Employment Law

by Manatt, Phelps & Phillips, LLP

In This Issue:

  • PAGA Suit Belongs in State, Not Federal, Court Says Ninth Circuit
  • The Intersection of Social Media and Employment Law
  • Employment Contract That Limited FEHA Claims to 6-Month Window Unreasonable
  • New Guidance From The EEOC on Religious Dress, Grooming
  • Second Circuit: EEOC Charge Doesn’t Toll State Law Claims

PAGA Suit Belongs in State, Not Federal, Court Says Ninth Circuit

Why it matters: A wage and hour suit brought under California’s Private Attorney General Act (PAGA) belongs in state , not federal , court, the Ninth U.S. Circuit Court of Appeals has concluded. The federal appellate panel effectively shut the doors of the federal courthouse by concluding that a PAGA claim is not “substantially similar” to a Rule 23 class action, meaning that the employer could not establish original jurisdiction under the Class Action Fairness Act (CAFA). The panel left undecided the issue of whether a federal court may allow a PAGA action otherwise within its original jurisdiction to proceed under Rule 23 as a class action – leaving one possible avenue for employers seeking to keep a PAGA action in federal court.

Detailed Discussion
Joseph Baumann filed his PAGA claim in California state court against former employer Chase Investment Services. Baumann alleged that Chase failed to pay him and other financial advisors for overtimeand meal and rest breaks and did not timely reimburse business expenses.

Chase filed a notice of removal to federal court, invoking original jurisdiction under the federal CAFA. Aggregating the potential penalties under PAGA, the federal district court kept the case.

But the 9th Circuit reversed the denial of Baumann’s motion to remand to state court. Citing to last year’s Urbino v. Orkin Services, the three-judge panel noted that the amount-in-controversy requirement for federal jurisdiction was not satisfied, as PAGA penalties cannot be aggregated.

Further, the federal court lacked CAFA original jurisdiction, the court concluded. While the state Labor Code is silent as to whether a PAGA action is a “class action,” the California Supreme Court has ruled it is not, finding PAGA actions “fundamentally different” from class actions.

“In the end, Rule 23 and PAGA are more dissimilar than alike,” the panel said. “A PAGA action is at heart a civil enforcement action filed on behalf of and for the benefit of the state, not a claim for class relief.” The California Legislature enacted PAGA because of inadequate financing and staffing to enforce state labor laws, the court noted, and such parens patriae suits lack the defining attributes of true class actions.

Unlike Rule 23 suits, PAGA has no notice requirements, lacks the ability for employees to opt out, contains no requirements of numerosity, commonality, or typicality, and no inquiry occurs into whether the named plaintiff and class counsel have the ability to fairly and adequately represent unnamed employees.

The panel continued its list of differences with the finality of PAGA judgments. Under the Federal Rules, members of a class action who decline to opt out are bound by the resulting judgment. Not so in PAGA actions, which expressly provide that employees retain all rights to pursue or recover other available remedies under state and federal law. Penalties are also “markedly different,” with the bulk of recovery in a PAGA action going to the California Labor and Workforce Development Agency (LWDA), not to aggrieved employees.

“In short, ‘a PAGA suit is fundamentally different than a class action,’” the court said. “These differences stem from the central nature of PAGA. PAGA plaintiffs are private attorneys general who, stepping into the shoes of the LWDA, bring claims on behalf of the state agency. Because an identical suit brought by the state agency itself would plainly not qualify as a CAFA class action, no different results should obtain when a private attorney general is the nominal plaintiff.”

To read the opinion in Baumann v. Chase Investment Services, click here.

The Intersection of Social Media and Employment Law

Why it matters: What is the impact of social media on the workplace? Exploring the issue, the Equal Employment Opportunity Commission (EEOC) recently held a public meeting to discuss “Social Media in the Workplace: Examining Implications for Equal Employment Opportunity.” Speakers discussed how social media affects a spectrum of employment issues, from hiring (should employers review an applicant’s Facebook page?) to harassment in the workplace (what if employees post derogatory comments about coworkers?) to litigation. Of serious concern to the EEOC is whether, and to what extent, employers should be able to obtain social media during discovery in employment-related litigation. “The increasing use of social media in the 21st century workplace presents new opportunities as well as questions and concerns,” EEOC chair Jacqueline A. Berrien said in a statement about the meeting. “This meeting has helped the EEOC understand how social media is being used in the employment context and what impact it may have on the laws we enforce and on our mission to stop and remedy discriminatory practices in the workplace.” Interestingly, a recent case out of Florida provides a perfect example of the intersection of employment litigation and social media, when a plaintiff lost the bulk of his settlement proceeds after violating the terms of a confidentiality agreement by telling his daughter about the settlement. She posted the news to her Facebook account, resulting in an appellate court agreeing with the school that it was not required to pay the remaining balance of the deal.

