Wednesday, April 20, 2011

Employers Continue to Face Difficult and Costly Litigation

Recent cases, involving both jury trials and settlements, demonstrate that employers continue to face difficult and costly litigation in employment law disputes. Fortunately, in two of the cases described in this article, the employers obtained a defense verdict, although most likely still incurred significant defense costs. The defense costs of a single plaintiff case, taken through trial, are estimated by some to be in the $300,000 range, for reputable defense firms. Moreover, the significant amount of actual defense costs does not begin to address the immense time commitment these cases require from an employer in preparing a defense. For example, the typical production of documents in a wage and hour case often involves compiling volumes of payroll records that cover significant periods of time. In addition, the depositions of supervisors, managers, human resources personnel, co-workers and many others may be required as part of the lawsuit. Thus, because of the substantial amount of time and expenses associated with employment law litigation, and because of the continuing barrage of these types of case, employers must understand and follow the law, properly train their staff, and document as needed, particularly in regards to personnel matters. Employers should also consider “Employers Practices Liability Coverage” (EPLI). This is a type of insurance which provides coverage for many employment related matters. Some policies even cover wage and hour disputes, which employers must increasingly contend with, particularly in regards to misclassification of employees and overtime compensation claims. The following cases, which involve age discrimination, harassment, sexual orientation discrimination, exempt/overtime claims and failure to accommodate disputes are only a small sampling of the employment law cases that continue to plague employers.

Discrimination/Failure to Accommodate/Sexual Harassment--Carmen Hunt v El Camino Community College District This case involved a jury trial in downtown Los Angeles, a venue where plaintiffs typically are very successful as Los Angeles juries are notorious for favoring plaintiffs. The case involved Carmen Hunt, a professor at El Camino College. Ms. Hunt alleged she was harassed and discriminated against by her superiors at the college. According to Ms. Hunt, the college tried to force her out because of her extended leaves of absence due to Post Traumatic Stress Disorder (PTSD). The leaves of absence occurred when she collapsed on campus in 2002, took a leave of absence until 2005, then returned on a part-time basis. Ms. Hunt also claimed that the college and the district did not accommodate her PTSD and that her superiors collected secret personnel files on her, which were defamatory. Further, she claimed she was sexually harassed and exposed to a hostile work environment all in violation of Education Code §87031. The college denied all accusations. After a week of trial, and only 50 minutes of deliberation, the jury returned a 12 – 0 verdict in favor of the defendant. This case demonstrates that employers can sometimes “fight city hall and still win.”

Sexual Orientation Discrimination--Parks v City of Oakland
Sherry Parks, a lesbian, was the only female plumber on the Port of Oakland (the Port) staff. She complained that she was harassed regularly because of her sexual orientation, that she was given unfair job assignments, and that she was subjected to a hostile work environment. The Port alleged that every job assignment and disciplinary action taken against Parks was for a legitimate business reason. After a 6 week trial the jury returned a 12 – 0 defense verdict in one day of deliberation. Parks was represented by Jean Hyams a graduate of Wellesley and UC Berkeley School of Law ( Boalt Hall) who was admitted to practice in 1989 and is a member of the State Bar’s employment law section. The Port of Oakland was represented by Edwin J Wilson, Jr., who graduated from UC Berkeley and UC Berkeley School of Law and was admitted to the practice of law in 1971. Mr. Wilson is a specialist in employment cases. This was obviously a significant victory for employers.

Wage and Hour/Overtime--Hilda Solis U.S. Secretary of Labor v Poetry Corporation
Don & J Inc., Nu Plus USA, Inc and A-do Fashion Inc., sewing contractors, produced goods for Poetry Corp, a garment manufacturer of women’s clothing from 2009 to 2010. The Department of Labor (DOL) filed suit against Poetry Corp alleging violations of the Fair Labor Standards Act (FLSA) regarding employees who worked for the sewing contractors. The DOL alleged that the contractors failed to pay its employees the federal minimum wage and also failed to pay overtime hours. Poetry Corp was also accused of transporting, delivering and selling products it knew were made by employees who were not lawfully compensated. According to the DOL, this was a sweatshop type case. The DOL sought to prevent future practices and also sought restitution for the employees – back pay and overtime. The case settled for $53,956 without admission of liability by the defendant. While we can be sure this cost the defendant a considerable amount in attorney fees and litigation costs, in our opinion the defense won this one because of the significant nature of the allegations and the relatively small size of the settlement.

Age Discrimination/Harassment--Judee Welch v Ivy Hill Corporation
This case was also a jury trial in downtown Los Angeles, which, as noted above, is a very “plaintiff friendly” venue. A defense verdict was reached on March 8, 2011, before the Honorable Richard Fruin, who is one of the most highly rated judges in downtown Los Angeles. In the case, Judee Welch alleged that she worked for Ivy Corporation from 1987 through March 2009, as a saleswoman, selling print to the music industry. During the last 4 ½ years of her employment a new vice president was brought in to supervise her and the rest of the sales staff. Welch alleges that during that time, the vice president/supervisor allegedly made comments about Welch’s age and allegedly showed preference for younger people in hiring and promotion. When the company was purchased in 2009, Welch was part of a layoff. She then filed a lawsuit alleging age harassment and age discrimination and prevailed. At the end of the 11 day trial the jury, in a 12 – 0 verdict, after 5 hours of deliberation, awarded Welch $213,000 loss of earnings and $731,000 in future loss of earnings. Her lawyer intends to move for attorney fees under the Fair Employment and Housing Act (FEHA). Welch’s lawyer, Carney Shegerian, was admitted to the practice of law after an undergraduate degree from Hofstra University and a law degree from Loyola University in Los Angeles. Defense counsel, Kelly O Scott, was admitted to the practice of law in 1987 after an undergraduate degree at UCLA and a law degree at USC.

