October and November 2017 employment law decisions

Unenforceable arbitration agreement

October 26, 2016, First District Court of Appeal, Maya Baxter v. Genworth North America Corporation: Ms. Baxter sued her former employer for wrongful termination. Genworth moved to compel arbitration of the dispute. The trial court concluded that the parties’ arbitration agreement was unenforceable on grounds of unconscionability. On appeal, the First District agreed with the trial court that the agreement was procedurally unconscionable because Ms. Baxter had to accept it as a condition of continued employment (contract of adhesion). The appellate court also found the agreement to be substantively unconscionable. There was a one-sided limitation on employees obtaining information outside the formal discovery process, and default limitations on discovery could only be exceeded for “good and sufficient cause” (a higher standard than “showing of need”). The limits were low: for example, only two depositions, and Ms. Baxter demonstrated that she would need six to ten depositions. In addition, the statute of limitations to commence arbitration was one year as compared to up to three years in court after considering the administrative requirement to file with the Department of Fair Employment and Housing and a potential investigation by that agency. Finally, the arbitration claim process with its short deadlines had the practical effect of limiting an employee’s right to seek remedies with the DFEH.

Continuance to oppose summary judgment justified

October 30, 2017, First District Court of Appeal, Richard Denton v. City and County of San Francisco: Mr. Denton filed a lawsuit against his employer, San Francisco, and his supervisor. Defendants sought dismissal of the case (motion for summary judgment), and in the weeks leading up to the hearing on the motion the parties engaged in settlement discussions. That led to a settlement and Mr. Denton’s then-counsel filed a notice of conditional settlement. A week later, after Mr. Denton had discharged his attorney, defendants’ counsel successfully persuaded the trial court to have the settlement set aside, even though Mr. Denton twice assured defendants’ counsel that he was not backing out of the settlement. Four days later, the motion was heard at which Mr. Denton, representing himself, insisted the parties had a settlement and requested a continuance so he could oppose the motion. The trial court denied the request. On appeal, the First District found that the trial court acted arbitrarily or capriciously. It also concluded that Mr. Denton had good cause for a continuance of the motion because San Francisco refused to recognize a settlement it had previously asserted to exist, and from which Mr. Denton had not withdrawn, and Mr. Denton was justifiably surprised that the motion was being heard and needed additional time to seek new counsel to help oppose the motion if he could not settle.

Employee fails to show an implied contract to not terminate without good cause

November 1, 2017, First Appellate District, Steve Jameson v. Pacific Gas and Electric Company: Mr. Jameson sued his employer, alleging PG&E fired him in violation of an implied-in-fact employment contract not to terminate his employment without good cause. The trial court dismissed the case (summary judgment) on the basis that Mr. Jameson did not have evidenced to show an implied employment contract. Mr. Jameson’s claims were premised on his position that PG&E’s progressive discipline guidelines and code of conduct, his reliance on those policies, and his prior tenure with PG&E created an implied contract not to terminate his employment without just cause. On appeal, the First District decided it need not address this premise because, even if true, Mr. Jameson has not shown facts to show he was terminated without just cause. The appellate court determine that the issue was whether PG&E’s decision to terminate was reached honestly, after an appropriate investigation and for reasons that were not arbitrary or pretextual. The First District concluded that PG&E had evidence that it acted with good faith in making the decision to terminate, following an investigation that was appropriate under the circumstances, which gave it reasonable grounds for believing Mr. Jameson had engaged in misconduct. The court of appeal rejected Mr. Jameson’s expert who opined that the investigation was flawed. An employer need not undertake a precise type of investigation as long as the process was fair.

