November 2015

Ninth Circuit Adopts Rebuttable Presumption that Less Than 10-Year Age Difference is Insubstantial in Failure to Promote Claim under the ADEA

France v. Johnson (9th Cir. 2015) 795 F.3d 1170

The ninth circuit reversed an Arizona district court’s summary judgment in favor of the employer (U.S. Department of Homeland Security) in a failure to promote case brought by a border patrol agent under the Age Discrimination in Employment Act (ADEA).  In holding that the employee met his burden of stating a claim of age discrimination, the court applied a rebuttable presumption that a less than ten-year age difference between the complaining employee and the candidate who received the promotion at issue was insubstantial.  Here, there was a less than a ten-year difference between the employee and the candidate promoted, but the court found that the employee rebutted the presumption.  Notably, all top candidates were over 40 years old and within ten years of each other, but the employee at issue was the oldest.

To rebut this presumption, the employee offered evidence that: (1) one of his interviewers said he preferred “young, dynamic agents,” and just two months earlier had repeated retirement discussions with the employee despite his expressed desire not to retire; (2) this same interviewer, while not a decision-maker, would be the supervisor of the promoted candidate such that the decision-makers were influenced by his recommendations of who should be promoted, and in fact followed his recommendation (this is a legal theory known as “cat’s paw” wherein non-decision-makers with discriminatory animus are found to have influenced decision-makers); and (3) one of the decision-makers also commented that he preferred “younger, less experienced agents.” 

This evidence also established pretext—that age was a factor in the promotion decision—even though the employer provided a legitimate reason for not promoting the employee, according to the court.  The employer’s reasons for not choosing the employee were his lack of judgment (e.g., he “had a big mouth” and didn’t know when to turn it off), leadership, flexibility and innovation.  The court nevertheless found the employee’s evidence defeated summary judgment.

Labor Code Section 1102.5 is Not Limited to Whistleblowers Reporting Unlawful Business Activities to Law Enforcement Agencies

Cardenas v. M. Fanaian, D.D.S., Inc. (2015) 240 Cal.App.4th 1167

The employee reported to the police that a co-worker stole her wedding ring at work.  The employer subsequently terminated the employee because the police investigation was disrupting the workplace.  She filed a lawsuit against her employer alleging retaliation in violation of Labor Code section 1102.5 and wrongful termination in violation of public policy.   The jury found in favor of the employee on both causes of action and awarded her $117,768 in damages.  The employer appealed the judgment.

The court of appeal affirmed the jury verdict, holding that Labor Code section 1102.5 is a stand-alone theory of recovery and does not require proof of a violation of public policy.  To establish a prima facie case of retaliation under Section 1102.5(b), a plaintiff must show: (1) she engaged in a protected activity; (2) her employer subjected her to an adverse employment action; and (3) there was a causal link between the two.  An employee engages in protected activity under Section 1102.5(b) when he or she discloses to a law enforcement agency reasonably-based suspicion of illegal activity.

The court further held that a Section 1102.5 claim is not limited to protecting against employer retaliation for reporting violations of law arising out of the employer’s business activities.  The court clarified that Section 1102.5 protects employees from retaliation even where the report to law enforcement concerns a violation of law committed by a fellow employee or contractor, and not by the employer.  Justice Gomes dissented, finding that Section 1102.5 was intended to protect whistleblowers, and that the Legislature intended to exclude from its scope private matters that are of no practical concern to anyone other than the individual claiming to have been the victim of a criminal act.

The “Death Knell” Doctrine Applied to a Dismissal of a PAGA Claim Allows an Immediate Appeal from the Dismissal of a Representative Claim

Miranda v. Anderson Enterprises, Inc. (2015) 241 Cal.App.4th 196

The “the death knell” doctrine provides that an order which allows a plaintiff to pursue individual claims, but prevents the plaintiff from maintaining the claims as a class action is immediately appealable because it “effectively rings the death knell for the class claims.”  In this case, the court of appeal concluded that this doctrine also applies to the dismissal of a representative action under the California Private Attorneys General Act of 2004 (PAGA) (Lab.Code §2698 et. seq.).

A former employee, who agreed to arbitrate all employment claims and waived the right to arbitrate class or representative claims, filed a putative class action alleging wage and hour violations including a representative PAGA claim.  The employer moved to dismiss the class and representative claims and compel arbitration.  The trial court found the arbitration agreement valid and enforceable, dismissed the class and representative claims without prejudice based on the arbitration agreement’s waiver and granted the motion to arbitrate the individual claims.  The employee appealed, arguing the decision with regard to the PAGA claim waiver was contrary to a subsequently issued California Supreme Court opinion in Iskanian v. CLS Transportation of Los Angeles, LLC (2014) 59 Cal.4th 348, which invalidated such waivers.  The court of appeal agreed and reversed, holding that the “death knell” doctrine (allowing an immediate appeal from an order dismissing class claims but allowing individual claims) applied to representative claims under the PAGA, and thus, the employee was allowed to appeal the dismissal of the PAGA claim.

