LEGISLATIVE

California

Last month’s newsletter provided a recap of the legislative session, identifying the key bills either signed into law or vetoed by the Governor. Listed below are several additional bills recently signed into law and scheduled to take effect on January 1, 2010, unless otherwise noted:

Increased Workers Compensation Penalties (SB 313)

California requires that every employer secure the payment of workers’ compensation for work-related injuries, and authorizes the Department of Industrial Relations to issue penalty assessment orders against employers who fail to comply. This bill increases the penalty assessment to $1,500 per employee (up from $1,000 per employee) employed during the time the employer was uninsured, and restructures the laws governing penalties for non-compliance.

Price Discounts for Unemployed Consumers do not Violate the Unruh Act (SB 367)

The Unruh Civil Rights Act (Civil Code section 51 et seq) prohibits business establishments from discriminating, including through price discounts, against customers because of specified reasons (e.g., sex, race, religion, etc.), and authorizes civil remedies for non-compliance. This bill clarifies that discounts or other benefits offered to or conferred on a consumer because the consumer has suffered the loss or reduction of employment would not be considered an arbitrary discrimination in violation of the Unruh Civil Rights Act. This bill was enacted on an urgency basis and took immediate effect on November 2, 2009.

Civil Air Patrol Employment Protection Act (AB 485)

This bill requires employers with more than 15 employees to provide at least 10 days of leave per year for voluntary members of the California Wing of the Civil Air Patrol to respond to emergency operational missions. To be eligible for this leave, employees must have worked for their current employer for more than 90 days immediately preceding the commencement of the leave. Eligible employees are also required to provide as much advance notice of the leave as possible. This bill also requires employers to reinstate employees to their original position or a position with equivalent seniority and benefits, unless the employee is not restored due to conditions unrelated to the leave. This bill does not require employers to grant Civil Air Patrol leave to employees required to respond as first responders for a local, state or federal agency to the same or simultaneous emergency operational mission. This bill also authorizes employees to bring civil actions to enforce these Civil Air Patrol leave rights.

Federal

Extended Unemployment Insurance Benefits Signed into Law

As expected, President Obama signed legislation extending unemployment insurance benefits for an additional twenty weeks for workers who exhaust benefits, and further extending these insurance benefits an additional six weeks for workers in states with an unemployment rate greater than 8.5 % (i.e., a twenty week extension).

Emergency Influenza Containment Act Introduced into House (H.R. 3991)

This bill would require employers to provide up to five paid sick days in a twelve month period to employees who stay home or leave work because of an employer’s concern the employee has a contagious illness (defined as including “influenza-like-illnesses such as the H1N1 virus”). This bill would also prohibit retaliation against employees who comply with the employer’s direction not to come to work or file a complaint concerning an employer’s failure to provide paid sick leave, and an employer’s failure to pay sick leave would be considered a violation of the FLSA. This bill has been referred to the House Committee on Education and Labor.

A similar just-introduced bill, entitled the Pandemic Protection for Workers, Families and Businesses Act (H.R. 4092), would require employers to provide up to seven paid sick days due to “contagious illnesses” for employees to use for themselves or for the health needs of their families, including in situations where the employer or the employee’s child’s school is ordered closed. This bill has been referred to the House Committee on Education and Labor.

 

AGENCY

California

No Increase in Computer Professional Salary for Exemption Purposes

Pursuant to Labor Code section 515.5(a)(4), the Division of Labor Statistics and Research (DLSR) is required to annually evaluate and potentially adjust the hourly pay rate and salary level for the computer professional exemption, with the new rate to take effect the following January 1st. (In October 2008, the DLSR increased the hourly salary exemption for computer professionals from $36.00 to its current level of $37.94). In November 2009, the DLSR announced that the overtime exemption rate for computer professionals will remain unchanged from its current levels. Accordingly, the minimum hourly rate for computer professionals will remain at $37.94, the monthly salary exemption will remain at $6,587.50 and the minimum annual salary requirement will remain at $79,050.00.

