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Who us? I mean, of COURSE it's us. Well, thanks for the honor, Delaware Employment Law Blog. We like you too.

California Supreme Court Upholds Bonus Plan's Forfeiture

Can a bonus plan provide for forfeiture of unpaid bonus if an employee voluntarily leaves employment or is fired for cause? Yes, said the California Supreme Court. Money quote:

“nothing in the public policy of this state concerning wages . . . transforms [a] contingent expectation of receiving bonuses into an entitlement.” (Neisendorf, supra, 143 Cal.App.4th at p. 522.) Only when an employee satisfies the condition(s) precedent to receiving incentive compensation, which often includes remaining employed for a particular period of time, can that employee be said to have earned the incentive compensation (thereby necessitating payment upon resignation or termination). (Ibid.; Lucian v. All States Trucking Co., supra, 116 Cal.App.3d at p. 975 [“An employee who voluntarily leaves his employment before the bonus calculation date is not entitled to receive it”].)

Here, of course, Schachter voluntarily terminated his employment before his restricted stock fully vested. By the terms of the Plan, and Schachter’s own concession, he is not entitled to those unvested shares of restricted stock. Having elected to receive some of his compensation in the form of restricted stock, a transaction he was aware carried risk as well as the potential for reward, Schachter cannot now assert that he should have been paid in cash that portion of his compensation he elected to receive as restricted stock.[1] As the company persuasively argues, Schachter’s “bargained-for ‘wages’ have been paid in full. He received all of his promised cash compensation, received immediately exercisable voting and dividend rights in the restricted stock, and was awarded contingent rights of full ownership in that stock. The only thing that has not been ‘paid’ is something Schachter never ‘earned’ — fully vested [company] stock. Schachter therefore has no claim under [section] 201 or [section] 202.” [1]

So, the Supreme Court has blessed bonus plans that require the employee to remain employed. However, the Court did note that Citigroup's plan would have paid certain compensation to Schachter if he has been fired without "cause," e.g., laid off. The Court approved this formulation, noting that employees terminated "without cause" may not be be deprived of the benefits of their contract. This was all "dicta" so it should not have much force. But the DLSE will rely on it to bolster its own enforcement position.

The case is Schachter v. Citigroup and the opinion is here.

Mixed Motives in FEHA Cases

The U.S. Supreme Court in Gross v. FBL Fin. Servs. (blogged here) limited "mixed motive" cases under federal law. The Court said there is no need for that defense in age discrimination cases under the federal ADEA. Employees must prove "but-for" causation, so the employer need not prove it would have made the same decision with or without additional discriminatory motivation. The defense remains viable in discrimination cases brought under Title VII.

Anyway, in California, the mixed motive is alive and well. The Court of Appeal in Harris v. Santa Monica, opinion here, held that the trial court prejudiced the city of Santa Monica by refusing to instruct the jury that even if discrimination played a role in Harris' termination, the City was entitled to win if it would have made the same decision regardless.

The opinion is noteworthy for a few reasons:
- it reinforces the relevance of employment at will in discrimination cases.
- it explains clearly that the employer's decision cannot be attached for being "unwise" or "factually incorrect" if it is not motivated by discrimination.
- it revives the old "BAJI" jury instruction on mixed motive cases, given the new CACI instructions do not contain model for mixed motive cases.
- "mixed motives" need not be pleaded as an affirmative defense because it is not "new matter."

New Poster!

The EEOC has issued a revised “Equal Employment Opportunity is the Law” poster. See the announcement here.
Here's your chance to update the look of your breakroom, time clock wall, and anywhere else that employees are likely to see the poster. Those of you with laminated multi-posters will contribute to our economic recovery by purchasing the new versions.

Click here for the compliance options. You either may print and post the "supplement" or replace your existing posters.

Greg

New California Employment Statutes 2009

The California Bar's Labor and Employment Law Section provided this helpful list of the employment law bills Governor Schwarzenegger signed.... He vetoed the scary ones. The long list below primarily involve public sector employees and their benefits.


SB 519 by Senator Roy Ashburn (R-Bakersfield) - This one affects certain retirement benefits calulations for public employees.

SB 538 by Committee on Public Employment and Retirement - County employees’ retirement: mandatory retirement.

SB 751 by Senator Gloria Romero (D-Los Angeles) - Teacher credentials - permits California to issue teaching credentials to teachers certified in other countries.

