Employers Can Be Held Liable For Violating Uniformed Services and Reemployment Rights Act of 1994 Based On Discriminatory Animus of Non-Decision Making Supervisors

By Andres C. Hurwitz and Christopher S. Andre

In Staub v. Proctor Hospital. the Supreme Court of the United States affirmed a lower court's application of what is known as the "cat's paw" theory of liability whereby an employer can be held liable for discrimination in violation of the Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA") when an otherwise non-discriminatory adverse employment decision made by a decision maker is influenced by discriminatory animus toward military service on the part of a non-decision making suprvisor of the employee in question

Vincent Staub worked as a hospital technician, and was a member of the United States Army Reserves. Staub’s military service required him to attend military training a few days each month, and two weeks per year, and he was required to be prepared to be called to active duty. Two of Staub’s supervisors were overtly unsympathetic to his military commitments and,displayed hostility towards it. After Staub failed to comply with a requirement that he be at a certain location at a specific point in time, his supervisors reported this to the Vice-President of HR, who made the decision to terminate Staub. The Vice-President’s decision was unrelated to Staub’s military service but had been prompted by the supervisors who were found to be hostile to Staub's military service

Staub brought an action pursuant USERRA which prohibits discrimination against employees who serve in the military. Staub prevailed at trial, establishing that the discriminatory animus of the supervisors influenced the decision maker, who was herself not acting in a discriminatory manner. The Seventh Circuit Court of Appeals reversed the verdict based upon what it determined to be improper consideration of discrimination by the non-decision-making supervisors, neither of whom were the decision maker.

The Supreme Court disagreed with the Seventh Circuit, holding that “if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action,[] and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA.” As the Court noted, “it is axiomatic under tort law that the exercise of judgment by the decisionmaker does not prevent the earlier agent’s action (and hence the earlier agent’s discriminatory animus) from being the proximate cause of the harm.” The supervisor’s biased reports had been taken into account by the Vice-President, which was sufficient to establish liability. “An employer’s authority to reward, punish, or dismiss…” the Court pointed out, “is often allocated among multiple agents.” The Supreme Court sent the matter back to the District Court to either reinstate the verdict or to proceed with a new trial consistent with its opinion.

While lawsuits alleging discrimination against employees on account of military service in violation of USERRA have not yet become as commonplace in our experience as other types of discrimination claims, we think such lawsuits will be filed more frequently as more plaintiff's attorneys learn about the USERRA. Employers with employees who serve in the military reserves in particular should consider training supervisors at all levels to be mindful of the employer's obligations under USERRA.  Such training could be incorporated into other types of discrimination and harassment training. 

Disability Discrimination Claims Are On The Rise: Some Steps Employers Can Take To Help Reduce Potential Exposure

By Christopher S. Andre and Scott K. Dauscher

The Los Angeles Daily Journal, a leading legal newspaper, reports that claims of alleged disability discrimination and claims for alleged failure to reasonably accommodate persons with disabilities and/or medical conditions are being filed in record numbers as the job market in California continues to falter.  The Daily Journal reports that "[t]he prolonged recession and high unemployment prompted terminated workers to go after their former employers in higher numbers, because they have a harder time finding new jobs after getting fired or laid off."  

Such cases can be time consuming and expensive to defend.  There are, however, steps employers can take to reduce the chances of becoming a target and to reduce the expense associated with defending against such a case should the employer be targeted:

1.  Have in place sound policies for complying with applicable federal and state laws.  Employers are generally required to reasonably accommodate workers with disabilities or medical conditions when it is reasonably possible to do so.

2.  Apply policies consistently.  Inconsistent application of policies, and, especially inconsistent discipline of employees can create a situation where a disgruntled current or former employee is able to allege he or she was discriminated against on account of a disability or on account of a medical condition.  

3.  Document contemporaneously performance deficiencies and any steps the employer takes to improve the employee's performance.  Good documentation or the lack of it can sometimes make or break the defense of a case.