DLSE Clarifies That Employer Benefit Plans That Dock Salaried Employee’s Accrued Benefits For Partial Day Absences Do Not Put The Employee’s Salaried Status At Risk

In an opinion letter dated November 23, 2009, California’s Division of Labor Standards Enforcement (DLSE) clarified that employers may make deductions from a salaried employee’s accrued leave balance in connection with partial day absences as long as the employee’s actual salary is not reduced, and that such deductions would not jeopardize the employee’s exempt status. The question has been raised by many employers due to (1) the requirement under both federal and California law that salaried-exempt employees’ wages not be subject to reduction because of the quality or quantity of work performed; and (2) California’s treatment of vacation time as a type of deferred wages. The concern was that deductions from a salaried employee’s leave bank for a partial day absence might be considered a reduction in wages, thus causing the employee to fail the salary basis test.

The DLSE’s Opinion Letters clarified that different rules apply for deductions from exempt employee’s pay and for deductions from leave balances. Regarding “pay” deductions, the DLSE reiterated the general rule that an exempt employee’s pay may not be docked regardless of the quality or quantity of work performed except in the case of “full day” absences under very narrow statutorily enumerated circumstances. Specifically, the DLSE observed that employers may deduct from pay when an exempt employee (1) is absent from work for one or more full days for personal reasons other than sickness or disability, and (2) for absences of one or more full days occasioned by sickness or disability if the deduction is made from a bona fide plan, practice, or policy of providing compensation for such sickness or disability. The DLSE reiterated, however, that these deductions from “pay” applied only for full-day absences, and that there are no similar deductions from “pay” for partial day absences.

The DLSE also observed that different rules apply to deductions from leave balances for partial day absences of exempt employees, and that employers may make such partial day deductions from leave balances without affecting the exempt status provided the employee still receives the full payment of his or salary. Quoting prior DLSE Opinion Letters, the DLSE observed:

“Where an employer has a bona fide benefits plan (e.g., vacation time, sick leave), it is permissible to substitute or reduce the accrued leave in the plan for the time an exempt employee is absent from work, whether the absence is a partial or full day, without affecting the salary basis of payment, if the employee nevertheless receives payment of his or her guaranteed salary. Where the employee’s absence is for less than a full day, payment of the employee’s guaranteed salary must be made, even if an employee has no accrued benefits in the leave plan and the account has a negative balance.”

The DLSE concluded that “while it is impermissible to deduct from a salary for partial day absences, the [employer] may deduct from leave time balances in connection with absences due to vacation or sickness of less than a full day under a bona fide plan providing for such leaves without the employee losing his or her exempt status.” (emphasis in original).

The DLSE opinion put the DLSE officially in agreement with the only California court to address the question, Conley v. P.G. &E. (2005) 131 Cal.App.4th 260, 267. As stated by the Conley court, “nothing in California law precludes an employer from following the established federal policy permitting employers to deduct from exempt employees’ vacation leave, when available, on account of partial-day absences from work.” (Id. at 263.) Interestingly, while Conley had upheld partial day deductions for “four or more hours,” the DLSE observed that Conley did so because the employer in that case had a policy authorizing deductions only for “four or more hours,” and not necessarily because only partial day deductions for such amounts would be upheld. In other words, the DLSE noted that Conley’s “four or more” rule might be factually limited to the specific policy at issue in that case, and the DLSE observed it could not located any federal standards or policies imposing a “four or more” hours limitation for partial day deductions from leave balances.