AB 399 by Assemblymember Julia Brownley (D-Santa Monica) - Public employee retirement benefits.

SB 11 by Senator Gloria Negrete McLeod (D-Chino) - County employees retirement: San Bernardino County health benefits.

SB 37 by Senator Tony Strickland (R-Thousand Oaks) - State employees: statement of deductions. This law permits state employees to receive electronic wage statements unless they opt out.

SB 634 by Committee on Public Employment and Retirement - State Teachers’ Retirement System.

AB 65 by Assemblymember Mary Hayashi (D-Hayward) - Public employee health benefits: vision care: local, school, and university members.

AB 239 by Assemblymember Julia Brownley (D-Santa Monica) - Teacher credentialing.

AB 468 by Assemblymember Mary Hayashi (D-Hayward) - Public Employees’ Medical and Hospital Care Act: employer contributions.

AB 506 by Assemblymember Warren Furutani (D-South Los Angeles County) - State teachers’ retirement: postretirement earnings.

AB 544 by Assemblymember Joe Coto (D-San Jose) - Teaching credential: American Indian languages.

AB 854 by Assemblymember Juan Arambula (I-Fresno) - Employment regulation and supervision: unpaid wages.

AB 1319 by Assemblymember Paul Krekorian (D-Burbank) - Talent services.

AB 1584 by Assemblymember Dr. Ed Hernandez (D-West Covina) - Public employees’ retirement: retirement boards.

SB 72 by Committee on Budget and Fiscal Review - State employees: payroll: health care.

SB 752 by Senator Lou Correa (D-Santa Ana) - County employees’ retirement: Orange County.

AB 1025 by Assemblymember Connie Conway (R-Tulare) - Schools: employees and volunteers: Activity Supervisor Clearance Certificate.


AB 381 by Assemblymember Marty Block (D-San Diego) - Unemployment compensation disability benefits: academic employees.

AB 395 by Assemblymember Felipe Fuentes (D-Sylmar) - Employment: apprenticeship programs.

AB 720 by Assemblymember Anna Caballero (D-Salinas) - Peace officers: marital privilege.

Court of Appeal: "Reasonable Accommodation" Must Be Perfectly Executed Every Time

It is one thing to grant a reasonable accommodation. It is another thing to ensure that it is implemented perfectly, every time. Hard cases make bad law. This is a combination of a sympathetic plaintiff, a big company, and a one-time event resulting in a huge verdict.

A.M. was a cashier at an Albertson's in Marin County. After receiving treatment for cancer, she needed to drink copious water. Albertson's let her have water at her station, even though it was against policy. Naturally, A.M. had to use the bathroom more frequently because of the water she was drinking. Albertson's said that she could call her supervisor and they would cover her.

So, Albertson's had granted A.M. extra breaks as an accommodation, and had implemented a system for A.M. to obtain them. The system was working, with A.M. receiving extra breaks by calling her supervisor. On one occasion, the system did not work because the supervisor was the only person who could relieve her and he was unloading a truck. A.M. had an accident at her cashier station. She went home and did not return to work for Albertson's.

According to the court of appeal, that single failure of the supervisor sufficed to be a "denial" of reasonable accommodation. The court upheld a jury verdict of $200K for that one incident. Add the plaintiff's and defense attorney's fees and sooner or later we're talking about a lot of money.

By the same argument, then, if an employee's wrist starts to hurt a few months after the employer installs ergonomic equipment, that alone is the denial of an accommodation? If a diabetic experiences low blood sugar one day, does that mean the employer's accommodation of permitting food at the work area is actionable?

If an accommodation becomes ineffective, the employer is required to engage in the interactive process to come up with a better accommodation, and grant the new accommodation. It is unreasonable to assume that an employee with a disability has a right to a perfect work environment and a guaranteed flawless accommodation, every day. The world does not work that way for anyone - with or without a disability. The issue is: did Albertson's grant her request for accommodation? Yes. Was it effective? Except for the one occasion, apparently so. Was there evidence the company intended to mistreat A.M. or only pretended to accommodate her? No. Could A.M. have filed a workers' compensation claim if she were injured by a work-related condition? Yeah, which was her real remedy here.

Again, A.M. was very sympathetic and what happened that day was truly unfortunate. But absent proof of intentional discrimination, the result of this case is that FEHA is not providing a remedy for a wrong; it is elevating individuals with disabilities above all others and exposing employers to potential liability for isolated failures.