Employee who went on military service leave can recover for denial of bonus

November 2, 2017, Ninth Circuit Court of Appeals, Dale Huhmann v. Federal Express Corporation: Mr. Huhmann was hired by FedEx in 2001 to pilot a “narrow-body” aircraft. Mr. Huhmann was later selected for training to be a first officer on a “wide-body” aircraft that would qualify him for a higher pay grade. Before the training could begin, Mr. Huhmann was mobilized for active Air Force duty. While on duty, FedEx and Mr. Huhmann’s labor union negotiated a signing bonus for pilots employed (including those on military leave) on the day a collective bargaining agreement was signed. The amount of the bonus would be determined by the highest crew status the pilot held. After completing his military service, Mr. Huhmann returned to active pay status and received a signing bonus based on his status as a narrow body crew member. Mr. Huhmann sued Fedex alleging a violation of the Uniformed Services Employment and Reemployment Rights Act by failing to pay him the signing bonus based on a wide-body crew member status. The trial court found in favor of Mr. Huhmann after deciding that it was reasonably certain that Mr. Huhmann would have become a wide-body crew member prior to the date the collective bargaining agreement was signed if he had not gone on military leave. On appeal, the Ninth Circuit concluded that the trial court properly analyzed whether Mr. Huhmann’s military status was a substantial or motiving factor for an adverse employment action based on him receiving the smaller bonus after concluding that he was entitled to the higher bonus based on the “reasonably certain” test. This test applies to any denial of “reemployment” or “benefit of employment,” which includes a bonus.

Tax consequence adjustment is a remedy under federal employment discrimination law

November 3, 2017, Ninth Circuit Court of Appeals, Arthur Clemens, Jr. v. Qwest Corporation: Arthur Clemens, Jr., sued his employer Qwest Corporation (“Qwest”) for race discrimination and retaliation under Title VII. A jury awarded $457,000 in damages for back pay, emotional distress, and punitive damages. But the trial court denied Mr. Clemens’s request for a “tax consequence adjustment” or “gross up” to compensate for increased income-tax liability resulting from his receipt of his back-pay award in one lump sum. On appeal, the Ninth Circuit noted that back pay is taxable and that a lump-sum back pay award will sometimes push a plaintiff into a higher tax bracket than he would have occupied had he received his pay incrementally over several years. The Ninth Circuit decided to join the Third, Seventh, and Tenth Circuits, and reject the D.C. Circuit, in concluding that a tax consequence adjustment is available as part of the district court’s equitable relief powers.

No attorney’s fees for a prevailing individual defendant

November 29, 2017, Second Appellate District, Elisa Lopez v. Gregory Routt: Ms. Lopez sued her employer and her supervisor for harassment in violation of the California Fair Employment and Housing Act (FEHA). A jury found in favor of the City and Mr. Routt on the harassment claim, and Mr. Routt moved for prevailing party attorney fees. The trial court denied Mr. Routt’s motion, concluding he had failed to establish Ms. Lopez’s claim was frivolous, as is required for a prevailing defendant to obtain an attorney fee award under FEHA. On appeal, Mr. Routt argued the frivolousness standard should not apply to a fee request by a supervising employee who has been sued as an individual defendant. Based on California Supreme Court precedent and the relevant legislative history, the Second District concluded the same standard applies to an individual defendant’s request for attorney fees under FEHA as applies to an employer defendant, and thus a fee award is only available in the discretion of a trial court when the court finds that the plaintiff’s claim was frivolous.

Union grievance does not satisfy the Government Claims Act

November 29, 2017, Second Appellate District, Cassidy Olson v. Manhattan Beach Unified School District: The trial court dismissed Mr. Olson’s case after deciding that his complaint failed to allege that he satisfied the claim filing requirements of the Government Claims Act. On appeal, Mr. Olson contended that his filing of a grievance substantially complied with the claim filing requirements. Substantial compliance is normally raised where a timely but deficient claim has been presented to the public entity, but where there is a complete failure to serve any responsible officer of the entity, the doctrine does not apply. Because Mr. Olson’s complaint did not allege that he served or attempted to serve a claim on any responsible officer of the school district, the doctrine of substantial compliance did not apply. Mr. Olson also contended that his grievance was a “claim as presented.” This applies to a claim that fails to comply substantially with Government Code sections 910 and 910.2, but nonetheless puts the public entity on notice that the claimant is attempting to file a valid claim and that litigation will result if it is not paid or otherwise resolved. But Mr. Olson’s grievance did not disclose the existence of a claim against the school district, which if not satisfactorily resolved, would result in litigation. Finally, Mr. Olson argued that he was excused from filing a government claim because it would have been futile. The Second District disagreed because Mr. Olson did not identify any case applying the futility exception to the claim filing requirement, the Government Code does not provide for futility as an exception from the claim filing requirements, and application of the futility doctrine would contravene the purposes of the claim filing requirement because even a “futile” claim would provide a public entity with notice of a potential claim enabling adequate investigation and fiscal planning.

Posted by deanroyerlaw