Key California Employment Law Cases: December 2019

Payne & Fears

This month's key California employment law cases involve disability discrimination, wage and hour, and arbitration agreements enforcement.

Doe v. Dept. of Corrections & Rehabilitation, No. E071224, 2019 WL 6907515 (Cal. Ct. App. Nov. 27, 2019)

Summary:  Employer did not violate FEHA by failing to provide accommodations because employee failed to disclose known disability and limitations.

Facts:  Plaintiff sued his former employer, defendant California Department of Corrections and Rehabilitation, alleging discrimination, retaliation, harassment, and failure to accommodate on the basis of disability.  In his initial job application, plaintiff did not check the disabled box under penalty of perjury.  However, in 2013, plaintiff submitted an accommodation request stating “LD NOS” which stands for “learning disorder not otherwise specified.”  Defendant followed up on the request by asking plaintiff to provide documentation from his doctor to determine how to accommodate him.  His doctor submitted a note stating that plaintiff needed a workplace that would help him concentrate as he was easily distracted and under stress.  Defendant found that plaintiff was already provided a workspace free from distraction.  Plaintiff then alleged that he was harassed beginning in 2014 and that he was later terminated in 2016 while on medical leave.  He alleged that his supervisor subjected him to adverse employment actions by criticizing his work during an interrogation-like meeting, ordering a wellness check on him when he was out sick, suspecting him of bringing a cell phone into work, and assigning him to be the primary crisis person on the same day as a union meeting.  Defendant filed for summary judgment which the trial court granted.

Court's Decision:  The California Court of Appeal affirmed.  First, plaintiff’s discrimination and retaliation claims failed because he provided no evidence that he was subjected to an adverse employment action.  Even if his supervisor did the things plaintiff alleged, these actions were relatively minor and did not threaten to materially affect the terms, conditions, or privileges of his job.  Plaintiff’s harassment claim failed for similar reasons.  Lastly, plaintiff’s interactive process and accommodation claims failed because the information provided by plaintiff and his doctor was insufficient to put defendant on notice that he suffered from a disability covered by FEHA; employers are only responsible for accommodating known disabilities.  The doctor’s note stated that plaintiff was easily distracted and under stress.  Those conditions are not unique to plaintiff and FEHA does not guarantee a stress-free working environment. 

Practical Implications:  While FEHA is generally lenient with employees, this case shows that employees still have to appropriately notify their employers of their disabilities such that the employer can know how to accommodate them.  In addition, FEHA does not guarentee a stress-free working environment.  An employee needs to provide more than that he is under stress in order to properly notify an employer of a disability.

Mathews v. Happy Valley Conference Ctr., Inc., No. H043723, 2019 WL 6769659 (Cal. Ct. App. Dec. 12, 2019)

Summary:  While centralized control of labor relations is typically considered most important factor in integrated enterprise test, if evidence otherwise supports finding of single employer, fact that trial court failed to instruct jury about importance of that factor will not be deemed error.

Facts:  Plaintiff Jeremiah Mathews worked as a maintenance supervisor and a cook for defendant Happy Valley Conference Center.  Happy Valley was a subordinate affiliate of another defendant, the Community of Christ church.  During plaintiff’s employment, a younger male employee disclosed to him that a female executive director had been sending him sexually inappropriate text messages.  Plaintiff reported the allegations to a member of Happy Valley’s board of directors and to the church’s general counsel.  The female executive admitted that she sent the texts and was reprimanded, but was allowed to continue supervising both plaintiff and the younger male employee.  Plaintiff was fired about a month later, and he filed suit alleging retaliatory termination.  The jury returned special verdicts in favor of plaintiff on all causes of action, and defendants were ordered to pay almost a million dollars in damages and another million dollars in attorney’s fees.  Defendants appealed, contesting most of the jury’s findings and arguing that the church could not be held liable for Happy Valley’s actions because the two entities did not fall within the single employer doctrine.  Defendants further argued that the trial court committed instructional error by giving a single employer doctrine jury instruction.

Court's Decision:  The California Court of Appeal affirmed the judgment except for a modification to reflect that defendants, as religious organizations, were exempt from liability under the California Fair Employment and Housing Act.  The court first reviewed the integrated enterprise test as described in Laird v. Capital Cities/ABC, Inc., 68 Cal. App. 4th 727, 80 Cal. Rptr. 454 (1998).  The test has four factors:  interrelation of operations, common management, centralized control of labor relations, and common ownership or financial control.  Typically, the most important factor is the centralized control of labor relations.  Common ownership or control alone is not enough.  The critical question is, what entity made the final decisions regarding employment matters related to the person claiming discrimination.  In this case, there was substantial evidence to support the single employer finding despite the fact that the trial court erroneously failed to instruct the jury of the importance of the centralized control factor.  Defendants conceded common ownership, claims of harassment were reported to the Happy Valley board and then to the church, Happy Valley’s board was otherwise closely linked with the church such that the church was involved in plaintiff’s termination decision, and Happy Valley’s financial statements were audited by the church.  As such, the evidence showed that there was centralized control despite the jury not being properly instructed. Accordingly, the court found that the error was harmless.

Practical Implications:  This case reaffirms that when determining whether two entities are considered a single employer for the purposes of liability under the integrated enterprise test, the most important factor is the centralized control of labor relations.

Safeway Wage and Hour Cases, No. B287103, 2019 WL 6954322 (Cal. Ct. App. Dec. 18, 2019)

Summary:  Task does not become exempt merely because manager undertakes it in order to contribute to smooth functioning of store.

