State and federal courts handed down labor and employment decisions last year that California employers must be aware of. Read about these decisions that impact everything from equal pay to medical leave, and more.

In this two-part annual series, Best Best & Krieger LLP takes a comprehensive look at the new laws and recent court decisions impacting public and private employers and employees.

Compensation, Equal Pay

• AHMC Healthcare, Inc. v. Superior Court: Payroll systems that round employee clock-in and clock-out times, either up or down, to the nearest quarter hour align with California law so long as the system is fair, neutral and does not undercompensate employees over time, the Second District Court of Appeal held. Evidence in this case showed employees, as a whole, were significantly overcompensated under the system. The court held that, while some employees — including the named plaintiffs — lost a minimal amount of time, the rounding method used here was fair and neutral.
• Alvarado v. Dart Container Corporation of California: In a unanimous decision, the California Supreme Court embraced an employee-friendly method for calculating overtime pay. The Court broke from a federal method for such calculations, ruling that when an employer calculates overtime for pay periods in which an employee earned a flat-rate bonus, the employer must divide the total compensation earned by the number of non-overtime hours the employee actually worked during the pay period. This method, the Court held, furthers State policies of discouraging employers from imposing overtime work and interpreting wage and hour laws to protect employee interests. (Additional information in the previous BB&K Legal Alert California Departs From the Federal Overtime Calculation Standard)
• Dynamex Operations West, Inc. v. Superior Court: The California Supreme Court clarified the standard by which a worker is classified as an employee or independent contractor under state Industrial Welfare Commission wage orders. In this case, delivery drivers brought a class action lawsuit against a same-day courier service for misclassification and violations of IWC wage orders. The Court affirmed an order certifying the class action and, in doing so, adopted the presumption that a worker is deemed an employee unless the employer establishes the worker is an independent contractor under the three-part “ABC” test. (Additional information in the previous BB&K Legal Alert The Dynamex Fallout: Independent Contractor Classifications Endangered)

• Troester v. Starbucks Corporation: The federal de minimis doctrine did not apply to claims for unpaid compensation under state IWC wage orders where a nonexempt employee is required to perform off-the-clock work on a regular basis or as a regular feature of the employee’s job, the California Supreme Court held. The case was brought on behalf of non-managerial employees who performed 4 to 10 minutes of uncompensated closing tasks at the end of every shift. The Court left open the possibility the existence of off-the-clock activities that are so irregular or brief that employers may not reasonably be required to compensate employees for time spent on them. (Additional information in the our previous Legal Alert Down to the Minute: Starbucks Wage-and-Hour Decision)
• Rizo v. Yovino: The U.S. Ninth Circuit Court of Appeals held that calculating a woman’s pay based on her previous salary is a form of gender discrimination and therefore a violation of the Federal Equal Pay Act. The practice, the court said, allows employers to capitalize on and perpetuate a persistent wage gap that undercuts the purpose of the Act. The appellate court held the Act’s “catch-all” exception for pay differentials is limited to legitimate job-related factors such as employment experience, ability or educational background. A U.S. Supreme Court petition is pending.

Harassment, Discrimination and Retaliation Decisions

• Abed v. Wester Dental Services: The plaintiff — a pregnant dental assistant — was falsely told no permanent positions were available following her externship and therefore didn’t apply for a position. When she learned that a position had been available and was awarded to another candidate, she sued for pregnancy discrimination under the California Fair Employment and Housing Act. The trial court granted summary judgment for the employer based on the plaintiff’s failure to apply for a position. The appellate court reversed, holding that, although plaintiffs in “failure to hire” cases must typically show they applied for a position, the plaintiff was not required to do so because her supervisor falsely stating no positions were open provided sufficient evidence of intentional pregnancy discrimination.

• Arave v. Merrill Lynch: The defendant/employer defeated claims for discrimination, harassment and retaliation claims brought under the California Fair Employment and Housing Act and a wage claim brought under the Labor Code. The defendant filed motions, as the prevailing party, for costs, expert witness fees and attorney’s fees. The trial court denied the request for attorney’s fees on the FEHA claims, but granted the motion for attorneys’ fees on the wage claim and for recovery of expert witness fees. The plaintiff appealed and the defendant cross-appealed. The appellate court affirmed the trial court’s order denying the defendants’ motion for attorney’s fees for defense of the FEHA claims because FEHA claims must be frivolous, unreasonable, without foundation or brought in bad faith before a prevailing defendant is entitled to recover attorney’s fees. For the same reason, the appellate court reversed the trial court’s award of costs and expert witness fees, holding that a prevailing defendant in a FEHA case is not entitled to recover ordinary costs unless there is finding that the claims were frivolous. The appellate court rejected the defendants’ argument that they were entitled to recover expert witness fees under Code of Civil Procedure section 998 (which provides that expert costs incurred after an offer of compromise is rejected are recoverable if the plaintiff does not recover an amount greater than that which was offered in compromise), holding that section 998 does not override the requirement that costs can only be recovered if the underlying FEHA claims are found to be frivolous.
• Camacho v. Target Corporation: The plaintiff/employee filed a workers’ compensation claim that was settled via a pre-printed “Compromise and Release” form. The plaintiff also signed a release that contained in an addendum that Target argued released it from all civil claims. The plaintiff then sued the company alleging harassment, discrimination and retaliation. A trial court dismissed the claims on summary judgement, finding the signed addendum constituted a broad release of any and all potential claims. The Fourth District Court of Appeal held that the form’s release did not apply to claims that were not within the scope of the workers’ compensation law, “unless otherwise expressly noted.” There was no reference to claims outside the workers’ compensation system and language did not show an intention to generally release all claims. The plaintiff was allowed to proceed with his claims.

