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IMPORTANT RECENT CASES IN EMPLOYMENT LAW
______
by
CYNTHIA E. GITT & MARIEL S. MULET
March 9, 2001
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TABLE OF CONTENTS
INTRODUCTION......
ARBITRATION......
Armendariz......
Post-Armendariz Refinements re: Arbitrability......
Craig......
Pinedo......
Martinez......
EEOC v. Luce, Forward, Hamilton & Scripps, LLP.......
Armendariz Guides Arbitration Disputes Outside The Employment Context......
EFFECTS OF ARBITRATION AWARDS OF TITLE VII AND FEHA CLAIMS RENDERED PURSUANT TO A COLLECTIVE BARGAINING AGREEMENT ON SUBSEQUENT LAWSUIT OF INDIVIDUAL EMPLOYEE FOR SAME CLAIMS
Camargo......
Eastern Associated Coal Corp.......
DISCRIMINATION CASES......
DISABILITY DISCRIMINATION......
Jensen......
Spitzer......
Humphrey......
Echazabal......
Downey......
Barnett......
Willis......
SEX DISCRIMINATION......
Frank......
Costa......
EEOC Decision......
HARASSMENT......
Carrisales......
Kortan......
Brooks......
Star......
Mosher......
RETALIATION......
Thomas......
Ray......
Fielder......
AGE DISCRIMINATION......
Guz......
Reeves......
CONTINUING VIOLATION......
Fielder......
Morgan......
O'Loghlin......
FAMILY RIGHTS ACT......
Pang......
REMEDIES......
Pollard......
ATTORNEYS' FEES......
PLCM Group, Inc.......
Beaty......
INDEMNIFICATION......
Jacobus......
WRONGFUL TERMINATION AND EMPLOYMENT CONTRACTS......
Guz......
PUBLIC POLICY VIOLATIONS......
D'Sa......
Luce, Forward......
CONSTRUCTIVE DISCHARGE......
Thompson......
EMPLOYER’S UNILATERAL CONTRACTS......
Asmus......
O’Neill......
SUMMARY JUDGMENT......
Guz......
Quinn......
Thompson......
Reeves......
Chuang......
Barnett......
Medina......
Fairbank......
Snead......
UNLAWFULLY WITHHELD WAGES UNFAIR COMPETITION......
Cortez......
NLRB RULES NON-UNION EMPLOYEE HAS RIGHT TO PRESENCE OF COWORKER DURING INVESTIGATORY INTERVIEW
COVENANTS NOT TO COMPETE AND TRADE SECRETS......
D’Sa......
GAB Business Services......
TABLE OF AUTHORITIES
FEDERAL CASES
Alexander v. Gardner-DenverCompany,
415 U.S. 36, 94 S. Ct. 1011 (1974) ...... 14
Arnett v. California Public Employees Ret. System,
179 F.3d 690 (9th Cir. 1999) ...... 27
Barnett v. U.S. Air, Inc.,
228 F.3d 1105 (9th Cir. Oct. 4, 2000) ...... 24, 62
Beaty v. Bet Holdings, Inc.,
222 F.3d 607 (Aug. 24, 2000) ...... 49
Brooks v. City of San Mateo et al.,
229 F.3d 917 (9th Cir. Oct. 23, 2000) ...... 31, 32, 36
Burlington Industries v. Ellerth,
524 U.S. 742, 118 S. Ct. 2257 (1998) ...... 33
Chuang v. University of California Davis et al.,
225 F.3d 1115 (9th Cir. Aug. 30, 2000) ...... 61
Circuit City Stores v. Saint Clair Adams,
Case No. 99-1379, cert. granted May 22, 2000 ...... 12
Cole v. Burns Intern. Security Services,
105 F.3d 1465 (D. C. Cir. 1997) ...... 4
Costa v. Desert Palace, Inc. dba Caesar's Palace Hotel & Casino,
