Originally published August 25, 2005

Within the past month, the California courts have been very active in deciding employment cases. These cases are outlined in this Alert. Clients that have employees in California should be aware of these developments. Additionally, employers that do not have California operations or employees should still find these cases instructive, particularly the Miller case that permitted plaintiffs to proceed with their claims of receiving lesser treatment than coworkers who were favored as a result of being involved with the supervisor. The Miller case was decided under California's Fair Employment and Housing Act, which is closely based upon Title VII. The California judiciary has often set the stage for judicial precedents that are later adopted by other states.

Sexual Harassment Includes Sexual Favoritism

In Miller v. Department of Corrections, plaintiffs Miller and Mackey were two female employees at the Valley State Prison for Women. In 1994, plaintiff Miller became aware that the chief deputy warden (Kuykendall) at the facility to which she was assigned was having sexual affairs with at least three women at the facility. The following year, Miller was transferred to the Valley State Prison, where Kuykendall had also been transferred and now served as warden. All three women with whom Kuykendall had been previously involved had also been transferred to Valley State. Miller competed for various promotions, but lost out repeatedly to Brown, one of the women who was involved with Kuykendall. Brown told Miller that Kuykendall would be forced to give her, Brown, the promotion, or she would "take him down with her knowledge of every scar on his body." Kuykendall participated in the selection process in both of the promotions that Brown received over Miller. Miller eventually complained internally about the apparent favoritism shown Brown and the other women with whom Kuykendall was involved. After voicing her complaint, Miller alleged that Kuykendall, Brown and another female supervisor retaliated against her in the workplace in a variety of ways, including demeaning her in the presence of coworkers. Miller also called Brown directly and confronted her about her (Brown's) relationship with Kuykendall and about the mistreatment she had been receiving from Brown. Brown then went so far as to physically assault Miller and to hold her captive in her office for two hours.

Plaintiff Mackey was a clerk who had received several promotions. She transferred to the Valley State Prison and stated her ambition to be promoted to correctional counselor. She was promised by Kuykendall that if she improved the prison's records office, she would receive the requested promotion along with "inmate pay," an enhanced form of compensation. After plaintiff Miller complained about the favoritism that Kuykendall was showing to the women with whom he was involved, Brown formed the belief that Mackey had complained. Mackey's supplemental "inmate pay" was withdrawn and Mackey began being subjected to verbal abuse by Brown. Brown also began interfering with Mackey's efforts to carry out her own job duties. Mackey witnessed Brown's assault upon Miller and attempted to come to Miller's aid. Thereafter, Mackey did in fact share her comments with the department's internal investigation department. She was assured that her comments would remain confidential but they did not. Kuykendall learned of her comments and he subsequently reduced Mackey's responsibilities. Brown also repeatedly interrogated Mackey about her comments to the internal affairs investigator.

Miller and Mackey filed a complaint under California's Fair Employment and Housing Act ("FEHA") for harassment and discrimination, and for retaliation for having complained of the harassment and discrimination. On defendants' motion for summary adjudication, the trial court held that Kuykendall's sexual favoritism did not constitute harassment or discrimination under FEHA. It also dismissed plaintiffs' retaliation claim. The Court of Appeal affirmed, holding that a supervisor who grants favorable employment opportunities to a person with whom the supervisor is involved does not, without more, commit sexual harassment against the other, nonfavored employees. The California Supreme Court accepted review and reversed.

The Court noted that in interpreting California's FEHA, it would look to federal authorities interpreting Title VII of the Civil Rights Act of 1964. It further stated that it agreed with the United States Supreme Court that an employee claiming hostile work environment harassment must show that the conduct in question was severe or pervasive enough to alter the conditions of employment and to create an environment hostile to members of one or the other gender because of their sex.

The Court cited with approval the federal EEOC's Policy Guidance on Employer Liability Under Title VII for Sexual Favoritism (January 12, 1990, No. N-915-048). The Court cited the EEOC's position that while isolated instances of sexual favoritism in the workplace do not violate Title VII, widespread sexual favoritism may create a hostile work environment by "sending the demeaning message that managers view female employees as 'sexual playthings' or that 'the way for women to get ahead in the workplace is by engaging in sexual conduct.'"

