California Employment Law : Employment Lawyer & Attorney : Fox Rothschild Law Firm : San Francisco, Oakland, Los Angeles, San Diego

In 2001, UPS hired Mauricio Centeno as a junior accounts payable clerk at its facility in Glendale, CA.  Centeno is deaf and has been since birth.  His primary language is American Sign Language and he reads and writes at a fourth or fifth grade level.  UPS provided him with an interpreter at monthly meetings and with written notes at weekly meetings. 

Centeno complained that getting the notes after the meeting deprived him of the opportunity to ask questions.  He asked for an interpreter for the weekly meetings or contemporaneous notes.  UPS began providing Centeno with contemporaneous notes in 2004, but Centeno complained that the notes weren't sufficiently detailed and repeated his request for an interpreter.  In addition, an EEOC investigator (stepping way outside the role of neutral fact-finder) told Centeno not to attend meetings where there wasn't an interpreter.  When Centeno stopped attending these mandatory meetings, UPS excused him from doing so.

To many of us, this sounds like an employer going above and beyond to assist a profoundly disabled employee.  And the judge who granted UPS's motion for summary judgment agreed.  But on Friday, the 9th Circuit Court of Appeals reversed that decision (pdf) holding that there was a triable issue as to whether UPS satisfied its obligations under the ADA to provide reasonable accommodation. 

The case illustrates the extent of the demands imposed on employers by the ADA.  The obligation to provide reasonable accommodation is a continuing one.  It requires employers to accept that accommodating disabled employees can be burdensome, costly, and inefficient.  And the larger the employer, the more they're expected to do to enable eligible employees to receive the benefits and privileges of employment.

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Even after all these years, I'm still shocked when I read about employment cases in other jurisdictions and realize how different the result would be if the case had been in California.  The latest example is Nyrop v. Independent School Dist. No. 11, a decision issued earlier this month by the Eighth Circuit Court of Appeal (and accessible here).  Nyrop affirmed a determination by the district court that a Minnesota teacher's multiple sclerosis didn't constitute a disability under the Americans with Disabilities Act.

The decision turned on the issue whether Nyrop was substantially limited in a major life activity.  Nyrop presented evidence that, because of her MS, she had problems controlling her tongue and larynx which prevented her from speaking clearly and projecting her voice.  She also described impairments in terms of feeling and sensation, muscle control, strength, and sensitivity to temperatures above 70 degrees.  Despite all this, the court concluded that Nyrop could not pursue a claim under the ADA because she was not substantially limited in any major life activity.

California's Fair Employment and Housing Act defines "limits" and "life activities" more broadly than federal law.  As a result, in California, I'm certain that the plaintiff would have been allowed to proceed with her claim.  Does this mean that employers should move their operations to Minnesota?  No.  First, the winters are brutal.  Second, this Brett Favre thing got tiresome two retirements ago.  Third, federal law is catching up with California.  The Nyrop case arose before enactment of amendments to the ADA.  Those amendments, which took effect in 2009,  broadened the definition of what constitutes a disability.  So while California law is definitely more employee-friendly here, Federal law is heading in that direction.

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On August 5, 2010, the California Supreme Court limited application of the "stray remarks" doctrine.  The doctrine deals with potentially discriminatory statements that are unrelated to the decision complained of.  For example, if an ageist remark is made by someone who had no involvement in the decision to terminate, is that remark somehow evidence that the decision was discriminatory?

Reid v. Google, Inc. (pdf) involved an age discrimination claim by Brian Reid, a former director of engineering, who worked at Google from 2002 to 2004.  Reid was 52 at the time he was hired.  He had a Ph.D. in computer science and had taught at Stanford (a private university with a decent reputation, despite having lost in football to the University of California in seven of the last eight years). 

A review of Reid's first year's job performance was very positive, but contained the following language:

Adapting to Google culture is the primary task for the first year here. . . . [para.]  Right or wrong, Google is simply different:  Younger contributors, inexperienced first line managers, and the super fast pace are just a few examples of the environment.