__ F.3d __, 2000 WL 1879906 (Dec. 29, 2000) ...... 27, 28
Craft v. Campbell Soup Co.,
177 F.3d 1083 (9th Cir. 1999) ...... 12
Downey v. Crowley Marine Services,
236 F.3d 1019 (Jan. 3, 2001) ...... 23
Duffield v. Robertson Stephens & Co.,
144 F.3d 1182 (1998) ...... 3, 11, 12
EEOC v. Luce, Forward, Hamilton & Scripps, LLP,
122 F. Supp. 2d 1080 (C.D. Cal. Nov. 21, 2000) ...... 11, 53
Eastern Associated Coal Corp. v. United Mine Workers,
__ U.S. __, 121 S. Ct. 462 (Nov. 28, 2000) ...... 15, 16
Echazabal v. Chevron USA, Inc.,
226 F.3d 1063 (9th Cir. Sept. 26, 2000) ...... 22, 23
Epilepsy Foundation of Northeast Ohio,
331 N.L.R.B. No. 92, 164 L.R.R.M. (BNA) 1233 (Jul. 10, 2000) ...... 65
Fairbank v. Wunderman Cato Johnson,
212 F.3d 528 (9th Cir. May 5, 2000) ...... 63
Faragher v. City of Boca Raton,
524 U.S. 775 (1998) ...... 33
Fielder v. United Airlines,
218 F.3d 973 (9th Cir. 2000) ...... 35, 41
Frank et al. v. United Airlines, Inc.,
216 F.3d 845 (9th Cir. June 21, 2000) ...... 25, 26
Gray v. Conseco Inc. et al.,
2000 WL 1480273 (U.S. District Court, C.D. California, Sept. 29, 2000) ...... 13
Gummell v. Utah Valley State College,
152 F.3d 1253 (10th Cir. 1998)...... 36
Hazen Paper Co. v. Biggins,
507 U.S. 604, 113 S. Ct. 1701 (1993) ...... 27
Hicks v. St. Mary's Honor Society,
509 U.S. 502, 113 S. Ct., 2742 (1993) ...... 38, 39, 58, 60
Hudson v. Reno,
130 F.3d 1193 (6th Cir. 1997) ...... 46
Humphrey v. Memorial Hospitals Association,
__ F.3d __, 2001 WL 118432 (9th Cir. Feb. 13, 2001) ...... 19, 21
Kimel v. Florida Board of Regents,
528 U.S. 62, 120 S. Ct. 631 (2000) ...... 27
Knox v. Indiana,
93 F.3d 1327 (7th Cir. 1997)...... 36
Kortan v. California Youth Authority,
217 F.3d 1104 (9th Cir. 2000) ...... 30
Materials Research Corp.,
262 N.L.R.B. 1010 (1982) ...... 67
McDonnell Douglas Corp. v. Green,
411 U.S. 792, 802 (1973)...... 1, 27, 28, 38, 39, 41, 63
Morgan v. National Railroad Passenger,
232 F.3d 1008 (9th Cir. Nov. 8, 2000) ...... 43
Mosher v. Dollar Tree Stores, Inc.,
___ F.3d ___, 2001 WL 128087 (7th Cir. Feb. 16, 2001) ...... 33
NLRB v. J. Weingarten,
420 U.S. 251 (1975) ...... 66
Nesbit v. Pepsicola,
994 F.2d 703 (1993) ...... 59
O'Loghlin v. County of Orange,
229 F.3d 871 (9th Cir. Oct. 6, 2000) ...... 44
Palcologer v. Rehab Consultants, Inc.,
990 F. Supp. 1460 (N.D. Ga. 1998) ...... 17
Pollard v. E.I. DuPont de Nemours Co.,
213 F.3d 933 (6th Cir. Aug. 25, 2000),
cert. granted, 2001 WL 12416 (Jan. 8, 2001) ...... 45, 46, 47
Price Waterhouse v. Hopkins,
490 U.S. 228, 109 S. Ct. 1775 (1989)...... 27
Ray v. Henderson,
217 F.3d 1234 (9th Cir. 2000) ...... 34, 35
Reeves v. Sanderson Plumbing Products, supra,
530 U.S. 133, 120 S. Ct. 2097 (June 12, 2000) ...... 1, 38, 39, 40, 58, 59
Rose v. Wells Fargo,
902 F.2d 1417 (1990)...... 59
Sears, Roebuck & Co.,
274 N.L.R.B. 230 (1985) ...... 67
Sherback v. Wright Automotive Group,