Assessing the particular facts of the case, the Court found that Kuykendall's sexual affairs with subordinates were well known within the department. It found that he engaged in inappropriate behavior with his paramours in the workplace and at work-related functions. The favoritism he showed to his paramours was known by all in the department.

On appeal, the department argued that Miller and Mackey had not complained of "sexual harassment" or "sexual discrimination" when they voiced their concerns. They had only complained of the "inappropriate situation" and of the favoritism. The department argued that since the plaintiffs had not specifically complained of sexual harassment or discrimination, their verbal complaints did not amount to protected activity.

The Court disagreed, stating that the general nature of the plaintiffs' complaints fell within the general purview of the FEHA. The Court stated, "We do not believe employees should be required to elaborate to their employer on the legal theory underlying the complaints they are making, in order to be protected by the FEHA."

The department also argued that the plaintiffs had no claim for sexual harassment since neither of them was ever subjected to advances by Kuykendall. The Court rejected this argument as well, noting that certain conduct can create a work atmosphere so demeaning to women that it constitutes an actionable hostile work environment, even though there were no overtures made to these women.

Finally, although the claim being advanced was one for hostile work environment, the Court noted that if the overall message was that the way for women to get ahead was to sleep with their supervisors, the facts could support a "quid pro quo" harassment claim, even for women who were not propositioned.

Lesson: The Miller case is the latest installment in the body of law that seems to be broadening the range of circumstances in which plaintiffs may recover. This holding underscores the importance of having sexual harassment training, particularly for supervisors. Such training is required by law for all supervisors who work for employers with 50 or more employees. Another observation is that the factual scenario in this case arose in the context of a supervisor having consensual relationships with his subordinates. In recent years, employers have often taken a more relaxed position regarding consensual supervisor/subordinate relationships. The Miller case demonstrates how such relationships can lead to litigation - and not necessarily litigation brought by a spurned paramour. In the Miller case, the plaintiffs were coworkers who were treated less favorably than the paramours. Employers may wish to consider implementing (or re-implementing) policies that prohibit consensual relationships between supervisors and other employees.

Employee Who Has Not Voiced a Complaint Has Viable Retaliation Claim

It is well established that an employee who opposes a practice that is truly discriminatory, or who voices a belief that a practice is unlawfully discriminatory, and who is retaliated against has a claim for retaliation under California's Fair Employment and Housing Act ("FEHA"). In Yanowitz v. L'Oreal U.S.A.., Inc., the California Supreme Court held that an employee who opposed a managerial directive, but did not specifically complain about it, had a viable retaliation claim.

Plaintiff Yanowitz was a regional sales manager for L'Oreal. A male supervisor (Wiswall) told her to terminate one of her female subordinates, stating that the woman was not sufficiently attractive and directed Yanowitz to "get me somebody hot." He pointed out women he did find attractive and instructed Yanowitz, "God damn it, get me one that looks like that." Wiswall repeatedly asked Yanowitz whether she had carried out the termination. Yanowitz never did so. She repeatedly asked Wiswall what justification there was for terminating the employee and did not receive a response. She never complained to the company's human resources department, and she never told Wiswall, or her direct manager (Roderick) who reported to Wiswall, that she thought his directive was discriminatory.

Roderick began soliciting negative information from other personnel about Yanowitz. In essence, the manager appeared to be conducting a "witch hunt." Roderick called Yanowitz to L'Oreal's home office in New York to discuss her "dictatorial" management style. Thereafter, Roderick and Wiswall audited Yanowitz's expense reports. They conducted a meeting with Yanowitz and other members of her team and denigrated Yanowitz in front of her subordinates. They also wrote her up and further criticized her performance. Yanowitz eventually went out on stress leave and never returned to work.