The DLSE then addressed these rules under fifteen different factual scenarios in which the variables included amount of time absent, the reason for the absence (personal reasons or sickness), and the amount of available leave time. These fifteen scenarios were discussed in five different subsections as follows: (1) full day absences and no applicable leave available; (2) full day absences and there is sufficient leave balance; (3) full-day absences and there is insufficient leave balance; (4) partial day absences for personal reasons; and (5) partial day absences due to sickness. While the fifteen different scenarios are detailed in the letter, some of the more common recurring scenarios addressed by the DLSE included the following:

• If an employee took off a full day of work for personal reasons and had no leave time accrued, the employer could reduce the employee’s pay by a full day’s wages;
  
  
• If an employee took off a full day of work for personal reasons and had only 5 hours of sick leave and 2 hours of accrued vacation, the employer could deduct the 2 hours of accrued vacation from the employee’s leave balance, and then reduce the employee’s pay by the equivalent of 6 hours (for an 8 hour day), because the employee was absent a full day;
  
  
• If an employee worked 3 hours and then was absent the remainder of the day for personal reasons and had only 5 hours of accrued sick leave and 0 hours of accrued vacation, the employer would still have to pay the employee for the entire day, because the employer can never reduce the employee’s salary for a partial day absence (even though there were no applicable accrued benefits to be used);
  
  
• If an employee worked 1 hour and then was absent the remainder of the day due to illness and had 2 hours of available sick leave and 2 hours of accrued vacation, the employer could deduct the 2 hours of sick leave and the 2 hours of accrued vacation from the employee’s leave balance, but then would still have to pay for the entire day’s wages.

To review the DLSE’s full opinion and the many additional examples of situations addressed therein, see the DLSE’s website at:

http://www.dir.ca.gov/dlse/opinions/2009-11-23.pdf

 

Federal

DOL Issues Guidance on Potential FMLA and FLSA Issues During Flu Season

The Wage and Hour Division of the Department of Labor has issued guidance documents intended to address potential questions concerning wages and hours worked under the FLSA and job-protected leave under the FMLA during the upcoming flu season. These documents are intended to answer frequently asked questions, including whether employers can require sick employees to stay home, and if so, whether they must pay employees for the time off, and whether employers may require a doctor’s note to return to work. These documents are entitled “Pandemic Flu and Family Medical Leave Act: Questions and Answers” and “Pandemic Flu and the Fair Labor Standards Act: Questions and Answers” and are available on the DOL’s website as follows: www.dol.gov/whd/healthcare/flu_FMLA.pdf and www.dol.whd/healthcare/flu_FLSA.pdf.

 

JUDICIAL

California

California Supreme Court Addresses Use of “Personnel Management Decisions” to Support FEHA Harassment Claim, and Constitutional Limits of Punitive Damages in Harassment Cases

An employer discharged an employee for incurring excessive “occasions” under its attendance policy requiring twenty-four hours notice for absences, even though the employer knew some of the short-notice absences resulted from the employee’s disability (panic attacks). The employee sued the employer for FEHA disability discrimination, failure to accommodate disability, and wrongful termination, and sued the employer and her supervisor for FEHA disability harassment. The jury ruled in the employee’s favor on all claims, awarding $3.5 million in compensatory damages and $15 million in punitive damages against the employer, and $500,000 in compensatory damages and $3,000 punitive damages against the supervisor. The appellate court reduced portions of the compensatory damage awards finding them duplicative (the jury had awarded the same amount of compensatory damages on all three termination-based theories), it reversed the harassment verdict on the grounds so-called “personnel management decisions” (e.g., attendance warnings) should not have been considered for harassment purposes, and it reduced the punitive damages award to $2 million.

The California Supreme Court ultimately granted review on three issues: (1) whether the employee could recover overlapping damages awards under different legal theories; (2) whether the employee could use evidence of “personnel management actions” to support her FEHA harassment claim; and (3) the constitutional limits on punitive damages awards in FEHA cases.