987 F. Supp. 433 (W.D. Pa. 1997)._ ...... 17
Snead v. Metropolitan Property & Casualty Insurance Company,
237 F.3d 1080 (9th Cir. Jan. 23, 2001) ...... 63, 64
Star v. West et al.,
237 F.3d 1036 (9th Cir. Jan. 18, 2001) ...... 32
Thompson v. Tracor Flight Systems, Inc.,
__ Cal. Rptr. 2d __, 2001 WL 114452 (5th Dist. Feb. 2, 2001) ...... 53, 54
UAW v. Johnson Controls,
499 U.S. §187, 111 S. Ct. 1197 (1991) ...... 23
Willis v. Pacific Maritime Association,
236 F.3d 1160 (9th Cir. Jan. 10, 2001)...... 25
Wyatt v. Boston,
35 F.3d 13 (1st Cir. 1994)...... 36
STATE CASES
Armendariz v. Foundation Health Psychcare Services, Inc.,
24 Cal. 4th 83, 99 Cal.Rptr.2d 745 (Aug. 24, 2000)...... 1, 2, 3, 4, 5, 6
Asmus v. Pacific Bell,
23 Cal. 4th 1, 96 Cal. Rptr. 2d 179 (June 1, 2000)...... 1, 55, 56
Ben Pinedo v. Premium Tobacco, Inc. et al.,
85 Cal. App. 4th 774, 102 Cal. Rptr. 2d 435 (4th Dist. Dec. 19, 2000) ...... 10
Camargo v. California Portland Cement,
__ Cal. App. 3d __, 103 Cal. Rptr. 841 (Jan. 31, 2001) ...... 14
Cortez v. Purolator Air Filtration Products Co.,
23 Cal. 4th 163, 96 Cal. Rptr. 2d 518 (June 5, 2000) ...... 64
Craig v. Brown & Root, Inc.,
84 Cal. App. 4th 416, 100 Cal. Rptr. 2d 818
(2nd Dist. Oct. 26, 2000) ...... 7
D'Sa v. Playhut, Inc.,
85 Cal. App. 4th 927, 102 Cal. Rptr. 2d 495
(2nd Dist., Dec. 21, 2000) ...... 52, 68, 69
Gab Business Services, Inc. v Lindsey & Newsroom Claim Services, Inc.,
83 Cal. App. 4th 409, 99 Cal. Rptr. 2d 665
(4th Dist., Aug. 29, 2000)...... 69
Guz v. Bechtel National, Inc.,
24 Cal. 4th 317, 100 Cal. Rptr.2d 352 (Oct. 5, 2000)...... 1, 36, 38, 51, 52, 57
Horn v. Cushman & Wakefield Western, Inc.,
72 Cal. App. 4th 798, 85 Cal. Rptr. 2d 459 (1999) ...... 59
Jacobus v. Krambo Corporation,
79 Cal. App. 4th 1096, 93 Cal. Rptr. 2d 425 (1st Dist., March 3, 2000) ...... 50
Jensen v. Wells Fargo,
85 Cal. App. 4th 245, 102 Cal. Rptr. 2d 55 (2nd Dist. Dec. 5, 2000) ...... 17
Kraus v. Trinity Management Service,
23 Cal. 4th 116, 96 Cal. Rptr. 2d 485 (June 5, 2000) ...... 65
Lagatree v. Luce, Forward, Hamilton & Scripps,
74 Cal. App. 4th 1105, 88 Cal. Rptr. 2d 664 (2nd Dist. 1999) ...... 11, 53
Loehr v. Ventura County Community College District,
147 Cal. App. 3d 1071 (1983)...... 64
Martinez v. Scott Specialty Gases, Inc.,
83 Cal. App. 4th 1236, 100 Cal. Rptr. 2d 403
(1st Dist. Mar. 3, 2000) ...... 11
Maryann Carrisales v. Department of Corrections et al.,
21 Cal. 4th 1132, 90 Cal. Rptr. 2d 804 (Dec. 9, 1999) ...... 30
PLCM Group, Inc. v. Drexler,
22 Cal. 4th 1084, 95 Cal. Rptr. 2d 198 (June 2, 2000)...... 48, 49
Pang v. Beverly Hospital,
79 Cal. App. 4th 986, 94 Cal. Rptr. 2d 643
(2nd Dist. April 10, 2000) ...... 45
Quinn v. City of Los Angeles,
84 Cal. App. 4th 472, 100 Cal. Rptr. 2d 914
(2nd Dist. Oct. 30, 2000) ...... 58
Rosales v. Thermex-Thermatron, Inc.,
67 Cal. App. 4th 187 (1994) ...... 54
Shubin v. William Lyon Homes, Inc.,
