Mandatory arbitration agreements in California employment have been granted a stay of execution. For now. Earlier today, a federal judge in California issued a temporary restraining order enjoining enforcement of AB 51, the new California law that would have banned employers in the state from requiring employees to sign mandatory arbitration agreements as a condition of employment.  AB 51 was set to take effect on January 1, 2020.

Earlier this month, a group of pro-commerce organizations and trade associations, including the United States Chamber of Commerce and the California Retailers Association, jointly filed a lawsuit seeking to block AB 51 from taking effect. The organizations argued that AB 51 was preempted by federal law that precludes states from limiting or interfering with the use of arbitration agreements to resolve disputes.

Judge Kimberly Mueller of the Eastern District of California accepted that argument, at least for now. The temporary restraining order prevents enforcement of AB 51 until at least January 10, 2020. The Court has set a hearing that day to decide whether to grant a preliminary injunction that would block enforcement of AB 51 until the lawsuit is resolved.

So what does this ruling mean for California employers? For now, not much other than hope. AB 51 will still take effect on January 10 unless Judge Mueller grants the longer injunction. Granting the temporary restraining order, however, does suggest that she believes the preemption argument may have merit. That said, employers would be best suited taking a wait-and-see approach between now and the next ruling from the court. In the meantime, employers may consider permissive, rather than mandatory, arbitration agreements that make clear entering into it is not a condition of employment. Also, because AB 51 does not apply retroactively, employers will still be able to enforce mandatory arbitration agreements that were entered into before January 1, 2020.

In 2018, this author blogged about how religious entities can navigate the potential traps when they seek to comply with the federal laws against anti-harassment, discrimination and retaliation laws by adopting handbook policies and training their employees, while protecting their status as exempt from the California analog to Title VII, the Fair Employment and Housing Act (FEHA).  While that case was up on appeal, the parties settled, leaving the state of the law unsettled.

Happily for religious entities, the Court of Appeal for the Sixth Appellate District of California, has paved a clearer path forward for religious employers in another case pending at the same time.

To read the full article, please click here.

In a decision that may lead employers to feel a little less gratified on Thanksgiving Day, a California appellate court determined last week that “even a legitimate company policy, if mistakenly applied,” can lead to liability for disability discrimination in the Golden State.  Specifically, the Court of Appeal ruled that “a lack of [discriminatory] animus does not preclude liability for a disability discrimination claim.”  A copy of that decision in is available at this link.

The plaintiff in Glynn v. Superior Court was a pharmaceutical sales representative who requested and obtained a leave of absence from his employer due to an eye condition that left him unable to drive.  So far so good.  But things started to take a turn for the worse when the employer declined to reassign the plaintiff to a new job in the company that did not require driving (even though the plaintiff applied for several such positions). 

Things got even worse yet when a temporary corporate benefits staffer mistakenly concluded that the plaintiff had transitioned from short-term disability to long-term disability.  This mistake led the staffer to conclude, innocently but incorrectly, that the plaintiff was unable to work with or without a reasonable accommodation.  Based on that seemingly good-faith mistake, the staffer fired the plaintiff (even though the employer’s policies did not allow such a termination unless the employee actually applied for and was receiving long-term disability benefits).  The plaintiff tried to correct the misunderstandings over the course of a few months, but the employer ignored his entreaties. 

Things went from worse to worst when the plaintiff filed a lawsuit alleging, among other things, disability discrimination in violation of the California Fair Employment and Housing Act, Cal. Govt. Code §§ 12940 et seq. (“FEHA”).  After realizing that a mistake was at the root of terminating the plaintiff’s employment, the employer tried to make things better by offering to reinstate him.  However, the plaintiff rejected that offer because the employer did not identify any specific position being offered or the rate of compensation. 

With seemingly nothing left to do but defend itself in litigation, the employer persuaded the Los Angeles County Superior Court to dismiss the plaintiff’s disability-discrimination claim.  However, the plaintiff filed an emergency appeal and convinced California’s Second Appellate District to reverse that dismissal.  The Court of Appeal reasoned that the FEHA “‘does not require an employee with an actual or perceived disability to prove that the employer’s adverse employment action was motivated by animosity or ill will against the employee. Instead, California’s statutory scheme protects employees from an employer’s erroneous or mistaken beliefs about the employee’s physical condition.’” 

Ultimately, the appellate court opined that “‘the financial consequences of an employer’s mistaken belief that an employee is unable to safely perform a job’s essential functions should be borne by the employer, not the employee, even if the employer’s mistake was reasonable and made in good faith.’”  This is not to say that liability in such circumstances is a forgone conclusion; it remains to be seen whether a jury might forgive such missteps if they do not appear to be borne of any discriminatory animus.  Still, there are important lessons to be learned from this decision.  

The take away is that disability accommodation is an area of the workplace that presents many traps for the unwary.  At the same time, any decision to terminate an employee, particularly one who is arguably entitled to some type of disability accommodation, can lead to costly litigation.  Similarly, an offer to reinstate a terminated employee may provide an employer with a valuable defense that might reduce exposure, but that offer must be handled correctly to be effective.  Therefore, it is advisable to review such decisions with an experienced employment attorney before executing them.

