here, they did so only because commissioned ministers were unavailable. Third, the Sixth Circuit placed too much emphasis on Perich’s performance of secular duties. Although the amount of time an employee spends on particu­lar activities is relevant in assessing that employee’s status, that fac­tor cannot be considered in isolation, without regard to the other con­siderations discussed above. Pp. 15–19.

(b) Because Perich was a minister for purposes of the exception, this suit must be dismissed. An order reinstating Perich as a called teacher would have plainly violated the Church’s freedom under the Religion Clauses to select its own ministers. Though Perich no longer seeks reinstatement, she continues to seek frontpay, backpay, com­pensatory and punitive damages, and attorney’s fees. An award of such relief would operate as a penalty on the Church for terminating an unwanted minister, and would be no less prohibited by the First Amendment than an order overturning the termination. Such relief would depend on a determination that Hosanna-Tabor was wrong to have relieved Perich of her position, and it is precisely such a ruling that is barred by the ministerial exception.

Any suggestion that Hosanna-Tabor’s asserted religious reason for firing Perich was pretextual misses the point of the ministerial ex­ception. The purpose of the exception is not to safeguard a church’s decision to fire a minister only when it is made for a religious reason. The exception instead ensures that the authority to select and control who will minister to the faithful is the church’s alone. Pp. 19–20.

(c) Today the Court holds only that the ministerial exception bars an employment discrimination suit brought on behalf of a minister, challenging her church’s decision to fire her. The Court expresses no view on whether the exception bars other types of suits. Pp. 20–21.

597 F. 3d 769, reversed.

ROBERTS, C. J., delivered the opinion for a unanimous Court. THOM-AS, J., filed a concurring opinion. ALITO, J., filed a concurring opinion, in which KAGAN, J., joined.

Go to http://www.supremecourt.gov/opinions/11pdf/10-553.pdf to read the case.

California: Class Action Goes Up in Smoke

April 27, 2011 Comments off

A group of attorneys figured they had found a financial bonanza and filed a class action lawsuit against Starbucks hoping to get a $200 statutory penalty for each of 135,000 job applicants because Starbucks’s preprinted job application allegedly violated provisions of this marijuana reform legislation.  During the first administration of Governor Edmund G. Brown, Jr., in the mid-1970s, the California Legislature reformed the state’s marijuana laws to require the “destruction” by “permanent obliteration” of all records of minor marijuana convictions that were more than two years old. Employers were prohibited from even asking about such convictions on their job applications, with statutory penalties of the greater of actual damages, or $200 per aggrieved applicant.

Plaintiffs alleged Starbucks failed to adequately advise job applicants not to disclose minor marijuana convictions more than two years old. (See Lab. Code, §§ 432.7, subd. (c), 432.8.) Not surprisingly, none of the plaintiffs had been convicted of a marijuana-related crime. But they contended that California law allowed any job applicant to receive a minimum statutory penalty of $200 per applicant if they filled out an improper job application. This would of course result in a $26 million or so verdict and one heck of a payday for the lawyers! Kinda like those dozens of class action notices you get every year in the mail that you toss because you may get a new pair of jeans or discount on your next purchase…and oh, by the way, the lawyers get $10 million or so. Even though they generally say you don’t have to do anything if you don’t want to opt out, you never see another correspondence or a dime! What a gimmick. That’s not justice as I see it. Thankfully the court agreed.

In the first round of appeals the court held the plaintiffs did not have standing to represent the proposed class because none had any marijuana convictions to reveal. They declined to turn the legislation into a “veritable financial bonanza for litigants like plaintiffs who had no fear of stigmatizing marijuana convictions.” They thought that was the end of it…but it wasn’t.

The same trial court that allowed the case to proceed in the first place didn’t get the appellate court’s message and it allowed an amended complaint that would only include those guilty of the crime to file the lawsuit. But of course they asked to review all 136,000 applicants to find who those alleged victims where (known as a fishing expedition). The trial court allowed that discovery too. In a witty and stinging opinion the court posed the issue thus: “Can a purported remedy cause the very disease it is supposed to prevent? In this so-called “headless” class action, the answer regrettably is yes.”

In shutting down round 2, it held that “providing for the disclosure of job applicants with minor marijuana convictions, the discovery order ironically violates the very marijuana reform legislation the class action purports to enforce. We fail to understand how destroying applicants’ statutory privacy rights can serve to protect them. We reverse the discovery order.”

Unfortunately, Starbucks is not completely off the hook. According to the court: “Starbucks’s job applicants who had marijuana convictions know about their own previous convictions and about the fact that they had applied for a job at Starbucks. They are free to effectuate the legislative purposes underlying Labor Code section 432.8 by bringing individual actions, filing, if necessary, through Doe pleadings, and recovering not only actual damages or a statutory penalty, whichever is greater, but also attorney fees. (See Lab. Code, § 432.7, subd. (c)….

“The newly defined class does not include Starbucks’s applicants who have sustained actual damages, such as lost wages, or damage to reputation, which exceed $200. Thus, ‘truly’ aggrieved applicants are not prejudiced in any way by the dismissal of a class action which does not even purport to cover them.” In other words, if you can prove you were not hired and didn’t get another job for a while, you may have a better than $200 case.