84 Cal. App. 4th 1041, 101 Cal. Rptr. 2d 390 (1st Dist. Nov. 14, 2000) ...... 9
Spitzer v. The Good Guys, Inc.,
80 Cal. App. 4th 1376, 96 Cal. Rptr. 2d 236
(1st Dist. May 1, 2000) ...... 17, 18
Thomas v. Department of Corrections,
77 Cal. App. 4th 507, 91 Cal. Rptr. 2d 770 (4th Dist. 2000) ...... 34
Thompson v. Tracor Systems, Inc., supra,
__ Cal. App. 4th __, 2001 WL 14452 (5th Dist. 2001) ...... 58
Turner v. Anheuser-Busch, Inc.,
7 Cal. 4th 1238, 32 Cal. Rptr. 2d 223 (1994) ...... 54
Villa Milano Homeowners Association v. Il Davorge,
84 Cal. App. 4th 819, 102 Cal. Rptr. 2d 1
(4th Dist., Nov. 6, 2000) ...... 13
FEDERAL STATUTES
EEOC Interpretive Guide, 29 C.F.R. 1630.9 App.. (1999) ...... 18
Civil Rights Act of 1991, 42 U.S.C. § 2000 et. seq...... 3
42 U.S.C. § 12113 ...... 22
Title VII 42 U.S.C. §1981a ...... 46, 47
STATE STATUTES
Cal. Bus. & Prof. Code Section 16600 ...... 68
Government Code §12940(a)(1) ...... 23
Labor Code § 2802 ...... 50
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IMPORTANT RECENT CASES IN EMPLOYMENT LAW
by
CYNTHIA E. GITT & MARIEL S. MULET
INTRODUCTION
This work encompasses a selection of cases decided during the past year that we found of particular relevance for corporate counsel in their dealings with employment practices.
The most significant judicial decisions of last year in the area of employment law are certainly the ones rendered in Armendariz v. Foundation Health Psychare Services, Inc., 24 Cal. 4th 83, Reeves v. Sanderson Plumbing Products, 120 S. Ct. 2097, Guz v. Bechtel National, Inc., 24 Cal. 4th 317, and Asmus v. Pacific Bell, 23 Cal.4th 1.
Armendariz defined the standards for acceptance of arbitration agreements in the employment context. Reeves, in addition to other contributions in the area of age discrimination, clarified the analytical reasoning of the McDonnell Douglas / St. Mary's Honor Society burden shifting treatment of discrimination and retaliation cases at the summary judgment stage. Guz, also an age discrimination case, interprets Reeves in providing guidelines for summary judgment standards under California law, and alerts employers that portions of company written personnel policies can alter the "at will" nature of the employment relationship or any "at will" disclaimer the employment manual or policies may contain. Finally, Asmus addresses the ability of employers to change, with notice, the terms and conditions of employment.
Other cases in this compilation treat accommodation requirements, elements of the "prima facie" case of claims of discrimination, reasonableness of award of attorneys' fees, protection of employer's confidential information, procedural issues such as requirements to obtain summary judgment and "continuing violation" theory and constitutionality of the statutory cap for compensatory damages in certain discrimination cases.