Regarding the jury’s compensatory damage calculations, the Court reiterated the general rules that, on the one hand, an employee cannot recover more than once for a distinct item of compensable damage regardless of the number of legal theories advanced, but on the other hand, an employee can recover for separate items of compensable damage even if other portions of the advanced theories overlap. The Court noted that while the employee’s wrongful termination, disability discrimination and failure to accommodate claims overlapped regarding the termination, the employee might also be able to recover for actionable conduct preceding the termination under the FEHA discrimination and failure to accommodate claims. The Court declined to remand, however, in light of the parties’ stipulation (reached during the appeal) concerning the recoverable compensatory damages.

The Court also held that the appellate court erred in excluding so-called personnel management actions (e.g., shunning the employee during weekly staff meetings, reprimanding the employee in front of co-workers, and belittling the employee’s performance, etc.) for purposes of the FEHA harassment claim. The Court observed that while these personnel management actions were certainly relevant to the employee’s FEHA disability discrimination claim, the mere fact these items overlapped with the discrimination claim did not prevent them from also being used as evidence to support the FEHA disability harassment claim. In other words, although the FEHA treats harassment and discrimination as distinct categories, there is no requirement that evidence of mistreatment be dedicated solely to one claim or the other, but never to both. The Court noted that this evidence of improperly motivated personnel actions, coupled with evidence of more traditional harassment-type evidence (e.g., negative comments about the employee’s body odor caused by her medication, referring to the employee as “disgusting” because of sweating and sores resulting from her panic attacks, overlooking only the employee when handing out holiday gifts, etc.) created a hostile work environment for FEHA disability harassment purposes.

The potential result of this portion of the Court’s ruling will be to minimize the distinction between “harassing” and “discriminatory” conduct, thus increasing the range of conduct considered for hostile work environment purposes, thereby making it more difficult to obtain summary judgment in FEHA harassment cases. Notably also, although not addressed by the Court, this portion of the Court’s ruling may make it easier for employees to plead “harassment”-type claims against supervisors, thus recasting prior discrimination claims permitted only against the employer into harassment claims against both supervisors and employers to prevent removal to federal court.

Regarding punitive damages, the Court reiterated the “three guideposts” for reviewing punitive damages awards: (1) the degree of reprehensibility of the defendant’s misconduct, (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award, and (3) the difference between the punitive damages award awarded by the jury and the civil penalties authorized or imposed in comparable cases. Analyzing the “reprehensibility” prong (also involving a five-factor test), the Court noted that the employer’s decision to adopt a harsh attendance policy that arguably did not sufficiently contemplate accommodating disabled employees did not constitute “repeated wrongdoing,” and it reiterated that a supervisor generally will not constitute a “managing agent.” Ultimately, based on the low degree of reprehensibility and the substantial award of non-economic damages, the Court concluded a one-to-one ratio between compensatory and punitive damages was the federal constitutional limit, rather than the five-to-one ratio awarded by the trial court. (Roby v. McKesson Corp. (2009) ___ Cal.4th ___, 2009 Cal.LEXIS 12374.)

California Supreme Court Holds That Attorney-Client Privilege Precludes Discovery of Legal Opinion Letter Discussing Wage and Hour Issues

Class plaintiffs sought discovery of an opinion letter that had been drafted by an employer’s outside counsel years earlier analyzing whether certain employees qualified as exempt under California’s wage and hour laws. The 22-page letter at issue contained both attorney opinions and factual information about various employees’ job responsibilities which had been obtained during witness interviews. While the trial court had concluded that portions of the letter were attorney-client communications and/or work product, it also held the factual portions relating to the witness interviews were discoverable, and ordered a redacted version produced to the class plaintiffs.

The California Supreme Court concluded the trial court erred in ordering portions of the letter produced. The Court first found that the attorney-client privilege attached to the entirety of the opinion letter, regardless of content, and regardless of whether certain portions of the opinion letter were arguably non-privileged and might be discoverable through other means. Second, it found that a party seeking relief from a discovery order that invades the attorney-client privilege does not need to establish that its case will be harmed by the disclosure of the evidence in order to get extraordinary relief. (Costco Wholesale Corp. v. Superior Court (2009) ___ Cal.4th _____, 2009 Cal.LEXIS 12375.)

