California Employment Law Notes - July 26 2012

by Proskauer Rose LLP

Medical Group Partner Could Proceed With FEHA Retaliation Claim

Fitzsimons v. California Emergency Physicians Med. Group, 205 Cal. App. 4th 1423 (2012)

Mary Fitzsimons is an emergency physician and a member of the California Emergency Physicians ("CEP") partnership. After Fitzsimons's appointment as a regional director was terminated, she filed suit alleging she had been removed in retaliation for reports she had made to her supervisors that certain officers and agents of CEP had sexually harassed female employees of CEP's management and billing subsidiaries. At trial, the jury determined that Fitzsimons was a partner and not an employee of CEP, and the trial court then entered judgment in favor of CEP on the ground that a partner has no standing to assert a claim under the Fair Employment and Housing Act ("FEHA"). The Court of Appeal reversed, holding that FEHA makes it unlawful for CEP to retaliate against "any person" for opposing harassment, including a partner. See also Rickards v. United Parcel Serv., 206 Cal. App. 4th 1523 (2012) (employee's attorney's verification of the online complaint to the DFEH is sufficient to exhaust administrative remedies).

Pharmaceutical Sales Reps Are Exempt From FLSA As Outside Salespeople

Christopher v. SmithKline Beecham Corp., 567 U.S. ___, 132 S. Ct. 2156 (2012)

Plaintiffs in this case are pharmaceutical sales representatives for SmithKline Beecham whose primary objective was to obtain nonbinding commitments from physicians to prescribe the company's products. Each week, the employees spent approximately 40 hours in the field calling on physicians and an additional 10 to 20 hours attending events and performing miscellaneous business-related tasks. The employees received a base salary and incentive pay, but no overtime for hours worked in excess of 40 per week because they were classified as exempt outside salespeople. In this lawsuit, the employees claimed they had been misclassified as outside salespeople and that they were entitled to overtime pay. The district court granted summary judgment to the employer, which the employees challenged on the ground that the court had failed to accord controlling deference to the U.S. Department of Labor's interpretation of the pertinent regulations, which the DOL had announced in 2009 in an amicus brief filed in a similar action. The district court and the Ninth Circuit Court of Appeals rejected the employees' contention and determined that the DOL's interpretation is not entitled to controlling deference. The United States Supreme Court affirmed the judgment of the Ninth Circuit.

Employee Terminated For Refusing To Sign Disciplinary Memo Was Disqualified From Unemployment Benefits

Paratransit, Inc. v. CUIAB, 206 Cal. App. 4th 1319 (2012)

Craig Medeiros was terminated by his employer Paratransit for refusing to sign a disciplinary memorandum that was issued in connection with a prior incident of misconduct involving a customer. Medeiros (who was a member of a union) refused to sign the disciplinary memo without a union representative being present (which he had requested and was denied) even though the signature line indicated only "Employee signature as to Receipt." The employer's representative informed Medeiros that the collective bargaining agreement required him to sign the disciplinary memo and that if he failed to sign, it would be treated as insubordination and his employment would be terminated. Medeiros refused to sign the memo, and Paratransit terminated his employment. Paratransit subsequently opposed Medeiros's application for unemployment benefits, and the administrative law judge concluded Medeiros's "deliberate disobedience of a reasonable and lawful directive of the employer, to sign the memorandum notifying him of disciplinary action, where obedience was not impossible or unlawful and did not impose new or additional burdens upon him, constituted misconduct." Although the CUIAB reversed the ALJ, the trial court granted the employer's petition for writ of administrative mandamus, concluding "this was misconduct rather than a good faith error in judgment." The Court of Appeal affirmed the trial court's judgment.

Employee Of Franchisee Could Proceed With Sexual Harassment Claim Against Franchisor

Patterson v. Domino's Pizza, LLC, 2012 WL 2402640 (Cal. Ct. App. 2012)

Taylor Patterson was an employee of Sui Juris, LLC (a franchisee of Domino's Pizza) where she alleged she had been sexually harassed and assaulted by assistant manager Renee Miranda. Patterson sued Miranda, Sui Juris and Domino's, but Domino's filed a motion for summary judgment on the grounds that Sui Juris was an independent contractor pursuant to the terms of a written franchise agreement and that there was no principal-agency relationship between Sui Juris and Domino's. The trial court granted Domino's motion for summary judgment, but the Court of Appeal reversed, finding triable issues of fact regarding the degree of control that Domino's exercised over Sui Juris and its employees.

News Reporters' Age Discrimination Lawsuit Was Properly Dismissed

Schechner v. KPIX-TV, 2012 WL 1922088 (9th Cir. 2012)

William Schechner (age 66) and John Lobertini (age 47) were television news reporters for KPIX-TV in San Francisco who alleged age discrimination when they were laid off after a network directive was issued, requiring each of its affiliates to reduce its annual budget by 10 percent. The district court granted the employer's motion for summary judgment, and the Ninth Circuit affirmed. However, the appellate court held, contrary to the district court, that a plaintiff's statistical evidence need not necessarily account for an employer's proffered non-discriminatory reason for the adverse employment action in order to make out a prima facie case of discrimination. The Court nevertheless affirmed summary judgment because KPIX had met its burden of offering a legitimate non-discriminatory reason for the layoffs (i.e., it laid off general assignment reporters based on the date of their contract expiration) and because Schechner and Lobertini had failed to show the proffered reason was mere pretext for age discrimination. The Court also held that KPIX was entitled to a "favorable same-actor inference because [it was the same managers who] signed Schechner and Lobertini to new contracts not long before they laid [them] off."