 

I have discussed in the past how the use of “no-rehire” provisions in settlement agreements between employers and their former employees were coming under attack in court.  In 2015, the Ninth Circuit in Golden v. California Emergency Physicians Medical Group, held that a “no-rehire” provision in a settlement agreement between the plaintiff doctor and his former employer could be found to violate section 16600 of the Business and Professions Code, which codifies California’s long standing public policy favoring employee mobility.  Section 16600 prohibits, with certain limited exception, any contract or agreement that places a restraint on a person’s trade or profession.

Employers find the use of “no-rehire” provisions useful in settlement agreements as a means of a protecting themselves against “boomerang” lawsuits.  That is, these provisions provide some protection to employers who settle claims with a former employee who claims that he or she was terminated because of discrimination from having to face a subsequent discrimination lawsuit if a former employee submits a new job application and is not hired.

California’s Legislature took up this issue and passed Assembly Bill No. 749, which was signed by Governor Gavin Newsom on October 12, 2019.  AB 749 creates a new statutory provision, section 1002.5 of the California Code of Civil Procedure, which will apply to any settlement agreement entered into on or after January 1, 2020.  This new law prohibits an employer from entering into a settlement agreement with an employee to resolve an employment dispute from inserting a provision “prohibiting, preventing or otherwise restricting a settling party that is an aggrieved person from obtaining future employment with the employer against which the aggrieved person has filed a claim” or any affiliate of that employer.  Any provision that violates this section will be void.

The new law will define “aggrieved person” to mean any person who has filed a claim against the employer either in court, before an administrative agency, in an alternative dispute resolution forum such as arbitration, or through the use of the employer’s internal complaint process.  The law does allow the employer and the settling employee to agree to “end a current employment relationship” as well as allows an employer to use a “no-rehire” provision provided that “the employer has made a good faith determination that the [former employee] engaged in sexual harassment or sexual assault.”  Finally, the new law does nothing to affect an employer’s ability to decline to rehire a person “if there is a legitimate non-discriminatory or non-retaliatory reason for terminating the employment relationship or refusing to rehire the person.”

When this new law goes into effect, employers are encouraged to seek legal advice in resolving any disputes with an employee that may involve the termination of that employee’s employment as well as the handling of future applications for rehire from terminated employees who have entered into settlement agreements after January 1, 2020.  This may include reviewing an employer’s form severance agreement to ensure compliance.  While the new law does not apply by its terms to agreements containing such provisions entered into prior to January 1, 2020, employers must tread carefully.  For further details about AB 749 and its history, please see the article, “New California Law Ban `No-Rehire’ Clauses after Worker Lawsuits,” by Wes Venteicher in The Sacramento Bee.

The October 13, 2019 deadline for Governor Newsom to take his final actions in the 2019 legislative season has come and gone and as expected, he signed into law a number of employment-related bills. Below is a summary of just a few of those bills that will have a significant impact on employment litigation in California.  To read the full article, please click here.

A.    Assembly Bill 51

AB 51 was introduced by Assemblymember Lorena Gonzales and will severely restrict the use of mandatory arbitration agreements in employment. The Bill adds section 12953 to the California Government Code (“FEHA”) and states that it is an unlawful employment practice for an employer to violate section 432.6 of the California Labor Code.

B.   Senate Bill 707

In Armendariz v. Foundation Health Psychcare Services, Inc. case (2000) 24 Cal. 4th 83, the California Supreme Court concluded, among other things, that “when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.”  In a number of cases after Armendariz, courts have held that an employer’s failure to pay the arbitration costs [and thus delaying or preventing the arbitration of the dispute] constitutes a material breach of the arbitration agreement.

In line with this case law, SB 707, introduced by Senator Wieckowski, provides that a company’s failure to pay the fees of an arbitration service provider in accordance with its obligations contained within an arbitration agreement or through application of state or federal law or the rules of the arbitration provider hinders the efficient resolution of disputes and contravenes public policy.  According to SB 707, a company’s strategic non-payment of fees and costs severely prejudices the ability of employees [or consumers] to vindicate their rights. This practice is particularly problematic and unfair when the party failing or refusing to pay those fees and costs is the party that imposed the obligation to arbitrate disputes.

Therefore, among other things, SB 707 adds section 1281.97 to the California Code of Civil Procedure and provides that in an employment or consumer arbitration that requires, either expressly or through application of state or federal law or the rules of the arbitration administrator, the drafting party to pay certain fees and costs before the arbitration can proceed, if the fees or costs to initiate an arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel arbitration.  As a result, the employee [or consumer] may do either of the following:

  1. Withdraw the claim from arbitration and proceed in a court of appropriate jurisdiction; or
  2. Compel arbitration in which the drafting party shall pay reasonable attorney’s fees and costs related to the arbitration.

If the employee withdraws the claim from arbitration and proceeds with an action in a court of appropriate jurisdiction, the statute of limitations with regard to all claims brought or that relate back to any claim brought in arbitration shall be tolled as of the date of the first filing of a claim in any court, arbitration forum, or other dispute resolution forum.  Further, if the employee proceeds with an action in a court, the court shall impose sanctions on the drafting party in accordance with Civil Code section 1281.99, which requires the drafting party to the reasonable expenses, including attorney’s fees and costs, incurred by the employee as a result of the material breach.  The court may also impose additional sanctions against a drafting party including, but not limited to, discovery sanctions and terminating sanctions. Continue Reading New Laws that Will Significantly Impact the Litigation of Employment Disputes