California Supreme Court Finds Voluntary Employee Incentive Compensation Plan’s Forfeiture Provisions Do Not Violate the Labor Code

An employee participated for several years in the employer’s voluntary incentive compensation plan which provided employees with shares of restricted company stock at a reduced price in lieu of a portion of the employee’s annual cash compensation. Employees signing up for the plan agreed that, should they resign or be terminated for cause before their restricted shares of stock vested, they would forfeit both the stock and the portion of cash compensation they directed be paid in the form of restricted stock.

Plaintiff resigned his employment before any of the stock fully vested and thus forfeited all of his shares of stock and the percentage of his annual compensation he directed to be paid to him in the form of restricted stock.

Plaintiff filed a class action alleging the incentive plan’s forfeiture provision violated Labor Code sections 201, 202 and 219, which provide that employees be paid all earned, unpaid wages upon termination of employment and prohibit agreements that purport to circumvent this requirement. Both the trial and appellate courts concluded that plaintiff had been paid all of his earned wages – some in the form of restricted stock and some in the form of cash compensation. The appellate court also reasoned (and plaintiff agreed) that if he had been paid all of his compensation in cash and used a portion of his wages to buy his employer’s restricted stock, no Labor Code violation would have occurred.

The California Supreme Court affirmed. Plaintiff argued that the portion of his annual compensation he directed be paid to him in the form of restricted stock shares constituted a wage that remained unpaid following his resignation. The Court disagreed, noting that plaintiff voluntarily participated in this plan and acknowledged when he enrolled that resignation or termination before the end of the two-year vesting period would result in forfeiture of the restricted stock and the percentage of compensation he authorized to be paid as restricted stock. Such plans are permissible and numerous courts have found that only when an employee satisfies certain conditions precedent to receipt of incentive compensation, which often includes remaining employed for a particular period of time, can that employee be said to have earned the incentive compensation. Here, plaintiff voluntarily terminated his employment. Under the terms of the plan, he was not entitled to either the unvested shares or a cash equivalent. Plaintiff had never earned fully vested company stock because he did not remain employed for the entire vesting period. (Schachter v. Citigroup, Inc. (2009) __ Cal. 4th ___, 2009 Cal.LEXIS 11056.)

Over-Broad Non-Competition and Non-Solicitation Agreements Invalidated

Several employees and their new employer sued the employee’s former employer to enjoin it from enforcing non-compete and non-solicitation clauses in their employment agreements. The trial court granted the plaintiffs’ summary judgment motion on the grounds these provisions were facially invalid and void as a matter of law, and the California court of appeals affirmed, holding that these provisions violated Business and Professions Code sections 16600 and 17200.

The appellate court applied the California Supreme Court’s recent decision in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 946, which held that Business and Professions Code section 16600 prohibits non-competition agreements except in very narrow statutory exceptions not applicable in this case. The appellate court rejected the employer’s argument these provisions were necessary to protect “trade secrets” and expressed doubts about the continuing viability of the so-called “trade secrets” exception to section 16600. The court also observed that even if this exception existed, these particular provisions were overly broad since they broadly defined trade secrets as almost any information disclosed to the employees, and the non-solicitation clause prohibited the employees from providing services to customers who initiated the contact. The appellate court refused, however, to grant the plaintiffs a permanent injunction preventing the defendant from using such provisions for any employees anywhere in California on the grounds these employees had not pled and lacked standing to plead such a class action.

The appellate court also rejected the defendant employer’s argument that the new employer had engaged in unfair competition by “raiding” six employees in a brief period. The appellate court observed that it is not unlawful to hire a competitor’s at-will employee unless the hiring company engages in an independently wrongful act in doing so (i.e., an act proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard). (Dowell v. Biosense Webster, Inc. (2009) ___ Cal.App.4th ___, 2009 Cal.App.LEXIS 1860.)