California (Not Delaware) Law Governs CEO's Wrongful Termination Claim

Lidow v. Superior Court, 206 Cal. App. 4th 351 (2012)

Alexander Lidow, the former CEO of International Rectifier Corporation ("IR"), sued his former employer for wrongful termination in violation of public policy and several other claims arising from the termination of his employment. In response, IR moved for summary adjudication of Lidow's wrongful termination claim on several grounds, including that pursuant to the "internal affairs doctrine," Delaware not California law governed the claim. The trial court granted summary adjudication to IR, but in response to Lidow's petition, the Court of Appeal issued a peremptory writ of mandate directing the trial court to vacate its order dismissing the claim and to enter a new order denying IR's motion. The appellate court reasoned that where there are allegations made by a corporate officer that he was removed for complaining about possible illegal or harmful activity, the internal affairs doctrine is inapplicable and California law governs the claim.

$480,000 In Fees And Costs Was Properly Awarded Against Employer For Prosecuting Trade Secrets Claim In Bad Faith

SASCO v. Rosendin Elec., Inc., 2012 WL 2826955 (Cal. Ct. App. 2012)

SASCO sued three of its former senior managers and their new employer (Rosendin Electric) for, among other things, misappropriation of trade secrets under the California Uniform Trade Secrets Act. More than two years after it filed the litigation (in which the "parties engaged in fierce discovery battles"), SASCO voluntarily dismissed the action without filing an opposition to defendants' motion for summary judgment. Defendants then filed a motion for attorney's fees and costs pursuant to Cal. Civ. Code § 3426.4, asserting the lack of evidence of any trade secret misappropriation by defendants. The trial court granted defendants' motion and awarded them the total amount of $484,943.46 because there was no evidence of misappropriation of any trade secret – "instead, SASCO sued defendants based on the suspicion that they must have misappropriated trade secrets because the individual defendants left the employ of SASCO to work for a competitor." The Court of Appeal affirmed.

Bank's Defamation Action Against Former Employee Was Properly Dismissed

Summit Bank v. Rogers, 206 Cal. App. 4th 669 (2012)

Summit Bank sued its former employee Robert Rogers for posting allegedly defamatory statements about the bank in the "Rants and Raves" section of Craigslist. In response to the bank's lawsuit, Rogers filed an anti-SLAPP motion to strike the complaint on the ground that the suit was brought for the illegitimate purpose of chilling Rogers's right to speak freely about the bank. The trial court denied Rogers's motion, but the Court of Appeal reversed, holding that Rogers had met his burden of showing that the bank's defamation action arose from an act in furtherance of his constitutional right of free speech in connection with an "issue of public interest" and that the bank had failed to satisfy its burden of showing a probability of success on the merits.

Employer's Chargeback Provision Did Not Violate Labor Code

Deleon v. Verizon Wireless, LLC, 2012 WL 2765812 (Cal. Ct. App. 2012)

Verizon's sales representatives received commissions on the sale of cell phone service, which were not earned until the expiration of a chargeback period during which the customer could cancel the service. Although Verizon advanced commission payments to its employees, the plan stated: "Your commission is not earned and the sale does not 'vest' until your customer satisfies his or her contract during the applicable chargeback period." If a customer disconnected service during the chargeback period, the employee's future commission advances would be reduced by the amount previously advanced. In this class action lawsuit, Deleon alleged violations of the Private Attorneys General Act ("PAGA") on various grounds including that the chargebacks constitute a "secret underpayment of wages." The trial court granted summary judgment to Verizon, and the Court of Appeal affirmed, holding that the commission payments are advances and not wages until the specified conditions have been satisfied. See also Sotelo v. MediaNews Group, Inc., 2012 WL 1955054 (Cal. Ct. App. 2012) (trial court properly denied class certification to workers who fold, bag and deliver newspapers and their managers all of whom were allegedly misclassified as independent contractors); People ex rel. Harris v. Sunset Car Wash, LLC, 205 Cal. App. 4th 1433 (2012) (liability was properly determined against successor car wash employer).

California Supreme Court Modifies Attorney Work Product Rules

Coito v. Superior Court, 2012 WL 2369186 (Cal. S. Ct. 2012)

Although this case does not involve the employment relationship, it has significant implications for all California attorneys who litigate civil matters. The Supreme Court held that (1) recordings of witness interviews conducted by investigators employed by a party's counsel are entitled to at least qualified work product protection and possibly absolute protection if the party can show that disclosure would reveal its attorney's "impressions, conclusions, opinions, or legal research or theories"; and (2) the identity of witnesses from whom a party's counsel has obtained statements (as called for by Form Interrogatory No. 12.3) is not automatically entitled as a matter of law to absolute or qualified work product protection.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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