Detailed Discussion
Five panelists appeared before the Commission to discuss social media in the workplace, offering perspectives from agency lawyers and attorneys on both sides of the bar in employment disputes.

Employers may use social media for a variety of reasons, like maintaining a corporate blog to keep employees apprised of company goings-on or regularly posting to a Facebook page as a form of marketing to potential customers. Employers may also utilize sites like LinkedIn or Facebook to review applicants or recruit candidates for a position.

Speakers acknowledged the potential for violating antidiscrimination laws based upon information found on social media and recognized that several states have outlawed the request for social media passwords and the need to use only publicly available information.

Social media can also impact day-to-day employment issues if employees post harassing or derogatory comments about coworkers. And employers may be liable for failing to address a hostile work environment if an employee can establish the company had knowledge of such postings or an employer-owned device or account was used to make the postings.

An EEOC attorney testified about an employee of a federal agency who based his claim of racial discrimination on negative postings made on Facebook by a coworker. Although his agency dismissed the claim, the EEOC remanded it, acknowledging “that a social media posting by a co-worker may contribute to the creation of an unlawful hostile work environment,” EEOC lawyer Carol Miaskoff told the Commission.

The most pressing issue for the agency: the ever-increasing use of social media as a source of discovery in employment discrimination litigation. EEOC attorney Rita Kittle expressed concern that such efforts could have a chilling effect on employees’ bringing suit or joining an agency action. “When people think that participating in our case will mean that all their private communications may be laid bare for search by their employer or former employer who discriminated against them, they’re far less willing to participate in our cases,” she testified.

Commissioner Constance S. Barker noted that “private” should be considered in context. “I have a total lack of sympathy for all the people who blast their private lives on Facebook and other social media,” she said at the hearing.

A case out of Florida reinforces her point.

Patrick Snay filed an age discrimination and retaliation suit against his former employer, Gulliver Schools. The parties reached a settlement agreement in which Snay dropped his lawsuit and the school agreed to pay a total of $150,000 ($10,000 for back pay, $60,000 to his attorneys, and a final check for $80,000).

Included in the agreement was a detailed confidentiality provision requiring Snay and his wife to keep the terms of the deal strictly confidential. A breach of the provision would result in disgorgement of the settlement proceeds. Despite the clause, Snay informed his daughter the case was resolved.

Her response? Post the following message on her Facebook page: “Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation in Europe this summer. SUCK IT.” Many of her 1,200 Facebook friends were current or former Gulliver students.

The school then refused to pay the $80,000 because Snay breached the confidentiality provision. Snay filed a motion to enforce the agreement, arguing that his revelation to his daughter and her Facebook post did not constitute a breach. A trial court agreed, but the Florida Court of Appeals reversed.

“[B]efore the ink was dry on the agreement, and notwithstanding the clear language of [the provision] mandating confidentiality, Snay violated the agreement by doing exactly what he had promised not to do,” the court wrote. “His daughter then did precisely what the confidentiality agreement was designed to prevent, advertising to the Gulliver community that Snay had been successful in his age and retaliation case against the school.” The court therefore sided with the school and held Gulliver was precluded from enforcing the agreement based on Snay’s breach of a material term.

To read the written testimony given at the EEOC’s meeting, click here

To read the opinion in Gulliver Schools v. Snay, click here.

Employment Contract That Limited FEHA Claims to 6-Month Window Unreasonable

Why it matters: Can a California employer cap the length of time an employee has to file suit alleging violations of the Fair Employment and Housing Act (FEHA)? An appellate court decision declined to state that any limitations would be invalid but did conclude that a six-month time period was unreasonable and refused to uphold the provision found in an employment agreement. “It is too short,” the court concluded.

Detailed Discussion
Ashley Ellis was one of several female employees who complained to U.S. Security about a sexually harassing supervisor. The man was eventually terminated. After Ellis later resigned from the company, she filed suit under the FEHA alleging sexual harassment and sex discrimination, retaliation, and failure to maintain an environment free from harassment. The suit was filed within the statutory time limits.