NOTE: As discussed in the August WTK Newsletter, another California court of appeal has similarly held that Business and Professions Code section 16600 invalidates employment agreement clauses prohibiting former employees from soliciting former customers. (The Retirement Group v. Galante (2009) 176 Cal.App.4th 1226.) In Galante, the court observed that “contractual” provisions prohibiting solicitation are generally invalid, although a court may prohibit such solicitations if they violate California’s Uniform Trade Secrets Act or its unfair competition provision. The results in Dowell and Galante, coupled with the $1.6 million “bad faith” trade secret litigation (Flir Systems, Inc. v. Parrish (2009) 174 Cal.App.4th 1270 [discussed in the June WTK newsletter]) and the discovery limitation in Perlan (discussed below) perhaps signal a judicial trend against allowing businesses to prevent competition under the guises of trade secret litigation.

Public Employee’s Negative Email Concerning Supervisor Not Protected Free Speech

Upset about his supervisor’s inquiry into a project, a public employee sent an e-mail to his co-workers blasting his supervisor’s “hypocritical,” “autocratic,” “spiteful” and “small minded” management style. The public employer terminated the employee for insubordination and serious misconduct, and the employee sued claiming his termination violated the California Constitution’s free speech clause. The trial court granted summary judgment to the employer, and the court of appeal affirmed on the grounds the e-mail did not constitute protected speech.

The court of appeal began its analysis by holding that the United States Supreme Court’s recent decision in Garcetti v. Ceballos (2006) 547 U.S. 410 applies to free speech claims by California public employees, and that California’s free speech protections do not apply to statements made by public employees while performing their official duties. The appellate court noted California’s free speech protections would not apply to this e-mail, and even if they did, the public employer may still discipline the employee if it can articulate an adequate justification for treating the employee differently than other members of the public. In this case, the public employer disciplined the employee not because of any comment on a matter of public concern, but because of the inappropriate manner in which the employee publicly undermined his supervisor. The court also rejected the employee’s claim under the California False Claims Act (Gov. Code § 12650 et seq.) noting the employee’s e-mail was not intended to file a false claim action, but was simply a “disgruntled employee’s expression of dissatisfaction” with his supervisor. (Kaye v. Bd. of Trustees of the San Diego County Public Law Library (2009) ___ Cal.App.4th ___, 2009 Cal.App.LEXIS 1804.)

“Mixed Motive” Defense Still Applicable in California

In a FEHA pregnancy discrimination suit, the jury found for the plaintiff and awarded $175,000 (plus $400,000 in attorneys’ fees), and the employer appealed arguing the trial court had erroneously refused to provide a so-called “mixed motive” jury instruction. Under the “mixed motive” instruction (previously contained in BAJI jury instruction 12.26), if the jury concludes both discriminatory and non-discriminatory reasons motivated the challenged decision, the employer can still prevail by demonstrating it would have made the same employment decision solely on the basis of its legitimate reasons (i.e., its legitimate reason, standing alone, would have induced the employer to make the same decision). The plaintiff argued the new standard jury instructions (so-called CACI instructions) do not expressly contain the “mixed motive” instruction and therefore it is no longer good law in California.

The California court of appeal court agreed with the employer that the mixed motive defense remains good law and is available to employers in the right instance. The appellate court also noted this instruction should have been provided in this case since the employer presented substantial evidence of the employee’s poor performance and that the employer was investigating the employee before learning of her pregnancy. Lastly, on a procedural note, the appellate court noted the “mixed motive” defense is not an affirmative defense and therefore is not required to be pled separately in the employer’s initial responsive pleading. (Harris v. City of Santa Monica (2009) ___ Cal.App.4th ___, 2009 Cal.App.LEXIS 1731.)

