Employment Law

California Considers Extending Fair Pay Act to Race, Ethnicity

Why it matters

Reflecting the nationwide trend of pay equity, a new bill under consideration by California legislators would extend the state's Fair Pay Act (FPA) to include protections for race and ethnicity. Equal pay legislation and regulation is sweeping the country, with states like California and New York beefing up their laws and the federal government requiring employers to report pay data to the Equal Employment Opportunity Commission. Capitalizing on the trend, California lawmakers recently introduced Senate Bill 1063, which would extend the protections of the FPA to race and ethnicity, prohibiting employers from paying workers a rate less than that paid to employees of a different race or ethnicity for substantially similar work. The Wage Equality Act of 2016 is expected to pass both houses of the state legislature and move on to Governor Jerry Brown for an expected signature.

Detailed discussion

First enacted in 1949, the California Fair Pay Act (FPA) originally provided that an employer may not pay an employee at a rate less than that paid to employees of the opposite sex in the same establishment for equal work performed on equal jobs.

On January 1, a new bill took effect that lessened the burden on employees by requiring them to prove only that they received lower wages for "substantially similar" work and by eliminating the "same establishment" requirement.

The new bill also identified limited circumstances where an employer can show that wage disparity is based on a legitimate factor other than sex, added a prohibition regarding retaliation, and bulked up recordkeeping requirements for employers, requiring them to maintain records of the wages and wage rates, job classification, and other terms and conditions of employment for a three-year period.

Now, legislators are at work on a further expansion of the FPA, this time to add protections for race and ethnicity. The Wage Equality Act of 2016 would prohibit employers from paying employees a wage rate less than the rate paid to employees of a different race or ethnicity for substantially similar work, using the same evidentiary standards and burdens set forth in the January amendment to the statute.

The same affirmative defenses available to employers under the FPA would apply in instances of race or ethnicity. Only a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than race or ethnicity (such as geographic location, education, experience, or training) will suffice.

Such defenses "shall apply only if the employer demonstrates that the factor is not based on or derived from a race- or ethnicity-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity." The burden to establish a bona fide factor other than race or ethnicity is on the employer. For other bona fide job related differences, such factors can only be considered if they are reasonably applied to explain the entire compensation difference, as well as being compelled by business necessity.

To read S.B. 1063, click here.

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New Paid Sick Leave Laws for Los Angeles

Beginning July 1, 2016, employers in the City of Los Angeles must provide at least 48 hours of paid sick leave to employees—double the amount required by California's paid sick leave law.

Employees will be entitled to take up to 48 hours of sick leave in each year of employment, calendar year, or 12-month period. Accrued unused paid sick leave shall carry over to the following year of employment and may be capped at 72 hours (as opposed to CA's cap of 48 hours). Paid sick leave can be provided in lump sum at the beginning of the year, or accrued at a rate of at least one hour per every 30 hours worked (same minimum accrual rate as CA law, but with a higher accrual cap).

Click here to read the final Los Angeles ordinance. Stay tuned for Manatt's detailed analysis of the law's implications.

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Even Without Vacancy, Promotion Denial = Adverse Employment Action

Why it matters

The D.C. Circuit Court of Appeals recently ruled that the denial of a promotion was recognizable as an adverse employment action even where no vacancy existed. A longtime, highly rated employee approached her supervisor requesting a promotion to a higher pay grade in 2007. No available positions existed so she tried over a period of four years to create a new position with higher pay and the same responsibilities. When that didn't work, she filed suit against her employer alleging discrimination on the basis of race and disability. Although no new position was created for her, three new roles were created for white workers without vision impairments, she argued. A federal court judge agreed with the employer that the denial of a promotion did not constitute an adverse action because the desired job did not exist. But the federal appellate panel rejected this position, writing that "no such categorical rule" existed and to establish it would create "an unacceptable loophole in our antidiscrimination law." However, the panel upheld the summary judgment ruling in favor of the employer because the plaintiff failed to tie the promotion denial to her race or disability.

Detailed discussion

A legally blind, African-American woman, Janean Chambers began working for the Department of Health and Human Services (HHS) in 1989. In 2006, she was promoted to an analyst position with a GS-9 pay grade. The next year, she became eligible to apply for GS-11 positions and spoke to her supervisor about her next promotion.

The supervisor explained that her current position was capped at the GS-9 level so she had two options for promotion: apply for an available GS-11 position in the agency (which might mean she would have to switch divisions, an option she was not interested in) or request a "desk audit" to demonstrate her current duties warranted a higher pay grade.

Chambers elected to take a third path, pursuing the creation of a higher-graded vacancy with the same responsibilities as her current job. Her supervisor told her he supported such a promotion but explained he lacked the authority to create a new position.

After four years and no movement, Chambers filed a complaint with the equal employment opportunity office at HHS alleging that she had been denied a promotion because of her race and disability. She argued that although she had been told budgetary constraints prevented the creation of her desired position, the agency had created positions to promote three white, sighted department heads from a GS-14 to GS-15 pay grade.

HHS responded with a desk audit that concluded Chambers' job was properly classified at the GS-9 level. Chambers then filed suit in federal court, alleging violations of Title VII and the Rehabilitation Act. A district court judge granted summary judgment to HHS, ruling that an employee could not suffer a cognizable adverse employment action when the position she sought did not exist and when her supervisor lacked the authority to create it. Chambers appealed.

While the court ultimately affirmed summary judgment in favor of the employer, it took pains to make clear that an adverse employment action can occur even if a vacancy for the desired position does not exist.

The D.C. Circuit has recognized that claims alleging an unlawful denial of promotion come in at least two forms, the court said: "the denial of a promotion to a vacant position and the denial of an increase in pay or grade. The government's argument recognizes the former, but overlooks the latter. Precedent makes clear that employees who pursue, and are denied, pay or grade increases can still suffer a materially adverse employment action. Chambers advances this type of claim, and she did not need to identify an available vacancy to survive summary judgment."

