Court of Appeal Examines "Same Actor" Inference

Nita White-Ivy was a senior HR manager. She was Marietta Harvey's boss at a company called Pyramid. Then, White-Ivy became VP of Global HR for Sybase. She hired Harvey to be a director of HR at Sybase. Both women are Filipina. At Sybase, White-Ivy promoted Harvey several times, up to where she was the second-highest ranking employee in the department. Later, White-Ivy was considering demoting Harvey because she was unhappy with Harvey's performance and wanted to reduce her responsibilities. Harvey spoke with other executives about this proposed demotion. White-Ivy did not go forward with the demotion. However, she called Harvey on the carpet for "back-stabbling" and eliminated her position. Also, in response to some other executives' feedback, White-Ivy had commented that there were too many Asian females in the HR department, and she was interested in hiring more males, and more white males.

Harvey sued Sybase for race /national origin and sex discrimination. Thus, she accused White-Ivy, another female Filipina, of firing Harvey because of discrimination. That's the same White-Ivy who supervised Harvey at two companies, hired her at Sybase, and gave her several promotions. Harvey also claimed she was fired for discussing her salary in violation of the Labor Code.

A jury obviously found that there was no way White-Ivy was motivated by sex or national origin discrimination when she decided to fire Harvey, right? Wrong. The jury awarded her $1.8 million, including $500,000 in punitive damages.

The Court of Appeal rejected Sybase's argument that the same actor evidence - evidence that White-Ivy had treated Harvey well on so many occasions over a long period of time - was dispositive. The Court found "substantial evidence" on which the jury could have found discrimination - that White-Ivy was motivated to replace Asian females with males and non-Asians. Under well-settled principles, if a jury's verdict is based on substantial evidence, the jury is is privileged to reject contrary evidence, even if compelling. So, the Court affirmed the jury's verdict, acknowledging the evidence of non-discrimination was strong.

There are a number of lessons to be learned from this case, including about "diversity" efforts. Announcing a desire to hire members of one protected group or another to improve the mix of races and sexes in a department may be used as evidence of discrimination by members of other groups. Even a manager with a history of favoring members of one group may be found to have discriminatory motivations. Finally, the "same actor" inference remains part of employment law, particularly in the context of motions for summary judgment. However, it is unclear how this case, decided after a verdict, will affect courts' analysis.

The case is Harvey v. Sybase and the opinion is here.

Proposed SB 1583 Imposes Liability for Bad Independent Contractor Advice

Non-attorney HR consultants - heads up!

SB 1583, now pending in the legislature, would impose penalties on third parties who merely advise employers that a given worker can be classified as an independent contractor. The penalty applies only if the worker is later found to have been mis-classified. The penalty is $200 per day per contractor. Licensed attorneys are exempt from this bill (whew).

The proposed bill text is here. Be careful out there!

DGV

Newspaper Delivery Drivers Are Employees for Workers' Comp. Purposes

State Compensation Insurance Fund assessed Antelope Valley Press workers' compensation premiums for newspaper delivery workers. AVP classified these persons as independent contractors, not employees, and challenged SCIF's decision in court. The Court of Appeal affirmed the trial court's conclusion that the delivery workers were properly considered employees.

The Court of Appeal found “the evidence does not show that in making deliveries. . . the carriers are engaged in a distinct occupation or business of their own” and “delivering papers requires no particular skill.” Moreover, the same company had employees, whom they admitted were employees, performing the same duties as the purported contractors. In addition, applying the seminal case of S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, found that nearly all the factors therein pointed to employee status. In particular, AVP controlled numerous aspects of how the deliverypersons handled their duties.

Three recent court of appeal opinions have found employee status with respect to delivery persons. The previous ones were JKH Enterprises v. Dept. of Industrial Relations and Estrada v. Federal Express. The current case is Antelope Valley Press v. Poizner and the opinion is here.

Thanks to Matt Norfleet of our San Francisco office for pointing out the decision.

Contractual Attorneys' Fees Provision Bites Employer

Profit Concepts Management, Inc. sued Greg Griffith, a former employee, for trade secrets violations in California Superior Court. Griffith moved to quash service on the basis of no personal jurisdiction. Profit Concepts did not oppose the motion and the trial court dismissed the case.

The confidentiality agreement that formed the basis for the lawsuit contained a provision awarding attorneys' fees to the prevailing party. Griffith, having secured dismissal, moved for attorneys' fees under the agreement. Profit Concepts opposed that motion.