Yanowitz filed suit against L'Oreal, alleging (among other claims) that she was retaliated against for having refused to fire the "unattractive" female employee. In analyzing the facts, the California Supreme Court noted that the pivotal issue was whether Yanowitz's refusal to fire the woman in question constituted "protected activity." L'Oreal argued that insofar as Yanowitz never told anyone at L'Oreal that she believed the firing directive was unlawful, she had not "opposed" a practice forbidden by the FEHA.

The Court stated, "There is sufficient evidence from which a trier of fact could find that Wiswall knew that she had declined to follow the order because she believed it to be discriminatory, and that under such circumstances retaliation on the basis of her conduct was forbidden, even if she did not explicitly tell Wiswall, in so many words, that the order was discriminatory."

This case is significant, for California's highest court has now decided that a person may "oppose" a forbidden practice through his or her conduct or inaction, and not just through verbalization. It is important to observe, however, that in the Yanowitz case, Wiswall's directive (to fire a female employee because she was not "hot" enough) is one that a reasonable person could view as having an unlawful or discriminatory motive. A court might not reach the same conclusion if the supervisor's directive was more gender neutral.

Lesson: Employers should endeavor to train their supervisors in making the distinction between factors that may be permissible bases for employment actions and those that are impermissible. Such training should inform supervisors about the possible consequences of inappropriate comments such as the one that formed the basis of the lawsuit described here.

Employers May Deduct Vacation Time for Partial Day Absences for Exempt Employees

California is consistent with federal law in holding that employers cannot make deductions from the salaries of exempt employees for partial day absences, except in certain narrowly drawn exceptions. For many years, however, it was believed that in California, employers could not require exempt employees to use vacation time to cover partial day absences (a practice permissible under federal law). However, in Conley v. Pacific Gas and Electric Company, the California Court of Appeal for the First District held that it is permissible for employers to make deductions from such employees' vacation time banks without jeopardizing their exempt status. The employees in this case argued that the deduction of vacation time amounted to a forfeiture. The court properly noted that the employees actually received all vacation time awarded - even if in half-day increments - and even though in this case, it was the employer that controlled the use of the vacation time.

This case is important for California employers, many of whom have long felt that they had to accommodate exempt employees who routinely worked partial days. Now, California employers may properly deduct time from such employees' vacation or PTO banks (although deductions from wages for the pay period are still forbidden).

However, California still observes the general rule that the salaries of exempt workers may not have deductions made for partial day absences, unless the reason for the partial day absence is the taking of intermittent leave under the federal Family and Medical Leave Act or its state counterpart, the California Family Rights Act.

Lesson: Employers should consider revising their vacation policies to expressly state that exempt employees who miss partial days of work may have vacation time deducted. Previously, because it was uncertain whether such deductions were permitted, employers often tolerated the exempt employee who routinely took partial days off. While employers may now deduct from such an employee's vacation time, they may still face the same situation when and if the employee in question has no vacation time. Then, as before, the employer should treat the situation as a disciplinary matter and inform the employee of the expectations concerning the job.

Individual Officers and Directors Not Liable for Unpaid Wages

In Reynolds v. Bement, the California Supreme Court held that individual officers and directors of corporations are not personally liable for unpaid wages. The issue involved the interpretation of the term "employer" as used in some of the California wage orders. Since 1947, California's Industrial Welfare Commission, the administrative body that issues the wage orders, has defined "employer" to include an individual who exercises control over the wages, hours or working conditions of any person.

The Court noted that none of the wage orders specifically imposes individual liability for unpaid wages upon individual corporate agents. The Court also cited common law, which generally provides that corporate agents and employees acting on behalf of a corporation are not liable for the corporation's breaches of contract.

In essence, the Court held that failure to pay wages when due was the corporation's breach of a contract and held that the individual officers and directors were not liable.

Lesson: While this is a positive development, officers and directors should be careful not to make promises about the payment of wages when the corporate entity is struggling, for there are other potential claims that could be asserted against them, such as fraud and negligent misrepresentation.

For more information concerning employment law, please contact Thomas G. Servodidio.

For more information concerning immigration law, please contact Denyse Sabagh.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

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