U.S. Security sought to dismiss the suit, relying on a provision in the agreement Ellis signed when she applied for her job as a security guard. The clause stated that “any claim or lawsuit . . . must be filed no more than six (6) months after the date of the employment action,” and waved “any statute of limitations to the contrary.”

A trial court granted the employer’s motion to dismiss Ellis’s suit, upholding the provision.

But the California Court of Appeal reversed, holding that “the shortened limitation provision is unreasonable and against public policy.”

The FEHA is not just any statutory scheme, the court wrote, but an elaborate law with more than 80 sections intended to “protect and safeguard” the rights of employees against discrimination. The statute includes a one-year statute of limitations in which to file an administrative claim with the Department of Fair Employment and Housing (DFEH) from the date of the unlawful act. Another one-year period is provided for an employee to file suit after receiving a right-to-sue letter.

Although parties may agree to contractually shorten a limitations period, the agreed-upon time period must be reasonable, the court said. The provision in Ellis’s agreement “seriously truncates the time she has to vindicate her statutory rights, drastically reducing the time to sue allowed by the FEHA.”

The time period under the statute was determined by the state legislature as providing an effective remedy under the FEHA. “Six months does not,” the panel wrote. “It does not provide ‘sufficient time for the effective pursuit of the judicial remedy. ‘It is too short.’

Noting that the legislature extended the statute of limitations for products liability cases from an “unduly short” one-year period to two years, “a fortiori is a six month limitation provision ‘unduly short’ in a FEHA case, which requires that the employee first report the claimed misconduct to the DFEH and await is action before any suit is ripe, necessarily delaying the filing of the complaint,” the court said.

Allowing a shortened limitation period would also thwart the DFEH’s administrative enforcement, the court added, and create anomalous results. “[S]ince the provision runs six months from the ‘date of the employment action’ on which the employee’s suit is based, it would mean different limitations periods for different FEHA claims,” the court explained. “As applied here, for example, one date would run from the time [the supervisor] harassed Ellis, another when her claim that U.S. Security failed to prevent harassment finally accrued, and yet another when she was retaliated against. This is not how the FEHA is designed to operate, with all claims timely if filed within one year from the right-to-sue letter.”

The court rejected U.S. Security’s attempts to argue that the shorter time period would encourage the promptness of bringing actions, writing that “[n]o claim can ever be stale under the FEHA limitations period.”

To read the opinion in Ellis v. U.S. Security, click here.

New Guidance From The EEOC on Religious Dress, Grooming

Why it matters: In the wake of several high-profile cases – from a Muslim worker’s suit against Abercrombie and Fitch over the right to wear her hijab to a new suit filed by the Department of Justice against a Philadelphia school district accusing it of religious discrimination by requiring a school police officer to trim his beard despite his Islamic beliefs – the Equal Employment Opportunity Commission has released new informal guidance on the issue of religious dress and grooming. In a question-and-answer guide and fact sheet, the agency addressed topics ranging from accommodations for religious grooming or dress to cautioning employers not to engage in job segregation, like assigning an employee to a stockroom after he requests an accommodation. Employers should review the new guidance to understand the application of federal law and what steps they can take to meet their legal responsibilities.

Detailed Discussion
The EEOC’s “Religious Garb and Grooming in the Workplace: Rights and Responsibilities” guidance emphasizes a central point: Employers covered by Title VII must make exceptions to general rules to allow employees to follow their religiouslymandated dress and grooming practices unless it would pose an undue hardship.

“It is advisable in all instances for employers to make a case-by-case determination of any requested religious exceptions, and to train managers accordingly,” the agency advised in the fact sheet. Undue hardship does not include jealousy or disgruntlement from coworkers, the guidance noted.

The Q-and-A document provides several examples of dress and grooming practices. Dress includes articles like a Christian cross, a Sikh turban, or a Muslim hijab as well as a prohibition on certain articles of clothing , such as the practice of Orthodox Jewish women not to wear pants or short skirts. As for grooming, many religions include observances against shaving or about hair length, like Jewish sidelocks, Rastafarian dreadlocks, and Sikh uncut hair and beards.