ARBITRATION
California State Court Cases
Armendariz
Arbitrability of FEHA claims, unconscionability.
The California Supreme Court's decision in Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83, 99 Cal.Rptr.2d 745 (Aug. 24, 2000) established new guidelines for the state courts on the validity of arbitration provisions in employment agreements and/or employment application forms.
While the ruling resulted in the unenforceability of the specific arbitration agreement examined in the case, the Supreme Court affirmed the legality and adequacy of arbitration agreements in the employment context, even in discrimination cases under the Fair Employment and Housing Act ("FEHA"), and provided a useful framework for employers to draft and enforce such agreements.
The case arose from the alleged wrongful termination of Marybeth Armendariz and Dolores Olague - Rodgers by their former employer Foundation Health Psychcare Services, Inc. The complaint alleged violation of the FEHA (sexual harassment) and three additional causes of actions for wrongful termination based on tort and contract theories of recovery. The complaint sought general damages, injunctive relief, and the recovery of attorney fees and costs of suit. The employer moved to compel arbitration pursuant to the arbitration agreement contained in the employment application and a separate arbitration agreement plaintiffs had executed upon employment.
The arbitration agreement provided that the employee would submit any matter related to the wrongful termination of his/her employment to binding arbitration. The arbitration agreement provided that the employee's exclusive remedies for violation of the terms, conditions or covenants of employment would be limited to a sum equal to the wages the employee would have earned from the date of any discharge to the day of the arbitration award, i.e., "backpay."
The trial court found the arbitration agreement invalid in its entirety, opining that the limitation on damages in the agreement was unconscionable and contrary to public policy. The Court of Appeal reversed, ordered the severance of that provision from the agreement, and the enforcement of the remainder of the arbitration agreement as valid.
The Supreme Court reversed the judgment of the Court of Appeal. However, the Supreme Court also ruled that arbitration agreements in the employment context are not always unconscionable, and it set forth some rules as to what an employment arbitration agreement must provide in order to avoid a finding of unconscionability. The Supreme Court also discussed the circumstances in which one or more unconscionable provisions could be severed to save the remainder of the agreement.
The Supreme Court first rejected the arguments expressed by the Ninth Circuit Court of Appeals in Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (1998) with respect to the inarbitrability of Title VII claims or equivalent state anti-discrimination statutes such as FEHA, pursuant to Section 118 of the 1991 Civil Rights Act, 42 U.S.C. § 2000 et. seq.[1] Contrary to the Duffield court, the California Supreme Court held that the language in Section 118 does not translate into a specific congressional intent to ban mandatory employment arbitration agreements. Specifically, the California Supreme Court affirmed that "California law, like federal law, favors enforcement of valid arbitration agreements" Armendariz, 24 Cal. 4th at 96.
Likewise, the California Supreme Court stated that "under California law, as under federal law, an arbitration agreement may only be invalidated for the same reasons as any other contract." Moreover, the Court found that the California Arbitration Act ("CAA"), unlike the Federal Arbitration Act ("FAA") as interpreted by the Ninth Circuit, contains no exemption for employment contracts. Id., 24 Cal. 4th at 98.
In analyzing whether arbitration is considered an adequate forum for securing employees' rights under FEHA, the Court concluded that such claims are in fact arbitrable if the arbitration permits an employee to vindicate his or her statutory rights. The Court adopted, as a minimum standard for agreements to arbitrate statutory rights, the one formulated in Cole v. Burns Intern. Security Services, 105 F.3d 1465 (D. C. Cir. 1997):
"Such an arbitration agreement is lawful if it ‘(1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum.’" [cite omitted.] (Emphasis added.)
Armendariz, 24 Cal. 4th at 102.
Applying those factors to the case before it, the California Supreme Court found that Foundation Health’s arbitration agreement met all but one of the Cole requirements: it did not provide for all of the types of relief that would otherwise be available in court. The "back pay" limitation of the arbitration agreement was found by the Supreme Court to be contrary to public policy and unlawful because it deprived the employee of the full remedies available by statute. The Court held that an arbitration agreement may never limit statutorily imposed remedies such as punitive damages and attorneys fees. Armendariz, 24 Cal. 4th at 104.