And of course, there may be a round 3 that is brought to the California Supreme Court.  We wait with bated breath.

You can read the decision at http://www.courtinfo.ca.gov/opinions/documents/G043650.PDF

Those of you who are California employers can take comfort in the fact the HR That Works sample Job Application has this disclaimer in about two year old marijuana convictions. If you are not using ours then better check yours!

Categories: California, Case Summaries

U.S. Supreme Court Outlines Parameters of “Cat’s Paw” Theory of Liability

On March 1, 2011, the U.S. Supreme Court unanimously held in Staub v. Proctor Hospital (.pdf) that an employer can, in certain circumstances, be held liable for employment discrimination based upon the bias of a supervisor who influenced, but did not make, the ultimate employment decision.  The Court struck down a narrow version of this so-called “cat’s paw” argument, under which the employer could be held liable only if the biased supervisor exerted a “singular influence” over the ultimate employment decision.  Unfortunately, the Court’s decision provides little guidance for employers as to what steps they can take to avoid liability for “cat’s paw” claims.

Background

Vincent Staub worked for Proctor Hospital as an angiography technician until his termination in 2004.  During his employment, Staub was a member of the United States Army Reserve, which required him to attend drill one weekend per month and to train full-time for two to three weeks per year.  According to Staub, both his supervisor, Janice Mulally, and Mulally’s supervisor, Michael Korenchuk, were hostile to these military obligations.  Staub claimed that Mulally was actively seeking to get rid of him, and that Korenchuk was aware of her efforts.  In January 2004, Mulally issued a disciplinary directive to Staub that required him to report to Mulally or Korenchuk when he had no patients or when the angio cases were completed.  Around April 2004, Korenchuk reported to Linda Buck, Proctor’s vice president of human resources, that Staub left his desk without informing a supervisor in violation of the disciplinary directive.  Buck relied on the accusation and, after reviewing Staub’s personnel file, decided to fire him.

Staub filed a grievance challenging his termination, claiming that Mulally fabricated the allegations that had resulted in the disciplinary directive because of her hostility to his military obligations.  After discussing the matter with another personnel officer, and without conferring with Mulally, Buck upheld her termination decision.

Staub subsequently sued Proctor Hospital under the Uniformed Service Employment and Reemployment Rights Act of 1994 (USERRA), claiming that his discharge was motivated by hostility to his military obligations.  Staub did not argue that Buck harbored any hostility to his military obligations, but that Mulally and Korenchuk’s hostility influenced Buck’s ultimate employment decision.  A jury found in favor of Staub, finding that his military status was a motivating factor in the decision to discharge him.  However, the Seventh Circuit Court of Appeals reversed the jury verdict, holding that Staub’s claim could not succeed unless the biased supervisor exercised such a “singular influence” over the decisionmaker that the decision to terminate was the product of “blind reliance.”  Because Buck took other factors into account in making the termination decision, the Seventh Circuit held that Proctor Hospital was not liable.

The Court’s Ruling

The Supreme Court unanimously reversed the Seventh Circuit’s decision.  In a majority opinion joined by six Justices, Justice Scalia wrote that the Seventh Circuit’s narrow view of the “cat’s paw” theory “would have the improbable consequence that if an employer isolates a personnel official from an employee’s supervisors, vests the decision to take adverse employment actions in that official, and asks that official to review the employee’s personnel file before taking the adverse action, then the employer will be effectively shielded from discriminatory acts and recommendations of supervisors that were designed and intended to produce the adverse action.”  Thus, the Court held that “if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA.”

In a separate concurring opinion joined by Justices Alito and Thomas, Justice Alito wrote that an employer should not be held liable “where the officer with formal decision making responsibility, having been alerted to the possibility that adverse information may be tainted, undertakes a reasonable investigation and finds insufficient evidence to dispute the accuracy of that information.”  The majority, however, declined to adopt a hard-and-fast rule that the decisionmaker’s independent investigation and rejection of the employee’s allegations of discriminatory animus shielded the employer from liability.  While not foreclosing the possibility that such an investigation could shield an employer from liability, majority observed that even with such an investigation, the biased adverse action could remain a causal factor in the dismissal if the decisionmaker took the biased action into account without determining that the adverse action was, apart from the supervisor’s recommendation, entirely justified.

Insights for Employers

This case is a clear victory for plaintiffs and plaintiffs’ attorneys, particularly in jurisdictions such as the Seventh Circuit (which encompasses Illinois, Indiana and Wisconsin) that had previously adopted more limited versions of the “cat’s paw” theory.  While the case addresses a claim under USERRA, the Court’s decision makes it clear that the same analysis is likely to apply under nearly all federal laws prohibiting discrimination and retaliation in employment.

In light of the Court’s opinion, it is clear that having HR or a higher-level manager review an employment decision will not necessarily absolve an employer of liability for the bias of a subordinate.  Nevertheless, this case makes meaningful review of employment decisions by HR and management even more vital, as the best way to avoid a lawsuit is to ensure that supervisors’ recommendations are well-supported and that questionable actions are reversed or postponed until they can be properly supported.  Further, it is now all the more important to ensure that even first-line supervisors receive effective training regarding equal employment laws and how to properly document and support employment decisions. 

Article courtesy of Worklaw Network firm Franczek Radelet.