The Court of Appeal decided Griffith was the "prevailing party" under Civil Code 1717, which authorizes recovery of contractual attorneys' fees as costs to a prevailing party "regardless" of whether the case proceeds to final judgment. Profit Concepts vainly argued that there was no determination of who prevailed under the contract itself. The court said that section 1717 did not require the prevailing party to win on the contract claim itself.

The case is Profit Concepts Management, Inc. v. Griffith. The opinion is here.

Happy Birthday Jennifer Shaw

OK, I know it's a little gross for me to post this. But I know Jennifer's clients and friends check in on the blog from time to time. Please give her a shout for her birthday! I know she'll be happy to hear from you.

DGV

Court of Appeal: No Individual Liability for Wages or UCL

The Wins Corporations were three garment manufacturers owned by the Wongs. After some business reverses, the businesses did not pay all wages due. The Labor Commissioner sought to hold the Wongs personally liable for the wages under a variety of theories. The trial court held they could not be personally liable. On appeal, the Labor Commissioner argued that managing agents like the Wongs may be held personally liable when the Labor Commissioner commences an action to recover wages under Labor Code section 1193.6. Relying on the Supreme Court's decision in Reynolds v. Bement, 36 Cal.4th 1075 (2003), the court of appeal held no personal liability for unpaid vacation, final pay, or associated penalties was available under the common law definition of "employer" applicable to these claims.
The court also rejected the Labor Commissioner's argument that the unfair competition law, Bus. Prof. Code section 17200 allowed for personal liability. The court reasoned that the remedy available under 17200 - restitution - could not apply to the Wongs. That's because they personally did not withhold the subject wages. As such, the could not be held liable for "restoring" those wages to the plaintiffs.
Of note, the Labor Commissioner did not dispute the superior court's conclusions that the Wongs were not "alter egos" and therefore waived the issue for appeal. (The superior court had determined the Wongs had respected corporate formalities and adequately capitalized the companies and, therefore, were not alter egos.) The Labor Commissioner also did not challenge the superior court's conclusion that the Wongs could not be held liable under a special statute applicable to the garment industry (section 2673.1) because she did not pursue that liability properly in the administrative forum. So, these theories remain potentially viable ways of holding corporate executives personally liable.

The case is Bradstreet v. Wong and the opinion is here.

CA Supreme Court Rules on California Family Rights Act Issues

So, Lonicki was an employee claiming major depression and work-related stress stopped coming to work and requested medical leave. In the employer’s view, the employee did not have a serious health condition and was capable of performing her duties. The employer ordered the employee to return to work, and fired her when she did not. The twist: While taking FMLA/CFRA leave, she worked for another employer. While her other job was not identical, there was a substantial overlap.
The Supreme Court considered two issues: First, could the employer just fire Lonicki without seeking additional medical certifications as provided by the CFRA statute? The court concluded (6-1) that employers need not do so. Justice Moreno, though, said that the employer must follow that procedure before denying leave based on an employer's belief that the employee is not eligible for leave.
The second issue is the one that got the headlines: If an employee seeks FMLA/CFRA leave for her own health condition, and she works another job, does she really have a serious health condition? Here, the Supreme Court split 4-3 that she MIGHT. The court decided that working another position is evidence that the employee's condition might not qualify for FMLA or CFRA. But the Court refused to hold that working in a comparable job was "conclusive" evidence no serious health condition justified leave. So, off to trial with Lonicki and her employer.

The case is Lonicki v. Sutter Health Central and the opinion is here.

Another Arbitration Agreement Invalidated

Metters worked for Ralphs Grocery. He believed he was a victim of discrimination and harassment and complained to human resources, and to the President of the company via a hotline.
Ralphs Grocery has a dispute resolution policy and an arbitration agreement that it includes with a request for dispute resolution. The language requiring arbitration, although on the second page of the form, is surrounded by a border box, is in white type on a black background, and emphasizes that arbitration is required. However, the arbitration agreement is contained in the request for dispute resolution, not in a separate document that is styled "arbitration agreement" or something similarly unambiguous.
The trial court and court of appeal agreed that the Ralphs forms did not establish an "agreement to arbitrate" because there was no contractual "meeting of the minds." Therefore, there was no need to decide whether the arbitration agreement was unconscionable, or whether the Federal Arbitration Act required arbitration. Without an agreement to arbitrate, the FAA does not apply.
The court of appeal found significant that Ralphs would have had a duty to investigate Metters' claims even if he did not submit the request for dispute resolution form. Yet, Ralphs apparently did not adequately explain Metters' options to him.
The case is Metters v. Ralphs Grocery. The opinion is here.