• Meeks v. AutoZone, Inc.: The plaintiff reported alleged sexual harassment to her supervisor who, in turn, allegedly threatened to fire the plaintiff and her husband (also an employee of AutoZone) if she pursued the sexual harassment claim. The plaintiff sued AutoZone alleging retaliation, among other things. The trial court granted summary adjudication in favor of AutoZone on the retaliation claim. The Fourth District Court of Appeal affirmed, holding that there was no evidence of adverse action following the plaintiff’s complaint. Viable retaliation claims brought under the California Fair Employment and Housing Act must demonstrate that adverse employment actions affected an employee’s job performance and/or opportunities for career advancement. Even if the plaintiff was threatened, there was no evidence that the threat was carried out. The plaintiff continued to be employed, didn’t lose pay, benefits or status and wasn’t denied a promotion.

• Terris v. County of Santa Barbara: The plaintiff was laid off and filed a complaint with the County’s Civil Service Commission alleging her termination procedure violated her seniority rights. She later filed suit, alleging, among other things, the County terminated her in retaliation for making workplace complaints in violation of Labor Code section 1102.5. The trial court found that the plaintiff failed to exhaust her administrative remedies and granted summary judgment in favor of the County. The plaintiff appealed, arguing that Labor Code section 244 states that claimants aren’t required to exhaust administrative remedies unless the code section expressly requires it — and Labor Code section 1102.5 does not. The appellate court affirmed the trial court, holding that section 244 was enacted to protect the right to sue without first having to exhaust administrative proceedings before the Labor Commissioner, not an employer’s internal administrative remedies. The appellate court held that, pursuant to Campbell v. Regents of the University of California, employees must exhaust their employer’s internal administrative remedies before filing suit.

• Wassman v. South Orange County Community College District: This case stems from the termination of a tenured librarian whose firing was upheld after a 5-day hearing before an administrative law judge. The plaintiff then filed a petition for writ of mandate alleging that the administrative law judge’s findings were not supported by the weight of evidence. The petition was denied. The plaintiff then sued the District alleging, for the first time, racial discrimination, age discrimination and harassment in violation of California’s FEHA. The trial court granted the County’s motions for summary judgment and the Fourth District Court of Appeal affirmed on the grounds that administrative proceedings under the state Education Code afford employees a robust due process platform where they can challenge adverse employment actions and judicial review is available.

Disability Discrimination and Medical Leave Decisions

• Snapp v. United Transportation Union: The defendant, a trainmaster with sleep apnea who was unable to work, sued his employer under the American with Disabilities Act for failure to provide a reasonable accommodation. His benefits were discontinued after 5 years and he was terminated for failing to secure another position. The Ninth Circuit affirmed a ruling in favor of the defendant, holding that, to prevail, an employee alleging failure to accommodate must prove: that the employee is a qualified individual, the employer received notice of the employee’s disability and a reasonable accommodation was available that would not create an undue hardship for the employer. The court found that the employer had met these obligations. It is important to note that there might have been a different result under California law because FEHA, unlike the ADA, makes it unlawful for an employer to fail to engage in the interactive process. The ADA has no such standalone cause of action. The case below, brought under FEHA, demonstrates this.

• Hernandez v. Rancho Santiago Community College: The plaintiff, an administrative assistant who was completing a required 1-year probationary period, was terminated while on temporary disability leave for a work-related injury. Suing the District under FEHA, she alleged her employer failed to both provide reasonable accommodation and engage in an interactive process. A trial court found in the plaintiff’s favor and awarded nearly $724,000 in damages. On appeal, the district argued it was compelled to terminate the plaintiff because she would have become a permanent employee without going through requisite performance evaluations. The appellate court disagreed, finding the college could have extended the probationary period by the length of her leave and conducted the evaluations upon her return to work after she completed a full 12-months of employment. The college was found to have also failed to engage in the interactive process because there was no exchange of information before a termination decision was made.
• EEOC v. BNSF Railway Co.: The plaintiff received a conditional job offer contingent on a satisfactory post-offer medical review. During the review, he disclosed a previous back injury, but three doctors agreed there were no current limitations and no need for follow-up testing. BNSF, nonetheless, required the plaintiff to submit an MRI (paid for by the plaintiff) as a condition of employment. Unable to afford the MRI, his job offer was revoked. He filed a charge with the EEOC, which sued on his behalf in federal district court for alleged violations of the ADA. The Ninth Circuit upheld a decision that BNSF could not require Holt to pay for the MRI.
• Dunlap v. Liberty Natural Products, Inc.: A shipping clerk diagnosed with problems in both elbows was terminated after the close of a workers’ compensation claim. A reinstatement pursuit was denied and the plaintiff sued for disability discrimination under the ADA and Oregon state law. The Ninth Circuit held that, once an employer is aware of the need for accommodations, it has a duty to engage in the interactive process to identify reasonable accommodations, which Liberty, in this matter, had failed to do.
• Caldera v. California Department of Corrections and Rehabilitation: A California Department of Corrections and Rehabilitation correctional officer was publicly and repeatedly mocked for a speech impediment in front of other employees. On an appeal by the CDCR, the court upheld a jury verdict in the plaintiff’s favor because he was subjected to unwanted harassing conduct based on his disability; the harassment was severe and pervasive;  a reasonable person in his position would have considered the work environment to be hostile or abusive; a supervisor participated in the harassing conduct and CDCR failed to take reasonable steps to prevent the harassment.

Read more about the new labor and employment laws impacting public and private employers and their employees in Part I of this series, which reviewed legislative changes and the #MeToo movement’s impact on laws shaping employee protections against sexual harassment.

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