4.  Make adverse employment decisions carefully.  When deciding whether to discipline an employee who has a disability or a medical condition, an employer should carefully consider whether the proposed discipline would take place near in time to, among other things, an employee reporting a he or she has a disability or a medical condition, near in time to an employee taking a protected leave related to a disability or a medical condition, or near in time to an employee experiencing an episode associated with his or her disability or medical condition.  When an adverse employment action takes place close in time to such events, a judge or a jury might view that as evidence of a discriminatory motive on the part of the employer.

5.  Consider providing the employee a detailed, written explanation of the reasons for any adverse employment decision, particularly if the adverse employment decision is a termination.  Attorneys interviewing a terminated employee as a prospective client will usually ask the employee to show the attorney any letters or other documents the employee received from his or her employer regarding the termination.   A detailed, accurate written explanation of the reason(s) for the termination decision might cause such an attorney to conclude that a lawsuit against the employer would not succeed and prevent a lawsuit!

6.  In some circumstances, it might be prudent to consider offering the employee a severance payment in exchange for a release of liability and covenant not to sue.  

7.  If the employer has an employment practices liability insurance policy, the employer should consider providing notice to the insurer as soon as the employer is aware that a current or a former employee might or will assert such a claim.  Failing to provide timely and proper notice of claims can jeopardize insurance coverage altogether. 

Supreme Court Conducts Oral Argument In Wal-Mart Stores v. Dukes

By Christopher S. Andre

As we previously reported here, on April 26, 2010, in Dukes v. Wal-Mart Stores, Inc., a divided Ninth Circuit Court of Appeals decided 6-5 en banc to affirm the decision of the trial court to grant class certification in a discrimination lawsuit alleging Wal-Mart Stores discriminates against its women employees. The nationwide class is reputed by the Los Angeles Daily Journal to number upward of 1.6 million women employees, which would make the class the largest class in United States history.

In 2001, the Impact Fund, a Berkley, California based organization many plaintiff's attorneys donate money to, filed on behalf of Betty Dukes and other current or former employees of Wal-Mart a lawsuit alleging Wal-Mart discriminates against its women employees regarding promotions and pay practices in violation of Title VII of the Civil Rights Act of 1964. The trial court later certified a class consisting of "all women employed by Wal-Mart at any time after December 26, 1998."

On Appeal, the Ninth Circuit Court of Appeals affirmed the trial court's grant of class certification but remanded to the trial court for further consideration the issue of whether to certify for class treatment the plaintiffs' claims for punitive damages and the issue of whether to certify an additional class or classes consisting of women who were no longer employed by Wal-Mart when the lawsuit was filed.

As we previously reported here, on December 23, 2010, only 17 days after it granted Wal-Mart's petition for review on December 6, 2010, the Supreme Court set the case for oral argument on March 29, 2011.

Today, the Supreme Court conducted the oral argument of the case.  The issues on review are (1) whether claims for monetary relief can be certified as a class action under Federal Rule of Civil Procedure 23(b)(2) and (2) whether the class certification ordered under rule 23(b)(2) is consistent with rule 23(a).  Click here to download and read transcripts of the oral argument. 

This case has the potential to have broad impact on class action litigation nationwide, and will report the Court's decision when it is issued. 

Off-Duty Employees Given Expanded Rights for Union Organizing on Employer's Property

By Thomas A. Lenz

On March 25, 2011 the National Labor Relations Board ruled in the New York New York ruling that off-duty employees of a restaurant, a contractor doing business on hotel property, can distribute flyers on hotel property regarding their union organizing campaign.  The hotel sought to exclude the off-duty employees and their distribution of flyers from hotel premises.  

The five members of the NLRB, appointed by President Obama, ruled on the case.  The majority wrote in favor of changing the rules for workplace access by off-duty employees.  Rather than looking to whether the off-duty employees had a reasonable means other than direct property access to disseminate their message about organizing to the on-site employees, the NLRB essentially cut away at employer property rights..  The NLRB's new standard looks to whether the off-duty employees interfered with or disrupted the property owner's business.  Finding no such disruption, the NLRB ruled that the New York New York hotel violated the National Labor Relations Act by removing the off-duty employees from inside the hotel and the sidewalk just outside the hotel. 