Trade Secret Plaintiff Must Specifically Identify Trade Secrets to Commence Discovery

In a trade secret dispute by an employer against a competitor involving allegations of misappropriation by former employees, the trial court refused to permit the plaintiff to proceed with discovery because it had failed to sufficiently identify the trade secrets allegedly misappropriated. The California court of appeal affirmed this ruling holding that the plaintiff company had failed to meet the requirements of Code of Civil Procedure section 2019.210, which requires a plaintiff suing for misappropriation of trade secrets to identify its trade secrets with “reasonable particularity” prior to commencing discovery, and therefore, was not entitled to discovery on those claims.

In opposing the protective order precluding discovery, the plaintiff company had argued that it had provided reasonably particular descriptions of the trade secrets at issue in the case because it had identified the invention and the process that it was claiming were misappropriated. The appellate court disagreed, finding that the trade secret statement had failed to show that the purported trade secrets were not generally known to the public or others who could obtain economic value from its use and that the trade secret statement had not clearly identified all of the trade secrets at issue. (Perlan Therapeutics, Inc. v. Superior Court (ex rel Nexbio, Inc.) (2009) ___ Cal.App.4th___, 2009 Cal.App.LEXIS 1787.)

Employees Suing for Workers’ Compensation Discrimination Must Present Evidence of Less Favorable Treatment than Non-Industrially Injured Employees

Labor Code section 132a prohibits employers from discharging, threatening to discharge or “in any manner” discriminating against an employee because he or she has filed or expressed intent to file a workers’ compensation claim. In this case, an employee injured at work claimed his employer violated Labor Code section 132a by not immediately returning him to work after receiving a physician’s release. The employer acknowledged a several month delay in reinstating the employee, but contended it delayed to clarify the ambiguous and seemingly contradictory information contained in the physician’s release. The Workers’ Compensation Appeals Board ruled in the employee’s favor, finding that the delay itself constituted a form of discrimination because it negatively impacted the injured worker, and awarded lost wages during the delay and imposed a $10,000 statutory penalty.

The California court of appeals reversed, holding that an employee suing under section 132a must show not only that he suffered an industrial injury and the employer caused him to suffer detrimental consequences as a result, but also that the “employer singled out the employee for disadvantageous treatment because of his [work-related] injury.” In other words, the employee must show the employer singled him out for less favorable treatment than employees who suffered a non-industrial injury or did not file a workers’ compensation claim. In this case, the employee presented no evidence the employer would not have also sought to clarify a similarly ambiguous release for non-industrially-injured employee, so the employee could not establish disadvantageous treatment because of his workers’ compensation claim. (Gelson’s Markets, Inc. v. WCAB (2009) ___ Cal.4th ___, 2009 Cal. App. LEXIS 1827).

Employer’s Severance Offer Inadmissible in Subsequent FEHA Litigation

At trial in a FEHA retaliation lawsuit, a former employee attempted to introduce evidence the employer had forwarded the employee a separation agreement offering to pay severance in exchange for a release of claims. The employer argued the separation agreement was inadmissible under California Evidence Code section 1152 which prohibits parties from introducing evidence the other party has offered money as a compromise in order to establish the offering party’s liability on the underlying claims. The trial court agreed and excluded the separation agreement from evidence, and the court of appeal affirmed. The appellate court rejected the plaintiff’s argument Evidence Code section 1152 applied only to disputes existing at the time the offer is made and not to potential claims. The court noted that the statutory language of section 1152 did not limit itself to offers of compromise of preexisting disputes, although it noted a potentially different result might occur in federal court given the different language used in Rule 408 of the Federal Rules of Evidence. Accordingly, the appellate court held the trial court had not abused its discretion in excluding the proposed separation agreement under Evidence Code section 1152. (Mangano v. Verity, Inc. (2009) ___ Cal.App.4th ___, 2009 Cal.App.LEXIS ____.)

