Employers should carefully draft workplace monitoring policies and take other steps to limit expectations of privacy.
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2009 CALIFORNIA SUPREME COURT
LABOR & EMPLOYMENT CASES
By Christopher W. Olmsted
Workplace Privacy
Hernandez v. Hillsides, Inc.
In a case involving secret videotaping, the California Supreme Court ruled that although employees may sometimes have a reasonable expectation of privacy in the workplace, an employer may sometimes intrude upon that privacy for legitimate business reasons.
A residential facility for abused and neglected children installed video monitoring equipment in the private office of two female clerks in an effort to catch a person who had been accessing internet pornography during night hours. Though the employer never operated the equipment during the day, when the employees discovered the equipment, they sued for invasion of privacy.
The Court acknowledged that the two employees had an expectation of privacy in their private office. It was an enclosed area. Moreover, the company had not warned employees that they may be monitored.
Nevertheless, the employer’s intrusion was justified. Catching the pervert was a legitimate objective. Further, the employer took steps to minimize the intrusion. The equipment did not operate during the day when employees were present, and the camera focused on the computer desk only, not the entire room.
Employers should carefully draft workplace monitoring policies and take other steps to limit expectations of privacy. Monitoring should be limited to what is necessary. Some monitoring (like bathrooms and locker rooms) is prohibited by California law.
Read more details about the case.
Sexual
Harassment
Hughes v. Pair
Not all sexual conduct in the workplace is “sexual harassment.” It is a question of degree. An employer who sexually harasses an employee can be liable for damages under both federal law (title VII of the Civil Rights Act of 1964 (Title VII)) and California law (the Fair Employment and Housing Act (FEHA)) when the sexually harassing conduct is so “pervasive or severe” that it alters the conditions of employment.
In a case titled Huges v. Pair, the California Supreme Court rejected a harassment claim because it was not sufficiently severe or pervasive. Notably, Hughes v. Pair was not an employment case, but the Supreme Court applied sexual harassment standards from FEHA and Title VII.
The Court examined the conduct and comments of an estate trustee directed at the mother of the estate beneficiary. During a telephone conversation, the trustee made a few crudely phrased romantic overtures. Later, at a public event, he made a vulgar sexual comment.
The Court ruled that these comments, though wholly inappropriate, were not “pervasive.” The trustee made the comments on only two brief occasions. The court also found that these comments were not “severe,” rejecting the plaintiff’s claim that the trust had threatened sexual assault.
The bottom line is that the California Supreme Court has endorsed a moderate standard for sexual harassment. Isolated sexual comments and mildly offensive sexual conduct is certainly in poor taste, and against company policy, but it won’t rise to the level of illegal sexual harassment.
Read more details about the case.
Same-Sex
Marriage
Proposition 8
In May 2009, the Supreme Court validated Proposition 8 as an amendment to the California Constitution. The case, titled Strauss v. Horton, examined the legal process necessary to amend the Constitution and did not directly address the question of same-sex marriage.
Despite the fact that same-sex marriages are not permitted in California, employers should note that same-sex couples who are registered domestic partners have workplace rights nearly equivalent to heterosexual married couples. Couples must register to achieve this status.
Read more details on workplace rights and same-sex marriage.
Labor & Employment Law Court Procedures
Class Action
Lawsuits
The California Supreme Court issued two rulings in 2009 relating to class action lawsuits: Amalgamated Transit Union v. Superior Court and Arias v. Superior Court.
At issue here are two California laws. One is the unfair competition law, which allows a private party to bring an unfair competition action on behalf of others (including for labor law violations), but only if the person “has suffered injury in fact and has lost money or property as a result of the unfair competition.” The other law is the Labor Code Private Attorneys General Act of 2004 (“PAGA”), which provides that an “aggrieved employee” may bring an action to recover civil penalties for violations of the Labor Code “on behalf of himself or herself and other current or former employees . . . .”
Issue 1: May a plaintiff labor union that has not suffered actual injury under the unfair competition law, and that is not an “aggrieved employee” under the Labor Code Private Attorney General Act of 2004, nevertheless bring a representative action under those laws (1) as the assignee of employees who have suffered an actual injury and who are aggrieved employees, or (2) as an association whose members have suffered actual injury and are aggrieved employees? The California Supreme Court’s answer is “no.” Labor unions cannot bring class action claims on behalf of its members for violation of these two laws because the unions have not suffered injury. Employees must bring the claims themselves.
Issue 2: Must a representative action under the unfair competition law be brought as a class action? The California Supreme Court’s answer is “yes.” In 2004, California voters passed Proposition 64. The proposition was aimed at curtailing litigation abuse of the unfair competition laws. It was too easy for plaintiff lawyers to file these claims purportedly on behalf of large groups of people. One way the proposition restrained plaintiff lawyers was to require that representative actions under the statute be brought as class actions.
Issue 3: Must a Labor Code Private Attorney General (PAGA) claim be brought as a class action. The Supreme Court’s answer is “no.” Aggrieved employees may file a PAGA claim without following class action procedures. Unlike the unfair competition law, which was amended to add class action requirements, PAGA contains no such restrictions. One employee may sue his employer to recover Labor Code penalties on behalf of himself as well as all other affected employees.
The California Supreme Court’s rulings are a mixed bag. On the one hand, unions cannot bring class action claims on behalf of union members, and employees must follow class action rules to bring an unfair competition lawsuit (for labor violations) against an employer. On the other hand, PAGA claims are not subject to class action rules and therefore are much easier to file and pursue.
Incentive Pay
Forfeiture
Schachter v.
Citigroup
David Schachter was hired as a stockbroker for what is now Citigroup. As part of his compensation, he chose to participate in the company’s employee stock purchase plan. The plan allowed him to divert 5% of his earnings to pay for company stock at below market prices.
The plan provided that if an employee remained in the company's employ for the two years following the purchase of restricted stock, title to the shares vested fully with the employee, free of any restrictions. However, if an employee voluntarily terminated employment or was terminated for cause before the end of the two-year period, the employee forfeited his or her restricted stock as well as the percentage of annual income designated by the employee to be paid as shares of restricted stock.
Mr. Schachter quit his job before two years, and the company said he forfeited his stock. Unhappy with the loss of these earnings, Mr. Schachter filed a class action lawsuit.
The broker alleged that forfeiture provisions of employer's voluntary incentive compensation plan violated state labor law and amounted to conversion of wages.
The California Supreme Court rejected the former employee’s claims. Based on the terms of the stock plan, the broker never earned the right to the stock. “Schachter necessarily agreed his compensation would consist of cash payments and a retention-based conditional interest in the shares, with the latter being earned only if he remained with [the company] for two years,” wrote the court. “He elected not to remain for the designated period.... Accordingly, Schachter did not earn-and thus had no right to receive either the restricted stock or the funds used to purchase it.”
The Court rejected the broker’s argument that he was entitled to a pro-rata share of the stock, in a manner analogous to vacation pay.
Download entire December 2009 Legal Update in PDF format.
This article is intended as a brief overview of the law and are not intended to substitute as legal advice. Any questions or concerns regarding any statute or case law should be addressed to a licensed attorney. Copyright © 2009 by Barker Olmsted & Barnier, APLC. San Diego, California. All rights reserved.
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