While Foundation Health's arbitration agreement did not contain some of the other Cole requirements, the California Supreme Court minimized that issue by stating that when parties agree to arbitrate statutory claims, they also implicitly agree, absent express language to the contrary, to such procedures as are necessary to vindicate that claim. Such procedures include the necessary "more than minimum discovery" required by the Cole decision. Armendariz, 24 Cal. 4th at 105-106. With respect to the requirement of judicial review of the arbitration award, the Supreme Court determined that the requirement would be satisfied as long as the arbitrator in a FEHA case issues a written arbitration decision that reveals the essential findings and conclusions on which the award is based. Armendariz, 24 Cal. 4th at 107. And as to the costs requirement, the Court held that the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if she or he were free to bring the action in court. Armendariz, 24 Cal. 4th at 110-111. It concluded that "a mandatory employment arbitration agreement that contains within its scope the arbitration of FEHA claims impliedly obliges the employer to pay all types of costs that are unique to arbitration." In the absence of specific provisions on arbitration costs, the Court held that the employer bear all the arbitration forum costs. Armendariz, 24 Cal. 4th at 113.
The Supreme Court also determined that because the arbitration provision before it required only employees to arbitrate their wrongful termination claims against the employer, but implicitly did not require the employer to arbitrate some claims it may have against the employee, i.e., those claims related to the protection of the employer's intellectual property or the enforcement of post-employment covenants not to compete, there was a lack of mutuality that made the agreement to arbitrate unconscionable. Notably, the arbitration agreement did not expressly authorize litigation of the employer's claims against the employee, but the Court saw it as a clear implication of the agreement. "The lack of mutuality can be manifested as much by what the agreement does not provide as by what it does." Armendariz, 24 Cal. 4th at 120.
The Supreme Court reached these conclusions by applying traditional elements of unconscionability, which apply regardless of the type of claim being arbitrated.
First, the Court held that employment contracts imposed on employees as a condition of employment, offer no opportunity to the employee to negotiate and thus are contracts of adhesion.[2] The Court then analyzed whether the adhesive contract was unconscionable: "Courts must then determine whether 'other factors are present which, under established legal rules-legislative or judicial-operate to render it [unenforceable]." Armendariz, 24 Cal 4th at 113, citing Graham v. Scissor-Tail, Inc., 28 Cal 3d 807, 820 (1981). The two judicially imposed limitations on the enforcement of adhesion contracts are "reasonable expectations" of the person against whom the agreement is being enforced (the contract or provision that does not fall within the reasonable expectations of the "adhering" party will not be enforced against him or her) and the limitation on "oppressiveness" (a contract or provision, even if consistent with the reasonable expectations of the parties, will be denied enforcement if it is unduly oppressive or unconscionable).[3] Id. A contract is determined unconscionable if both the procedural and the substantive element of unconscionability exist.
The Supreme Court interpreted the Civil Code provisions on arbitration, particularly sections 1599 (severability) and 1670.5 (a) (enforceability of unconscionable contract or unconscionable clause contained in contract), to allow a court that finds an arbitration agreement or any portion therein to be unconscionable, to refuse to enforce the contract, enforce the remainder of the contract without the unconscionable provision, or limit the application of such agreement as to avoid any unconscionable result. The Supreme Court held that these factors should be analyzed in light of the character and degree of unconscionability. If the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced, but if the illegality is collateral to the main purpose of the contract, then the illegal provision can be severed from the contract appropriately. Another factor was whether the unconscionable provision could simply be deleted, or would require the court to re-write (reform) the contract.
In the case before it, the Court reasoned that because the arbitration agreement contained more than one unlawful provision (limitation of damages provision and unilateral arbitration agreement), those "multiple defects indicate a systematic effort to impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum that works to the employer's advantage." Armendariz, 24 Cal. 4th at 124. Furthermore, there were no provisions the Court could sever to correct lack of mutuality. To remove such unconscionability, the Court would have to enhance the agreement with additional terms, which is not authorized by either the Civil Code or the arbitration statute.