In addition,  according to Reid, a 38-year-old vice president who he sometimes reported to described his opinions as "obsolete" and "too old to matter" and described Reid as "slow," "fuzzy," "sluggish," and "lethargic."  Reid also accused the VP of saying that Reid failed to "display a sense of urgency" and "lack[ed] energy."  He claimed that other co-workers called him an "old man," "old guy," and "old fuddy-duddy."  A co-worker also joked that Reid's office placard, which had a picture of a compact disc, should instead show an LP.

A little over a year into his tenure, Reid was relieved of most of his duties and told to focus on developing in-house graduate degree and college recruitment programs (but without a budget or staff support).  A few months later, when senior management was discussing whether to give Reid any bonus for 2003, one of Reid's supervisors expressed the opinion that he should be treated "consistently with all similarly situated performers."  That same supervisor suggested that Google should also offer Reid a severance package due to the risk of "a judge concluding that we acted harshly." 

A month later, Google terminated Reid.  Google said it told Reid that his job was eliminated because the company decided not to pursue the graduate degree program.  Reid says he was told only that there was not a "cultural fit."  Although he was given permission to pursue other positions in the company, e-mails between department heads indicated that doing so would not be productive.  In one e-mail exchange, a department head asked to be prepped for her interview with Reid.  She received a response advising her how to respond to particular inquiries and concluding that "[w]e'll all agree on the job elimination angle."

I quote the specific comments at length for two reasons.  One, they show how otherwise innocuous comments -- the type made in many workplaces -- can be used to support a discrimination claim.  For example, is it really a problem to say that an employee age 40 or over did not "display a sense of urgency"?  Second, the "stray remarks" doctrine was never well-defined and is best illustrated by example.  Comments dismissed as "stray remarks" in one case have been treated as evidence of discrimination in others.

In Reid, Google argued that application of the stray remarks doctrine is an important tool for trial courts to dispose of unmeritorious cases on summary judgment.  But the state supreme court disagreed, stating that deciding what weight to give the remarks was the jury's responsibility.  Instead, the court said that summary judgment determinations must be based "on the totality of the evidence, including any relevant discriminatory remarks." 

Based on this decision, it will be harder for employers to obtain summary judgment.  And, because a totality of the evidence test is really the absence of any test at all, it will be harder to predict how courts will treat particular situations.

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Employers must provide reasonable accommodation to disabled employees. That’s the law. And the law is neither convenient nor efficient. But employers do not need to provide any requested reasonable accommodation. As a general matter, employers can choose between equally effective accommodations. Moreover, employers may make the determination that no reasonable accommodation is possible. For example, in Milan, the Plaintiff suffered a workplace injury on September 10, 2002. Then, on March 30, 2004, she “received a letter from the city terminating her employment.  The letter stated that based on [her doctor’s] evaluation, the city had concluded that Milan could not return to her customary position and there was no job within the city which she could reasonably perform.” 

Plaintiff sued alleging the failure to make reasonable accommodation. At trial, the City contended that it met its obligations under the FEHA because “Milan had never sought an accommodation of her disability, and that in any event no accommodation was possible because she could not perform the essential functions of her job.” On appeal, the Court accepted the City’s argument:

Section 12940 [of the FEHA], subdivision (n), does not permit an employee to ignore notice his or her employer believes he or she is not fit to work, be absent from work for more than 18 months, and make no attempt to communicate with the employer about his or her desire to continue working.  Milan's apparent response to the workers' compensation administrator or workers' compensation appeals board was not adequate because in the end Milan accepted rehabilitation and retraining benefits offered by the administrator.  In this context, good faith required that Milan directly express to the city her interest in retaining her job.  Only then would an obligation to engage with her with respect to possible accommodations arise.

The lesson here is simple: both parties must put the “active” in the “interactive process.” And, if an employee unreasonably refuses to communicate, the employer may, under the right circumstances, take unilateral action.

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“Judges are not like pigs, hunting for truffles buried in briefs." United States v. Dunkel, 927 F.2d 955, 956 (7th Cir.1991).

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It is fairly well known by now that covenants not to compete are not enforceable in California. Business and Professions Code §16600 is said to contain a “strong public policy” in favor of allowing employees to depart and work for anyone else, including direct competitors of the original employer, even if the employee agreed in advance not to do so. Non-competition agreements are enforceable in many other states.