NBoxley

Friday, April 1, 2011

Why Do Employers Lose So Many “Discharge For Misconduct” Cases


Employers often lose “discharge for misconduct” cases at the Employment Development Department (EDD) and at the California Unemployment Insurance Appeals Board (CUIAB). The following is a discussion of the steps an employer can take to increase the chances of prevailing in these types of cases.

What is at Stake?
An employer’s EDD tax rate can vary from 1.2 to 6.2%, depending upon the number of employees and the number of claims paid from the employer’s reserve account in Sacramento. Therefore, doing a good job in defeating an unemployment insurance claim can save a company a lot of money, in the long run.

How Does the Law Define Employee “Misconduct”?
Misconduct connected with an employee's work consists of four elements:

• A material duty owed by the claimant/employee to the employer in the employment contract, whether oral or written;
• A substantial breach of that duty;
• A willful or wanton breach or disregard of that duty; and
• A “disregard of employer's interests”; i.e., that which tends to injure the employer's interests.

Thus, actions which do not violate such a duty are not misconduct. See Precedent Board Decision P-B-3

Let's consider an employee’s breach of a company policy or procedure. Violations of an employer’s policies and procedures may be valid reasons to discipline an employee, including termination, if repeated violations occur. Further, some violations may justify an immediate termination. However, unemployment insurance law does not allow an employee to be discharged without consequences to the employer’s EDD tax rate, for breach of an unwritten or undefined rule, except for such things as stealing company property, gross negligence, gross insubordination, fighting on job, sexual assault, etc. Therefore, the key to success at the Employment Development Department (EDD) and at the California Unemployment Insurance Appeals Board (CUIAB) is adequate documentation and the appropriate workplace policies and procedures.

Absent extraordinary circumstances, such as referenced above, the EDD and the Administrative Law Judges expect to see a copy of the employer’s policy/procedures, proof that the employee was aware of the policy/procedures, proof as to how the policy/procedures were breached, evidence of any performance warnings issued, and evidence as to how the breach of the policy/procedures injured company interests.

It is important for employers to understand that if the breach of a company policy or procedure is not documented in the employee’s personnel file, courts may hold that “it did not happen.” Therefore, it is essential to properly document.

The following are examples of common problems faced by employers that lead to employers losing “discharge for misconduct” cases at the EDD and CUIAB:
• No proof employee knew of employer’s policy/workplace rule.

Employers must have written documentation that proves the employee “knew” of the policy/rule. The easiest way is to have a signed acknowledgement of receipt of the policy/rule (such as a signed employee handbook which contains the policy/rule) by the employee, in the personnel file;

• The employer fails to offer evidence that the employee’s duty, required by the policy/rule, was “material” (i.e. important to the company).

• There is insufficient proof that the employee “substantially breached” the policy/rule.

Employers must present evidence of a “substantial breach” of the employer’s policy/workplace rule. Examples of sufficient evidence: Company records, sworn witness statements, drawings, photographs, police reports, etc;

• The employee proves the employer’s policy/rule was inconsistently enforced.

Employers must be sure their company rules are equally enforced. For example: If an employer tolerates numerous tardiness in an month from some employees, the employer cannot then hold another employee to one tardy a month;

• The employer condones a breach of the policy/rule.

Employers wait too long to take disciplinary action following a substantial, willful breach of duty.

• Progressive discipline was not established, in the workplace.

The EDD and the CUIAB judges expect employers to show that they made a reasonable effort to change an employee's bad behavior, before discharging the employee;

• The employer fails to show how the breach harms (injures) its interests.

The employer must present evidence as to how the breach harmed the company;

• The employer cannot prove the last breach was “willful” or not for good cause.

This is a huge problem and probably a major reason that employers lose misconduct cases at the EDD.

Finally, employers should do the following:
• Send copies of their documents to the EDD as soon as an employee makes a claim for unemployment benefits;
• Immediately return all EDD telephone calls;
• Be sure to timely appeal (20 days) an adverse EDD determination;
• Attend CUIAB hearings with their witness and original documents;
• Be present at the hearing location at least 15 minutes before the hearing commences;
• Cite Precedent Board (PB) decisions supporting their case to both the EDD (when objecting to the claim), and when appealing to an administrative law judge; and,
• Ask the judge, after all evidence is in, and the judge states “anything further”, for the opportunity to make a “brief” closing statement. Do not take more than a minute or so.

David W. O'Brien, Esq
Floyd, Skeren & Kelly, LLP
A Former Administrative Law Judge with the CUIAB