The case is A.M. v. Albertson's and the opinion is here.

My 0.02.

U.S. DOT: Medical Marijuana Users Cannot Breathe Easier

And they can't breathe sighs of relief, either. I kill me. Anyway, the Department of Justice announced it would pull back on enforcement against medical marijuana users where they are operating within the bounds of state law. (See DOJ memo: here) But the US Department of Transportation wants you to know they're a completely separate agency and there is no free pass on drug testing for medical marijuana users. Here is the DOT announcement.

Ninth Circuit Upholds FLSA OT Plan

Ponoma Valley Hospital pays nurses one rate for 12 hour shifts, and a higher rate for eight hour shifts. The nurses requested the 12-hour shifts. To accommodate them, the hospital calculated how much it would have to pay to neutralize the payroll effect of the 12-hour shift.

An employee claimed that the differing rates were a subterfuge to avoid paying overtime under the federal FLSA.

The Ninth Circuit held that it is lawful to pay different rates for different shifts. And it is OK to lower a base rate to minimize paying overtime, as long as it is above minimum wage.
The opinion does not address California wage and hour law.

The case is Parth v. Pomona Valley Hospital and the opinion is here.

Court of Appeal: Class Certification Denied in Independent Contractor Case

Ali brought a class action on behalf of taxi drivers. The primary claim was that the drivers were misclassified as independent contractors. Ali sought class certification, which the trial court denied.

The Court of Appeal affirmed, on the ground that common issues did not predominate. The company submitted over 40 declarations demonstrating that each putative class member experienced different working conditions and degrees of control by the company. Therefore, the case was not amenable to class treatment.

This case demonstrates that a motion for class certification may be defeated where declarations demonstrate numerous differences among each putative plaintiff's treatment. If the plaintiff cannot generalize about all employees by pointing to a few, a trial court may find that a class action is not suitable.

The case is Ali v. USA Cab LTD and the opinion is here.

Ninth Circuit Limits Federal Anti-Hacking Law

Brekka was an employee of LVRC Holdings, LLC. While employed, he was fully authorized to use the employer's network. He emailed several confidential documents to his personal email account during his employment. The employer discovered this activity after Brekka left LVRC. The employer sued Brekka under the federal Computer Fraud and Abuse Act. The CFAA provides for criminal penalties and a civil action against those who:

intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains— . . . (C) information from any protected computer if the conduct involved an interstate or foreign communication . . . . 18 U.S.C. § 1030(a)(2). . . .

or who

knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct
furthers the intended fraud and obtains anything of value . . . .

18 U.S.C. § 1030(a)(4).

The issue was whether Brekka exceeded authorization during his employment by sending out company information to his personal account. The court of appeals, agreeing with the district court said he did not.

The court held that an employee's self-dealing is not "exceeding" authorization under the CFAA. Rather, a violation occurs only when the employee (1) does not have authorization to access the files or (2) accesses them after authorization is terminated.

This decision does not affect any state law violations or torts that the employer might bring. It underscores the need for employers to have in place effective policies and procedures for limiting computer access, particularly after employees depart.

The case is LVRC Holdings LLC v. Brekka and the opinion is here.

Court of Appeal Explains Safe Harbor Period for Obtaining Sanctions

Most folks who read this blog don't care about sanctions. Like some of the courts. So, I'll make this quick. The employer settled a wrongful termination lawsuit with the employee. The employee tried to reopen the case four years after the settlement. The motion to reopen the case was frivolous.

The defendant filed a motion for sanctions because the plaintiff's motion was frivolous. To bring a motion for sanctions, you have to wait 21 days to see if the other side will withdraw its frivolous papers (called a "safe harbor"). But the court denied the plaintiff's motion too quickly to give the plaintiff the full 21-day opportunity to see the error of his ways and withdraw it. Therefore, the defendant could not successfully bring the motion for sanctions unless it (1) asked the court to delay the hearing on the frivolous motion. Or (2) the defendant could have gone into court and asked the court to shorten the "safe harbor" period. So, the defendant, victim of legally meritless litigation, has to spend more money and time changing the hearing dates too. Grrreatttt!

In fairness to the court of appeal that reversed the award of sanctions, the statute says what it says. But the statute is not a big deterrent to those who file legally frivolous papers. The Legislature probably will now go about amending it. Stop giggling.

The case is Li v. Majestic Industry Hills LLC and the opinion is here.

