A series of recent California state and federal decisions emphasize the urgent need for proper management training and the importance of preventive employment practices. These decisions highlight the top five employment liability issues for California employers: disability leaves; sexual harassment; workplace violence; arbitration and employment agreements; and unfair competition.

Dorsey & Whitney’s West Coast Labor and Employment attorneys can assist in this regard and have assembled a training team who regularly advise employers and train managers to avoid employment law pitfalls. Later this year, Dorsey will also hold other sessions at the following West Coast locations: Los Angeles, Irvine, Palo Alto, Sacramento, Seattle and Salt Lake City. Dorsey’s first mandatory sexual harassment prevention training will be on: June 27, 2007 at 8:00 a.m., Dorsey’s Southern California office.

As discussed below, the underlying message reiterated by these California decisions is the importance of management training and clear, cohesive employment policies.

Disability Leaves: Responding to CFRA and FEHA Claims

Two recent California appellate decisions in Faust v. California Portland Cement (5/10/07) and Malais v. Los Angeles City Fire Dep’t (3/29/07) emphasized the importance of properly training managers in responding to claims of medical and disability leaves.

California’s Fair Employment and Housing Act ("FEHA") obligates employers to engage in the interactive process and accommodate employees who suffer from a disability, as defined by statute. California employers employing 50 or more employees are also obligated to provide qualifying employees with 12 weeks of protected leave in a 12 month period under the California Family Rights Act ("CFRA"). Employers subject to the CFRA are required to provide notice to their employees of their rights under the statute. The interplay of the FEHA, CFRA and workers’ compensation can be confusing, thus creating issues of liability for many employers.

The California Court of Appeal’s decision in Faust v. California Portland Cement demonstrated the importance of correctly understanding and training managers and supervisors in applying these principles. In Faust, the Court of Appeal reversed the trial court’s summary judgment in favor of the employer and found the employer failed to provide proper notice to the employee under the CFRA.

Faust, a "lube specialist," entered into a 30 day psychiatric program as a result of severe stress and filed a workers’ compensation claim. His attorney informed the company of the claim and provided documentation of psychiatric impairment. Faust also submitted a medical certification from his chiropractor indicating he was being treated for back pain and would be unable to perform his regular duties for a period of time. The company’s human resources manager questioned the adequacy of the certificate and left Faust a message and sent him a letter outlining what she believed was incomplete about the doctor’s note. Faust’s wife returned the call and requested the company limit its communications to her, the chiropractor, or the workers’ compensation attorney, because Faust’s psychiatrist had advised him not to speak with the company due to his anxiety. The company did not contact any of the individuals.

Ultimately, the company terminated Faust after seven weeks of leave and failed to designate the leave as CFRA/FMLA leave. Faust sued for disability discrimination and harassment under the FEHA, retaliation, wrongful termination, violations of the CFRA and violation of California’s Business and Professions Code. The trial court granted the company’s motion for summary judgment, which the Court of Appeal reversed.

The Court of Appeal reversed on a number of grounds. Specifically, the court found the company’s failure to post the required CFRA/FMLA notices and inform Faust of his right to CFRA leave precluded it from denying leave or taking any adverse action against the employee, including denying CFRA leave. Faust’s retaliation and FEHA claims also survived summary judgment because the company’s legitimate business reasons were undermined by the fact that the company refused to communicate with any of Faust’s representatives, and thus failed to engage in the interactive process.

Conversely, the Court of Appeal in Malais v. Los Angeles City Fire Dep’t found in favor of the employer, where it properly accommodated the employee under the FEHA. Malais was a Captain with the Los Angeles Fire Department who sued the department for disability discrimination and retaliation under the FEHA when he was given special duty assignment following the partial amputation of one of his legs. The Department refused to return him to platoon duty, as they believed there was a risk to Malais, his co-workers and the public. In fact, it was undisputed that the Department denied Malais his desired job solely because of his disability. While on special duty he received the same pay and promotional opportunities.

The Court of Appeal reviewed the California Supreme Court’s definition of an adverse employment action in Yanowitz v. L’Oreal USA, Inc., (2005) 36 Cal 4th 1049,1055, which defined an adverse action as discrimination regarding compensation, terms, conditions or privileges of employment and disparate treatment in employment. However, the Yanowitz Court added: "A change that is merely contrary to an employee’s interests or not to the employee’s liking is insufficient." The Court of Appeal found although Malais was denied the job he wanted because of his disability, he continued to receive promotions. Moreover, there was no evidence he suffered from a hostile work environment. The appellate court said there is no precedent finding adverse employment actions "in transfers involved working assignments the employee preferred less than other assignments, but with equal pay, benefits, promotional opportunities, and no hostile environment."

Sexual Harassment: Employer Liability for Sexual Harassment Away from Work

Employers can be liable for sexual harassment even when the alleged harassment occurs away from the workplace, thereby emphasizing the importance of management sexual harassment prevention training. In Myers v. Trendwest Resorts (3/28/07), Myers alleged her supervisor sexually harassed her, including incidents which occurred off-site and during business trips. The Court of Appeal reversed the trial court’s summary judgment in favor of the employer.