Facts:  In a series of cases, former managers of defendant Safeway sought unpaid wages on the basis that they were misclassified as exempt executives.  The managers argued that they spent most of their time performing non-exempt work such as stocking shelves and checking out customers.  Following a trial, the jury found that Safeway had proven that plaintiff William Cunningham was an exempt employee and thus was not entitled to overtime pay.  Plaintiff appealed, alleging that the trial court committed error in instructing the jury that a manager’s purpose in performing work typically done by an hourly employee is important to the determination for whether a task is exempt or not.  Specifically, the trial court instructed the jury that it should classify any given task as exempt work if the manager performs hourly employee work for the purpose of supervising employees in the store or because it contributes to the smooth functioning of the store.

Court's Decision:  The California Court of Appeal affirmed.  It clarified the standard for determining whether a task is exempt, stating that a task does not become exempt merely because the manager undertakes it in order to contribute to the smooth functioning of the store.  The proper role of considering a manager’s purpose in performing a particular task is intended to capture the narrow category of work that is not inherently managerial but is directly and closely related to management and the supervision of employees.  An instruction on the topic may discuss a manager’s purpose in performing the task, but must also inform the jury of any relevant limiting principles outlined in the applicable regulations and case precedent.  Here, while the trial court’s instruction may have been slightly overbroad, it did not affect the jury’s verdict.

Practical Implications:  Employers should take caution in having exempt managerial employees perform hourly employee work unless it is directly and closely related to the management and supervision of employees.  If exempt managerial employees perform hourly employee work that is not related to the supervision of employees, those employees’ exempt status could be in jeopardy even if the purpose of performing the hourly employee work was to contribute to the smooth functioning of the store.

Noori v. Countrywide Payroll & HR Solutions, Inc., No. C084800, 2019 WL 7183403 (Cal. Ct. App. Dec. 26, 2019) 

Summary:  Employer may violate Labor Code by using unregistered acronym for out-of-state fictitious business name on paychecks.

Facts:  Plaintiff Mohammed Noori filed suit against his former employer, defendant Countrywide Payroll & HR Solutions.  He claimed that defendant violated California Labor Code section 226(a) by using the acronym “CSSG” as the employer name on his paycheck, which he contended was not the legal name of the employer entity, and by failing to maintain copies of accurate itemized wage statements.  He also sought to bring these claims under the Private Attorneys General Act (“PAGA”).  Defendant filed a demurrer to plaintiff’s first amended complaint and the trial court granted the demurrer without leave to amend.  Plaintiff appealed the trial court’s three findings that (1) the wage statements provided to plaintiff, as a matter of law, complied with section 226, subdivision (a)(8)’s requirement to include the employer’s name; (2) defendant maintained copies of wage statements as required by section 226, subdivision (a); and (3) plaintiff failed to satisfy the notice requirement for bringing a claim under PAGA.

Court's Decision:  The California Court of Appeal reversed two of the trial court’s findings, finding that plaintiff stated a claim under section 226(a)(8), and that plaintiff had satisfied the PAGA notice requirement.  Section 226 does not expressly require that the employer name on the paycheck be registered with the California Secretary of State, nor does it require the company’s complete name.  Fictitious names and acronymic names of registered fictitious names can also be acceptable under the statute.  However, CSSG was an unregistered acronym for an out-of-state fictitious business name.  This could lead to confusion on the employee’s behalf and thus may have violated the statute.

Practical Implications:  Employers should avoid using an unregistered acronym for an out-of-state fictitious business as the employer name on employees’ paychecks.  In general, an employer should make sure that any truncated version of its name or acronym does not render the name confusing or unintelligible to its employees.

Fabian v. Renovate Am., Inc., 42 Cal. App. 5th 1062, 255 Cal. Rptr. 3d 695 (2019)

Summary:  When proving authentication of electronic signature on contract, use of DocuSign alone may not be sufficient to carry party’s burden of proof. 

Facts:  Plaintiff Rosa Fabian filed a complaint against Renovate American, Inc. alleging that solar panels she purchased from them were improperly installed.  Renovate filed a petition to compel arbitration according to an arbitration agreement, alleging that plaintiff had signed the agreement via DocuSign.  Plaintiff, however, argued that she never signed the financial agreement financing her solar panels, nor the arbitration agreement.  Instead, plaintiff contended that Renovate solicited her telephonically, that she was never provided with documents to sign, that she did not sign the agreements physically or electronically, and that Renovate had placed her signature on the documents without her knowledge or consent.  Renovate then filed an additional declaration which asserted that plaintiff entered into the contracts in February 2017.  The trial court, however, found that Renovate had not carried its burden in proving the authenticity of plaintiff’s signature and thus, denied Renovate’s petition to compel arbitration. 

Court's Decision:  The California Court of Appeal affirmed, holding that the trial court did not err in denying Renovate’s petition.  While the burden of authenticating a signature is not great, there was not enough evidence in Renovate’s favor to overturn the trial court’s ruling.  Specifically, Renovate (1)  failed to provide any evidence about DocuSign in its moving papers; (2) offered no evidence about the process used to verify plaintiff’s signature via DocuSign, including who sent plaintiff the contract, how the contract was sent to her, how plaintiff’s electronic signature was placed on the contract, who received the signed the contract, how the signed contract was returned to Renovate, or how plaintiff’s identification was verified as the person who actually signed the contract; and (3) the declaration by Mike Anderson only summarily asserted that plaintiff had entered into the contract without providing any details as to why that was the case.  Thus, the court affirmed the denial of the petition to compel arbitration.

Practical Implications:  An employer should not rely on the use of DocuSign alone to carry its burden in authenticating an employee’s signature on an arbitration agreement, or any contract for that matter.  The employer should keep documentation about the process used to verify the employee’s signature, such as how the agreement was sent to or shown to the employee, how the employee’s signature was placed on the agreement, and how the employee’s identity was verified as the person who signed it. 

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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