Ninth Circuit: Subjective Criteria Cannot Be Used at Prima Facie Stage

Nicholson was a pilot for Cape Air. The airline rated her as unqualified to fly certain aircraft because of "CRM" skills, which included her communication and cooperation skills with her crew. She was the only female pilot in the Pacific area of operations. She had a personal relationship with one of the other pilots.

Once disqualified from flying a certain type of plane, she did not bid on other types of aircraft and was fired for job abandonment. She sued for sex discrimination under Title VII.

The court reversed the district court's grant of summary judgment. The court disagreed with the district court's determination that Nicholson was unqualified - an element of the prima facie case:

This court has long held that subjective criteria should not be considered in determining whether a plaintiff is “qualified” for purposes of establishing a prima facie case under McDonnell Douglas. Instead, “[t]he qualifications that are most appropriately considered at step one [of McDonnell Douglas] are those to which objective criteria can be applied . . . .” Lynn v. Regents of Univ. of Cal., 656 F.2d 1337, 1345 n.8 (9th Cir. 1981).

The court also found a genuine issue of material fact regarding pretext. Sometimes the court requires specific evidence when there is only circumstantial evidence (rather than direct evidence of discrimination such as sex-based comments). But here, the court picked from its patchwork of jurisprudence on what amount of evidence is required to show pretext, and settled on its most employee-friendly standard:

To avoid summary judgment at this step, however, the plaintiff must only demonstrate that there is a genuine dispute of material fact regarding pretext.
The amount of evidence required to do so is minimal. “We have held that very little evidence is necessary to raise a genuine issue of fact regarding an employer’s motive; any indication of discriminatory motive may suffice to raise a question that can only be resolved by a fact-finder. When the evidence, direct or circumstantial, consists of more than the McDonnell Douglas presumption, a factual question will almost always exist with respect to any claim of a nondiscriminatory reason.” McGinest v. GTE Serv. Corp., 360 F.3d 1103, 1124 (9th Cir. 2004)

The court found sufficient evidence of pretext. Under the above formulation of the law, how could it not? In fact, the court said that the evidence supporting the prima face case alone in this case would have been sufficient.

I'm pointing this out because it's time for the Ninth Circuit to articulate a clear standard regarding summary judgment in discrimination cases. Here's what the court said in another case in 2006:

To establish that a defendant's nondiscriminatory explanation is a pretext for discrimination, plaintiffs may rely on circumstantial evidence, which we previously have said must be "specific" and "substantial" to create a genuine issue of material fact. n7 Godwin v. Hunt Wesson, Inc., 150 F.3d 1217, 1222 (9th Cir. 1998) ("Such [circumstantial] evidence of 'pretense' must be 'specific' and 'substantial' in order to create a triable issue with respect to whether the employer intended to discriminate on the basis of sex.").

Cornwell v. Electra Cent. Credit Union, 439 F.3d 1018, 1029 (9th Cir. Or. 2006).

The court in Cornwell then went on to note that Godwin may have been undermined by later decisions:

Although there may be some tension in our post-Costa cases on this point -- several of our cases decided after Costa repeat the Godwin requirement that a plaintiff's circumstantial evidence of pretext must be "specific" and "substantial" n9 -- this panel may not overturn Ninth Circuit precedents in the absence of "intervening higher authority" that is "clearly irreconcilable" with a prior circuit holding, see Miller v. Gammie, 335 F.3d 889, 893 (9th Cir. 2003) (en banc), because that power is generally reserved to our en banc panels. See Miller, 335 F.3d at 899; United States v. Hayes, 231 F.3d 1132, 1139-40 (9th Cir. 2000); United States v. Washington, 872 F.2d 874, 880 (9th Cir. 1989). Whether or not the precedential weight of Godwin has been diminished to any degree by the Supreme Court's decision in Costa, or by our decision in McGinest, we conclude that Cornwell's evidence is sufficient to create a genuine issue of material fact regarding the motives for his demotion under either the Godwin standard which would require "specific" and "substantial" circumstantial evidence of pretext, or the McGinest standard, which would not.

Cornwell v. Electra Cent. Credit Union, 439 F.3d 1018, 1031 (9th Cir. Or. 2006).

The Cornwell court seems to be politely suggesting that there is a patchwork of decisions and they cannot really be reconciled without an en banc intervention, followed by Supreme Court clarification of its prior holdings. Just sayin'.

The case is Nicholson v. Hyannis Air Service, Inc. and the opinion is here.