The company argued it was not responsible for conduct it qualified as outside the scope of the manager’s responsibility (i.e., job assignments away from work, sponsored social drinking activities, invitations to his home). The Court of Appeal in Myers found that in order for the company to avoid strict liability for the supervisor’s actions, "the harassment must result from a completely private relationship unconnected with employment." Otherwise, the court held "the employer is strictly liable for the supervisor’s actions regardless of whether the supervisor was acting as the employer’s agent." The court also found the employee’s failure to complain, lack of use of the company’s anti-harassment policy and the employee’s consent to accompany her supervisor to a weekend trip were all irrelevant, but the fact the inappropriate conduct occurred as a result of work-related activity was sufficient to confer liability on the employer.

Workplace Violence: Avoiding Liability for Threats at Work

How should you respond when an employee reports an threat of potential workplace violence? The Court of Appeal in Franklin v. The Monadnock Company (5/24/07) held an employer has a legal responsibility to provide a safe place of employment for its employees and must respond to allegations of workplace violence.

Franklin alleged a coworker had threatened to kill him and three other employees. The company did not take action. A week later, the co-worker attempted to stab Franklin with a screwdriver and another metal object. He complained again to the company and reported the incident to the police department. Shortly thereafter Franklin was terminated from his employment. He sued the company for wrongful termination in violation of public policy.

The Court of Appeal found Franklin could maintain his wrongful termination claim as there was a public policy in providing a safe workplace. California Labor Code § 6400 and Code of Civil Procedure § 527.8 create an obligation for the employer to provide a safe and secure workplace. Specifically, the court emphasized the employer’s obligation to respond where the employee has a reasonable belief of a threat of violence or fear for his or her safety, which creates a "credible threat of violence."

Unfair Competition: Protection for Employers

Employers with well-drafted employment agreements might have an interference claim against competitors that attempt to hire away their employees. In CRST Van Expedited v. Werner Enterprises, 479 F.3d 1099 (9th Cir. 2007) the Ninth Circuit clarified that employers with employment agreements specifying a term of employment may to proceed with breach of contract and interference with contract claims to prevent employee raiding practices by competitors.

CRST is a trucking company that required student drivers to sign a one-year employment contract which allowed termination for cause. This period allowed its drivers to complete the necessary training and become certified truck drivers. Werner, a competitor, was interested in hiring two CRST truck drivers who had completed their training. CRST informed Werner of the employment agreements and warned against interference with the contractual agreements. Despite this, Werner hired the two CRST drivers.

CRST sued Werner for interference with CRST’s contracts. The Ninth Circuit held the complaint properly stated a claim under California law for interference with contractual claims and unfair business practices under California’s unfair competition law. The court found CRST was not required to prove "an independently wrongful act" to sustain its interference claim, as the employees had employment agreements and their employment was no longer "at-will."

On a related note, the California Court of Appeal in Huong Que v. Luu (4/30/07) reiterated the duty of loyalty owed by managers and supervisors during their employment. The Court of Appeal upheld a preliminary injunction where one of the company’s supervisors attempted to divert proprietary information to third parties during his employment.

Both decisions emphasize the importance of well drafted employment policies and agreements. Properly drafted employment agreements, confidentiality agreements and related policies protect the company’s assets and interests.

Arbitration Agreement: Avoiding Illegal Agreements

The Ninth Circuit recently cautioned employers attempting to enforce "take it or leave it" mandatory employment arbitration agreements. In Davis v. O’Melveny & Myers (5/14/07) the court found the international law firm’s mandatory employment arbitration agreement was not enforceable. Specifically, it held the agreement was both procedurally and substantively unconscionable and refused to enforce it. Davis was a paralegal with the firm’s Los Angeles office, and was presented with the firm’s mandatory Dispute Resolution Program which included an arbitration agreement. The Ninth Circuit found the firm’s "take it or leave it" arbitration agreement was procedurally unconscionable as it denied employees a choice or opportunity to negotiate. The Circuit Court also found the agreement to be substantively unconscionable because of its one-year notice provision which shortened the statute of limitations for certain claims, and the confidentiality clause, prohibiting disclosure that there was a claim or arbitration. The Circuit Court also found the agreement’s "carve-out" injunctive relief to be overly broad and one-sided. Lastly, the Circuit Court struck down the agreements prohibition against certain administrative actions, thereby invalidating the agreement.

Quick Fixes For California Employers

These recent decisions highlight the importance of cohesive employment policies combined with ongoing management training. Employers can quickly eliminate significant liability by:

  • Ensuring all required state and federal regulations are properly posted at their place of business and that these postings are updated regularly to reflect changes in the law.
  • Properly training their management teams and providing anti-discrimination, harassment and retaliation training. Dorsey offers a comprehensive training program which includes a variety of management training options, including California’s mandatory sexual harassment prevention training.
  • Consulting with Dorsey California employment counsel to review existing policies and procedures, including employment and arbitration agreements to ensure such policies and agreements are regularly updated and comply with California law.
  • Consulting with Dorsey California employment counsel to conduct wage-hour audits. Employers can prevent significant exposure by internally identifying potential exposure and vulnerabilities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.