A dissenting opinion, by Republican Board Member Brian Hayes, would have found removal from the private property at the interior of the hotel to be lawful but from the public sidewalk, due to its public use, unlawful.

Union organizing activity should be expected to increase in an improving economy, particularly as the political campaign season approaches.   Employers working in a contractor capacity on multi-employer work sites, including a hotel or resort like the New York New York case, the multi-crafted multi-employer construction environment, or elsewhere, should take time to review policy and practice for workplace access by employees and non-employees to ensure compliance with the new legal standard.

Thanks For Helping Us To Make The 12th Annual AALRR Employment Law Conference A Success

By Christopher S. Andre

On March 24, 2011, we conducted our 12th Annual Employment Law Conference at the Cerritos Center for Performing Arts and the Cerritos Sheraton.

We thank each of our guest speakers and each of the more than 600 attendees who helped us make this annual full day event a success.

Next year's conference is scheduled for March 29, 2012.  Please be sure to save the date.

Shopping Mall is Prohibited from Differentiating Between Labor and Non-Labor Protests

By Ronald W. Novotny

In the case of Best Friends Animal Society v. Macerich Westside Pavilion Property, LLC decided March 2, 2011, the California Court of Appeal addressed the question of whether a privately owned shopping mall can enforce rules that give preferential treatment to persons engaged in labor speech on their premises.  The court held that it could not, and that such rules violate the state Constitution by discriminating against other types of speech.

The dispute arose when an animal rights group named “Puppies Aren’t Products” sought permission to protest every Saturday and Sunday in front of a Barkworks store on the third floor of the Westside Pavilion in Los Angeles.  The mall granted permission to the group to congregate in two areas, one on the ground floor and one on a pedestrian bridge on the third level that was not within sight or earshot of the store.  The mall also prohibited the group from protesting on designated “blackout days” on which shopping traffic was the heaviest.

A suit was filed to enjoin the implementation of the rules based on Article I, section 2 of the Constitution, which provides that “Every person may freely speak, write, and publish his or her sentiments on all subjects” and prohibits the abridgment of liberty of speech.  A lower court denied an injunction on the ground that the mall had imposed reasonable “time, place and manner” restrictions for protesting in a public forum, even though the mall afforded persons engaged in labor speech the right to protest on blackout days and in less confined areas.  The appellate court held that the mall’s interest in maximizing profits for its tenants was not sufficiently compelling to justify discrimination against speech based on its content in these circumstances.

Along with the recent Ralphs Grocery Co.  v. U.F.C.W. Local 8 case reported here on February 1, 2011, this case is part of a trend in which the courts have begun questioning the favoritism that has historically been afforded to speech engaged in by labor unions in public places.  The effect of the ruling could be to not only expand the rights of non-labor groups to protest in public forums, but to also justify greater restrictions on labor protests so long as they are reasonable and imposed on all other persons regardless of the message sought to be conveyed.

Court Of Appeal Holds Arbitration Agreement Covering Independent Contractors To The Same Standards Applied To Arbitration Agreements Covering Employees

By Christopher S. Andre and Ronald W. Novotny

In Karena Wherry v. Award, Inc., Division Three of the Fourth Appellate District of the California Court of appeal held that the standards applicable to arbitration agreements between an employee and an employer apply also to arbitration agreements between an independent contractor and the contracting “employer.” 

The plaintiffs entered into an Independent Contractor Agreement with Award, Inc., to perform real estate sales.  That Independent Contractor Agreement required, among other things, that disputes arising out of the Independent Contractor Agreement be resolved by binding arbitration by the California Association of REALTORS (“CAR”) and incorporated by reference the Bylaws of CAR.

After the relationship between plaintiffs and Award, Inc., terminated approximately one year later, plaintiffs filed suit alleging Award, Inc., and other co-defendants engaged in gender discrimination, sexual harassment, and retaliation in violation of the California Fair Employment Housing Act (“FEHA”).

The trial court granted the defendants’ petition to compel the plaintiffs to arbitrate their claims.  The plaintiffs then filed with the Court of Appeal a petition for writ of mandate requiring the trial court to vacate its order compelling arbitration.