In an effort to hire out-of-state employees, some California companies have recently attempted to use B&P Code §16600 to nullify non-competition agreements between such employees and companies in states where those agreements are legal and enforceable. The companies attempting to nullify the out-of-state agreements are claiming standing to sue in their own right for “unfair competition” under B&P Code §17200. The case typically takes the form of an action in Superior Court for “declaratory relief.” The plaintiff company and the bolting employee ask the California court to declare the covenant between the employee and the original out-of-state employer “void” under California law. The out-of-state employer will likely counter with the argument that the suit seeks an unconstitutional, extraterritorial application of §16600 to citizens of other states, employees and companies alike. What’s a court to do? It depends.

The result will likely turn on the interpretation of Application Group, Inc. v. Hunter Group, Inc., 61 Cal.App.4^th 881 (1998), a case that lay rather dormant for over 10 years. Hunter Group was a Maryland corporation that provided computer consulting services for businesses, including customers in California. Hunter competed with Application Group, a California corporation, for projects. Hunter’s employees who resided outside of California, including employee Dianne Pike, had non-competition clauses in their employment agreements. Pike, a resident of Maryland, resigned from Hunter and went to work for its competitor, Application Group. Hunter filed a lawsuit in Maryland alleging that Pike had breached the covenant not to compete in her employment agreement, and further alleging that Application Group had interfered with its contractual relationship with Pike. While that suit was pending, Application Group and Pike sued Hunter in California seeking a declaratory judgment that California law (B&P Code §16600), and not Maryland law, applied to Pike’s covenant not to compete. Hunter filed a motion to stay the California action based on inconvenient forum grounds. The California court granted Hunter’s motion, and stayed the California action pending resolution of the Maryland litigation. The Maryland court subsequently granted Application Group’s motion for summary judgment because Hunter had failed to present evidence of damage. 

Application Group then filed an amended complaint in California seeking a declaratory judgment that: (i) B&P Code Sections 16600 and 17200, and not Maryland law, applied to Pike’s covenant not to compete; (ii) by including a non-competition provision in its employees’ contracts in Maryland, Hunter was engaging in “unfair competition” within the meaning of §17200; (iii) pursuant to Sections 16600 and 17200, Hunter was precluded from enforcing in California any out-of-state judgment or injunction it “might obtain” upholding the validity of its covenant not to compete; and (iv) Sections16600 and 17200 provided Application Group with a “privilege” to contact and recruit Hunter’s employees in Maryland regardless of the covenant not to compete in their employment agreements.

The California trial court ruled that Sections 16600 and 17200 applied, and that the covenant not to compete was unenforceable and a “contract to restrain trade,” which constituted “unfair competition.”

Hunter appealed, arguing that the trial court was wrong in its application of conflict of laws principles. The appellate court concluded that the trial court did not err in applying California law (Sections 16600 and 17200), reasoning that California had a “greater interest” in application of its law to the dispute, and that California's interests would be seriously impaired if its policy were subordinated to that of Maryland. Exactly why Maryland had a “lesser” interest in the matter was not fully explained.

Significantly, two other issues were not fully litigated in the Application Group case: (1) whether the California company could invoke standing under §16600, and (2) whether the extension of §16600 to out-of-state contracts is constitutional. On the issue of standing, §16600 itself does not on its face appear to confer standing upon a prospective employer. The question is whether §17200 can somehow be invoked to deem a covenant not to compete an act of “unfair competition” toward a prospective employer. On the issue of constitutionality, the U.S. Supreme Court has held that constitutional principles prohibit one state from imposing its laws on other states. Whether the Application Group case violates this doctrine by approving the seemingly “extraterritorial” use of §16600, remains to be seen. Sooner or later, two companies – one in California and one outside the state – will have enough at stake that the validity of Application Group will be tested.

Thanks to Dave Faustman for this entry.

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The first sentence of the Ninth Circuit's opinion in Narayan v. EGL., Inc. (filed July 13, 2010) explains what is at stake: “The California Labor Code confers certain benefits on employees that it does not afford independent contractors.” Indeed. At issue in Narayan was whether certain individuals “engaged to provide freight pick-up and delivery services for [Defendant] EGL in California” were classified properly as Independent Contractors. In support of a finding that no employment relationship existed, EGL argued that the issue was controlled by its “Leased Equipment and Independent Contractor Services Agreement,” which provided that the “intention of the parties” is to “create a vendor/vendee relationship” and that that “[n]either Contractor nor any of its employees or agents shall be considered to be employees of” EGL.  The parties also designated that Texas law should control.