Federal

A Voluntary Base Rate Wage Reduction Made In Exchange for a 12-Hour Shift Schedule Complied With the FLSA

In this putative class action, a group of nurses alleged their employer violated the FLSA by creating a pay plan that paid nurses working twelve-hour shifts a lower base hourly rate than nurses who worked eight-hour shifts. The employer had implemented these twelve-hour shifts in response to the nurses’ requests, and the nurses were offered the option to work a schedule of twelve-hour shifts in exchange for receiving a lower base hourly rate (that at all times exceeded the required minimum wage) and time-and-a-half pay for hours worked in excess of eight per day. Those who volunteered for the twelve-hour shifts made approximately the same amount of money as they made previously on the eight-hour shift while working the same number of hours and performing the same duties.

The district court and the ninth circuit ruled in the employer’s favor, holding the employer’s pay plan (requested by the nurses and approved by its union) was perfectly reasonable. There was nothing unlawful about responding to employees’ requests for an alternative work schedule by adopting the sought-after schedule and paying the employees the same wages they received under the less-desirable schedule. The court noted the FLSA prohibits employers from setting artificially low hourly rates in order to circumvent overtime pay requirements, but concluded the regular rate of pay for the nurses working the twelve-hour shift was not artificial and unrealistic. The employer properly calculated the “regular rate” of pay by adding all the wages payable for the hours worked at the applicable shift rates (“base rate,” “weeknight base rate” and “weekend night base rate”) and dividing the total base rate pay by the total number of hours worked.

The court rejected the argument that the “average blended rate” is the only permissible “regular rate” of pay computation under the FLSA. The court also concluded that workers working different shifts may be paid different rates. (Parth v. Pomona Valley Hosp. Med. Ctr. (9th Cir. 2009) 2009 U.S. App. LEXIS 23329.)

Ninth Circuit Rules That Independent Contractors May Sue For Discrimination Under the Rehabilitation Act

In a decision that deepened a split that already existed between federal circuits, the Ninth Circuit sided with the Tenth Circuit (and against the Sixth and Eighth Circuits) and held that independent contractors are protected by the Federal Rehabilitation Act (which prohibits discrimination by entities receiving federal funding). The underlying legal question was whether the Rehabilitation Act, which incorporates the “standards” from the ADA, incorporates all the provisions of the ADA (including its requirement that an employer-employee relationship exist), or only those standards of the ADA governing when discrimination has taken place. In finding that the Rehabilitation Act is only meant to incorporate the standards of the ADA regarding when discrimination has taken place, the Ninth Circuit opened employers to discrimination suits by independent contractors. The ever-deepening split between the federal circuit courts raises the possibility the United States Supreme Court may grant review on this issue. (Fleming v. Yuma Regional Medical Center (2009) 2009 U.S. App. LEXIS 25406.)

Ninth Circuit Reiterates That A Showing Of Pretext In The Retaliation Context Requires Specific And Substantial Evidence

An employee sued under the ADA alleging her employer had retaliated against her by reassigning her after she requested certain accommodations and that her employer had failed to accommodate her disabilities. The Ninth Circuit granted summary judgment to the employer. In regard to the retaliation claim, the Ninth Circuit reiterated earlier decisions indicating that to prove pretext, an employee must come forward with specific and substantial evidence of discrimination. The Court assumed that the plaintiff could state a prima facie case of discrimination, but found that the employer had come forward with legitimate nondiscriminatory reasons for reassigning her. The Court further found that the failure of the employer to investigate the plaintiff’s allegations of retaliatory reassignment, and the plaintiff’s disbelief of the employer’s reasons for the reassignment were insufficient to establish pretext.

In regard to the failure to accommodate claim, the Court found that the ADA Amendments Act of 2008 does not apply retroactively. Therefore, the old definition of “substantially limited” applied to this case. Because the Court found that the plaintiff was not “substantially limited” in any major life activity under the pre-ADAAA definition, she was not entitled to a reasonable accommodation. (Becerril v. Pima County Assessor’s Office (9th Cir. 2009) ___ F.3d ___, 2009 U.S.App.LEXIS 25855.)