The Court of Appeal granted that petition, holding that the arbitration provisions of the Independent Contractor Agreement were procedurally and substantively “unconscionable” and therefore unenforceable. The Court of Appeal concluded the arbitration provisions of the Independent Contractor Agreement were procedurally unconscionable because the Independent Contractor Agreement was presented on a “take it or leave it basis” (as many contracts are), and the plaintiffs were reportedly not provided an opportunity to ask questions or to have it reviewed by counsel.   The Court of Appeal held also that the arbitration provisions of the Independent Contractor Agreement were substantively unconscionable because some of those terms were inconsistent with the requirements the California Supreme Court held in Armendariz v. Foundation Health Psychcare Services, Inc., must be satisfied before a claim for alleged violation of the FEHA by an employer can be made subject to an employment arbitration agreement.

Without any analysis or explanation, the Court of Appeal states “[t]hat plaintiffs are independent contractors and not employees makes no difference in this context.  The contract by which they were to work for defendants contained a mandatory arbitration provision.”  We believe this represents a remarkable expansion of the jurisprudence heretofore applicable only to arbitration agreements between employees and employers and, potentially, a remarkable expansion of the FEHA and its jurisprudence to independent contractors.

The Court of Appeal’s decision in this case presents two important take-aways:

First, businesses should consider consulting competent counsel to determine whether an arbitration agreement covering independent contractors would be enforceable under the Court of Appeal’s decision in this case. 

Second, businesses with arbitration agreements, whether applicable to employees or to independent contractors or both, should bear in mind the risks associated with incorporating by reference arbitration provisions or arbitration procedures published by some other person or entity and not presume that such arbitration provisions incorporated by reference will necessarily withstand scrutiny by California courts.  In this case, the arbitration provisions the Court of Appeal found offending were contained in the Bylaws of CAR incorporated by reference into the Independent Contractor Agreement between the plaintiffs and Award, Inc. 

California Supreme Court Finds Another Employment Arbitration Agreement Unenforceable As Drafted

By Yona Conzevoy and Christopher S. Andre 

Despite the Federal Arbitration Act and the California Arbitration Act, both of which provide essentially that arbitration agreements are valid and enforceable, it can scarcely be gainsaid that California courts will for the foreseeable future continue to closely scrutinize pre-dispute arbitration agreements between employers and employees.  Such arbitration agreements have frequently been struck down as contrary to public policy, unconscionable substantively, and/or unconscionable procedurally on account of various features of such agreements.

In Sonic-Calabasas, Inc. v. Moreno, the California Supreme Court again found an arbitration agreement to be unenforceable as written.  The court held arbitration agreement at issue in effect impermissibly required employees to waive their right to pursue claims for allegedly unpaid wages by submitting such claims to the California Labor Commissioner by a process sometimes referred to as a "Berman hearing" whereby claims are addressed at an informal hearing conducted by the Labor Commissioner.  That process permits either an employee or an employer dissatisfied with the results of the Berman hearing to "appeal" the result to the Superior Court for a new trial conducted by the court.

In finding the arbitration agreement unenforceable as written, the Supreme Court held that requiring employees to waive their statutory rights to pursue wage claims via a Berman hearing is contrary to public policy and conscionable and therefore unenforceable.  However, the Court held also that an employer can require employees to arbitrate such disputes after a Berman hearing has been conducted.  In other words, the Court held the arbitration agreement would be enforceable after a Berman hearing is conducted if either side is unsatisfied with the result of the Berman hearing.

Having an enforceable arbitration agreement can help make an individual discrimination, harassment, or retaliation case less attractive to a plaintiff's attorney.  Plaintiff's attorneys sometimes rely on the prospect of a jury trial to increase the value of such a case.  However, the law regarding what provisions of an employment arbitration agreement will be enforced and what provisions will not be enforced frequently changes as California appellate courts issue reported decisions regarding the enforceability of such arbitration agreements.  Employers therefore should have such agreements reviewed periodically by competent employment counsel.