But these provisions delayed the Court not at all. Rather, the Court limited the choice of law provision to claims that “rise or fall on the interpretation and enforcement of any contractual provision.” Such provisions do not “encompass all disputes between the parties.” And here, says the Court, “[t]he Drivers’ claims involve entitlement to benefits under the California Labor Code. Whether the Drivers are entitled to those benefits depends on whether they are employees of EGL, which in turn depends on the definition that the otherwise governing law—not the parties—gives to the term ‘employee’.” Nice trick! 

Using this reasoning, the Court simply ignored Texas law and held that California law applies. But this reasoning seems shallow. Whether an individual is an employee is a question of law. And here the parties agreed to answer that question using Texas law. The Court’s analysis merely assumed what it should have demonstrated--i.e., that the California Labor codes applies in the first instance.  Individuals cannot make claims under the Labor Code unless they are employees.

As an added bonus to employees, the Court also emphasized the burdens that exist in litigation under the Labor Code. This topic is not heavily litigated, but can be very effective tool in avoiding summary judgment. Those principles are as follows:

Under California law, once a plaintiff comes forward with evidence that he provided services for an employer, the employee has established a prima facie case that the relationship was one of employer/ employee.

The fact that one is performing work and labor for another is prima facie evidence of employment and such person is presumed to be a servant in the absence of evidence to the contrary.

Once the employee establishes a prima facie case, the burden shifts to the employer, which may prove, if it can, that the presumed employee was an independent contractor.

The ultimate burden of proof is on the party attacking the employment relationship.

Having avoided Texas law and having emphasized the various burdens of persuasion, it is not a surprise that the Court reversed the lower court’s decision to award the employer summary judgment.

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While some may find this counterintuitive, the defense of an employment discrimination or harassment claim should begin before any alleged wrongful conduct occurs.  A Ninth Circuit Court of Appeals decision (Boswell v. Federal Express Corp. (pdf), No. 08-15935 (9th Cir., filed June 16, 2010)) illustrates this point.

Federal Express had asked the trial court for a jury instruction that it would not be liable for punitive damages if the jury found that it engaged in good faith efforts to implement policies prohibiting and addressing discrimination, harassment, and retaliation.  As the Supreme Court explained in 1999, "in the punitive damages context, an employer may not be vicariously liable for the discriminatory employment decisions of managerial agents where those decisions are contrary to the employer's good faith efforts to comply with Title VII."  This is so, the Ninth Circuit panel noted, even when the punitive damages stem from actions taken by managers, unless the manager is "sufficiently senior" to be treated as "the corporation's proxy."  Because the trial court failed to instruct the jury on the good faith defense to a punitive damages claim, the Ninth Circuit overturned the punitive damage award.

The Boswell decision is unpublished and, perhaps because of that, did not go into detail in defining and elaborating on some of these terms.  But it provides a valuable reminder that the defense of a claim for discrimination, harassment, and retaliation begins with policies, practices, and training that are implemented long before any complaint is filed. 

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Last week, the Supreme Court turned down the opportunity to review the Ninth Circuit Court of Appeals decision in Yuma Anesthesia Med. Servs. LLC v. Fleming.  In that case, a physician working at a hospital alleged that he was discriminated against because he had sickle-cell anemia.  There was no dispute that the physician was an independent contractor, not an employee.  And the Americans With Disabilities Act (like California's Fair Employment and Housing Act) deals exclusively with the employment relationship. But the physician argued that the Rehabilitation Act of 1973, which applies to employers who receive federal funds, extends its protections to independent contractors.

Federal appeals courts addressing this issue are split.  The Ninth and Tenth Circuits say independent contractors are covered.  The Sixth and Eighth Circuits disagree.  That would seem to make this an ideal opportunity for the Supreme Court to provide clarity.  Still, the Court, with no elaboration or explanation, declined to do so.  Therefore, until the split between the Circuits gets resolved, employers in California who receive federal funds must not only reasonably accommodate disabled employees, they must also accommodate disabled independent contractors.   

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