Employees Not Required to Exhaust Administrative Remedies Prior to Filing Suit Under Labor Code Section 6310

Sheridan v. Touchstone Television Productions, LLC (2015) 241 Cal.App.4th 508

An employee actress on the television show Desperate Housewives sued her employer pursuant to Labor Code section 6310, alleging she was terminated in retaliation for complaining that the show’s creator slapped her for requesting a script change.  Labor Code section 6310 states, “Any employee who is discharged, threatened with discharge, demoted, suspended, or in any other manner discriminated against in the terms and conditions of employment by his or her employer” because of complaints “of unsafe working conditions, or work practices . . . shall be entitled to reinstatement and reimbursement for lost wages and work benefits caused by the acts of the employer.”

The employer successfully demurred on the ground that the employee failed to exhaust the administrative remedy provided by Labor Code sections 98.7 and 6312.  The appellate court reversed, holding the employee need not exhaust her administrative remedies prior to filing suit under Labor Code Section 6310.   The appellate court reasoned that the permissive language of Labor Code sections 98.7 and 6312, which states the employee “may” file a complaint with the Labor Commissioner, evidenced the legislature’s intent to permit, but not require, that an employee file a complaint with the Labor Commissioner before bringing a civil action.  The appellate court also noted that 2013 legislation making exhaustion explicitly optional was a clarification of earlier legislation rather than a change in the law, so that it applied to the employee’s claim and eliminated any exhaustion requirement. The court therefore reversed and permitted the employee to proceed with her retaliation claim under Labor Code section 6310.

Court Review of an Arbitration Award was Prohibited even though the Arbitrator Enforced a Non-Compete Agreement that was Legally Unenforceable

SingerLewak LLP v. Gantman (2015) 2015 Cal.App.LEXIS 929

On appeal of an arbitration award that enforced a non-compete agreement a partner signed with his accounting firm, the appellate court reversed the trial court's order finding the non-compete agreement unenforceable under California law.  The appellate court ruled that the general rule prohibiting review of an arbitration award applied in this case.

In the arbitration (agreed to by the parties in their partnership agreement), the partner argued the non-compete clause in the partnership agreement was unenforceable.  The partnership argued an exception to California’s general prohibition on restraints on competition applied—Business and Professions Code section 16602, making an exception to certain departing partners—and the arbitrator agreed, and thereby enforced the non-compete agreement.  In response to the partnership’s petition to confirm the arbitration award, the partner argued Section 16602 did not apply because the partnership agreement’s non-compete clause did not have any geographical limits as required by the statutory exception.  The trial court concluded a review of the arbitration award was appropriate, and reversed the award on the geographical grounds asserted by the partner.

The appellate court reversed the trial court’s ruling and reinstated the arbitrator’s award because an error of law is not a ground allowing review of an arbitrator’s decision under Code of Civil Procedure section 1286.2, et seq.  The court also found the arbitrator did not exceed his powers to warrant court review.  Even if the arbitrator erred in his interpretation of Section 16602, he did not exceed his powers by acting in a manner not authorized by law.

Class Arbitration Waivers are Unenforceable Where the Matter is Not Governed by the Federal Arbitration Act

Garrido v. Air Liquide Industrial U.S. LP (2015) 2015 Cal.App.LEXIS 946

The employee filed a putative class action against his former employer, alleging various wage and hour violations and unfair business practices.  The employer moved to compel individual arbitration pursuant to an arbitration agreement, which stated it was governed by the Federal Arbitration Act (FAA).  Relying on Gentry v. Superior Court (2007) 42 Cal.4th 443, the trial court found the class arbitration waiver in the agreement to be an unlawful exculpatory clause and denied the employer’s motion.  The employer appealed.

While the appeal was pending, the California Supreme Court held in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, that Gentry’s rule against employment class waivers was preempted by the FAA.

The court of appeal affirmed, holding that the Gentry rule remained valid in cases not governed by the FAA.  The FAA does not apply to transportation workers who engage in foreign or interstate commerce, even if their employment agreements state otherwise.  Because the employee was a truck driver who transported goods across state lines, the court found that he was a transportation worker within the meaning of the FAA exemption.  Thus, the arbitration agreement’s prohibition of class proceedings was unenforceable.

There can be More Than One Prevailing Party for Fee Recovery Purposes in a Case where Different Fee Statutes Apply

Sharif v. Mehusa, Inc. (2015) 241 Cal.App.4th 185

After a jury trial, the employee prevailed on an Equal Pay Act (EPA) claim, and the employer prevailed on the employee’s overtime and wage claims.  The parties each filed motions for fees and costs on the claims they won.  The trial court granted both motions and offset the employer’s fee award against the larger fee award to the employee for a net award to the employee of approximately $3,700.  The employee appealed, objecting to the award to the employer and arguing she alone was the prevailing party “on a practical level,” and also under Code of Civil Procedure section 1032.

The appellate court affirmed the trial court’s ruling, granting each party its fees on the claims it won under the separate fee-shifting statutes applicable to each claim, and confirming the net amount to the employee.  The court rejected the employee’s argument that she was the sole prevailing party in the case under the general cost recovery statute, section 1032 which provides a “prevailing party” includes a party with a “net monetary recovery,” as more specific fee statutes applied, one specific to the EPA claim and another to the wage claims.  “Prevailing party” under these statutes is interpreted by courts to mean prevailing “on a practical level,” which in turn means achieving one’s litigation goals. 

In rejecting the employee’s position, the appellate court noted there was no logical or legal reason why the employer should be precluded from recovering its attorneys’ fees on the wage claims it successfully defended simply because the employee alleged her successful equal pay claim in the same case with her unsuccessful wage claims.