In 21 different examples, the agency answers questions like “Can an employer exclude someone from a position because of discriminatory customer preference?” and “What if an employer questions whether the applicant’s or employee’s asserted religious practice is sincerely held?” (Answers: No, and don’t assume that religious observance is not sincere, even with newly expressed beliefs or irregular observance. Instead, ask the employee for more information.)

Employers may need to make an exception to uniform policies as a religious accommodation, the guidance explains, offering the example of a female requesting to wear a long skirt under the tennis shorts required by her employer at a sports club. An argument that a requested accommodation would impact the employer’s “image” or marketing strategy is insufficient to demonstrate an undue hardship, the EEOC said.

An employer may refuse to grant an accommodation based upon workplace safety, security, or health concerns and that poses an undue hardship. But the agency provided several scenarios that did not trigger such concerns. In one example, a Native American worker who wears his hair long for religious reasons in contravention of a restaurant’s policy for men to keep their hair “short and neat” does not present any safety or health concerns, the agency explained, since he could be accommodated by wearing his hair in a ponytail or a clip.

Retaliation based on a request for religious accommodation is also outlawed by Title VII, and the guidance cautioned about religious harassment in violation of the statute when “an employee is required or coerced to abandon, alter, or adopt a religious practice as a condition of employment,” or is subjected to unwelcome statements or conduct based on religion.

Employers may be liable for harassment by coworkers and third parties, the EEOC said, in situations where it knew or should have known about the harassment and did not take “prompt and appropriate” corrective action. In one example, a supervisor was aware that coworkers made disparaging comments about fellow employees, observant Sikhs wearing religious head coverings, and embarrassed them in front of customers. By not taking steps to halt the harassment, the employer could be liable in that situation.

To read the guidance, click here

To read the accompanying fact sheet, click here

Second Circuit: EEOC Charge Doesn’t Toll State Law Claims

Why it matters: Joining two other federal appellate courts, the Second U.S. Circuit Court of Appeals held that filing a charge of discrimination with the Equal Employment Opportunity Commission does not toll the limitations period for state law tort claims – even when it arises out of the same factual circumstances. Despite the fact that New York’s one-year statute of limitations on tort claims had passed by the time she filed her complaint, an employment discrimination plaintiff alleged intentional infliction of emotional distress and assault and battery in her suit. But the unanimous three-judge panel found “no basis for concluding that Congress intended that a civil rights claimant should be entitled to delay filing any state tort claims during the EEOC’s consideration of a charge of discrimination,” affirming dismissal of her tort claims as time-barred.

Detailed Discussion
An accountant and receptionist for Majestic Kitchens, Patricia Castagna alleged that the company’s owner, Bill Luceno, regularly subjected female employees to an abusive work environment. Luceno yelled, engaged in offensive physical contact, and made “lewd, racial, and sexual comments and innuendos,” according to Castagna’s complaint.

After a particularly unpleasant incident, Castagna resigned on July 9, 2008. She filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) a few months later and received her right-to-sue letter from the agency on August 14, 2009. She then filed a federal complaint on November 9, 2009, that included federal claims based on violations of Title VII as well as tort claims based on assault and battery and intentional infliction of emotional distress.

Based on the one-year statute of limitations in New York for tort claims, Majestic moved to dismiss. Castagna argued that by filing a charge with the EEOC – and waiting for her right-to-sue letter – she tolled the one-year time limit that ran out on July 9, 2009, four months before she filed her complaint.

If such claims were not tolled, she told the court, then litigants would be forced to first bring a tort case in state court and later bring a separate federal discrimination lawsuit with identical facts, resulting in a waste of judicial economy. Rushing a case to trial would also undermine the EEOC’s opportunity to facilitate dispute resolution prior to commencing litigation, Castagna said.

Although the 2nd Circuit recognized the value of EEOC proceedings, the court held that Congress did not intend for the agency’s efforts to delay independent avenues of redress.

Plaintiffs in Castagna’s position can ask a court to stay proceedings in the initial action until the EEOC’s administrative work has been completed, the panel suggested. Castagna “always had ‘an unfettered right’ to pursue her tort claims,” the court wrote. “Notably, Castagna does not urge that she could not have brought those claims within the applicable statute of limitations. She simply failed to do so.”

The panel cited similar holdings from the 7th and 9th Circuits as well as the “vast majority” of district courts within the 2nd Circuit that have considered the issue.

To read the decision in Castagna v. Luceno, click here.

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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