Requiring that a vacant position exist would create "an unacceptable loophole in our antidiscrimination law," the panel wrote. "A categorical rule requiring employees to always identify a vacancy before advancing their denial of promotion claim would permit employers to systematically pass over qualified candidates because of their race or disability."

For example, an agency could limit formal promotional opportunities while allowing supervisors to promote subordinates by requesting the creation of vacancies tailored to their particular qualifications, the court suggested, and a supervisor could request vacancies only for white subordinates because of his animus toward African-Americans.

"Allowing employers to escape liability for this kind of unlawful workplace conduct would exalt form over substance by ignoring the reality that employers promote employees in a variety of ways—both formal and informal," the court said. "Courts have long avoided such anomalous results in the employment discrimination context by tailoring the evidence needed to survive summary judgment to the particular circumstances of the plaintiff's claim."

Following that lead, the panel held that "[a]s a matter of law, at least where a manager regularly requests and receives upgraded vacancies that are earmarked for his subordinates, his decision not to engage in that process because of an employee's disability or race can be an adverse employment action under our case law."

Despite this ruling, the court said Chambers failed to demonstrate that she was denied her promotion because of her race or disability. Although she tried to pin the unlawful discrimination on her supervisor's failure to create the position she desired, the record was supported with "ample evidence" that he not only made the request, he supported Chambers' career development with high performance ratings, approval to receive training to increase her opportunities, and encouragement to pursue a desk audit or other promotional possibilities.

While the plaintiff pointed to three other positions that were created during the relevant time period, the supervisor's superiors exercised their own initiative in creating the new positions, the panel found, and she failed to offer evidence that HHS ever granted any supervisory requests like the one Chambers asked her supervisor to make.

To read the opinion in Chambers v. Burwell, click here.

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First Circuit: Harassment Claims Must Be Considered in Context

Why it matters

Context is everything, the First Circuit Court of Appeals informed an employer, reversing summary judgment in favor of a bank, based on arguably innocuous comments that a former employee alleged constituted sexual harassment. Xiaoyan Tang interviewed for a new position at a "popular dating spot" by the job's supervisor, who reportedly mentioned he employed two Thai au pairs, referenced their swimwear choices, stated his belief that Asian women were obedient, and asked if she was married. Tang accepted the job offer but later sued for sexual harassment after being terminated. A federal court judge granted summary judgment in favor of the employer but the federal appellate panel reversed. "Title VII requires no magic words to convert a verbal exchange into the stuff of sexual harassment," the court wrote, and the supervisor's alleged comments about the au pairs, when viewed in the context of the plaintiff's other assertions, took on a sexually suggestive tone. Viewing the circumstances as a whole, the panel found Tang raised a reasonable inference that she suffered from sex-based discrimination and also raised a triable issue of fact as to whether she was terminated in retaliation for her complaints about sexual harassment.

Detailed discussion

Xiaoyan Tang began working in the Commercial Real Estate Group of Citizens Bank in October 2007. She applied to transfer to the Technology Banking Group and interviewed with David Nackley in early 2010.

The interview took place at what Tang characterized as a "popular dating spot," and she recalled that the focus was on personal matters. Nackley allegedly expressed his views that Asian women are obedient, referenced two live-in au pairs he hired from Thailand, stated the au pairs did not wear sufficiently revealing swimsuits, offered to teach Tang how to golf, and asked if she was married.

Tang began working for the group in May 2010 and had a meeting with Nackley in July. She claimed that they did not discuss her work but again focused on personal matters, with additional references to the au pairs, swimsuits, and Tang's dating habits. She also alleged that Nackley wrote the word "assume" on a piece of paper and stated it could be broken into "ass," "u," and "me," suggesting the two "combine" their asses, with obscene coupling motions.

When Nackley realized she was not responding to his advances, Tang said his attitude changed and she began receiving negative performance reviews and a performance improvement plan (PIP) in early 2011. Tang objected to the plan and filed a complaint with human resources.

She was later terminated for failing to demonstrate improvement after receiving her PIP and filed suit against Citizens and Nackley. Her pro se complaint was dismissed by a district court judge and she appealed.

The defendants argued that Tang failed to show that the alleged harassment was based on sex, as she asserted no evidence of sexual comments or behavior and Nackley never directly propositioned her or touched her. "Title VII, however, does not require evidence of overtly sexual conduct for a sexual harassment claim," the First Circuit Court of Appeals wrote. "Title VII requires no magic words to convert a verbal exchange into the stuff of sexual harassment. The context in which something is said may be just as important as what is said."

An innocuous comment that Nackley hired two Thai au pairs, without more, is unlikely to qualify as sexual harassment, the court agreed. But "[w]hen viewed in the context of Tang's allegations that Nackley also discussed the purported obedience of Asian women and whether the au pairs' swimwear choices were sufficiently revealing, however, Nackley's statements take on a sexually suggestive tone," the court said.

While many of the exchanges did not involve sexual conduct (such as Nackley yelling at Tang in a meeting), the plaintiff claimed that Nackley's behavior stemmed from her having rebuffed his advances. "Viewing the circumstances as a whole, then, this court determines that the evidence was sufficient to raise a reasonable inference that Nackley engaged in sex-based discrimination," the court wrote.

The court similarly found that the plaintiff alleged harassment that was severe or pervasive, despite the limited number of incidents, based on the "cumulative evidence." The defendants' many arguments against "are oblique criticisms of Tang's credibility and veracity," which are for the jury's consideration, the court added.

Tang's retaliation claim was also revived by the First Circuit, which found that her allegations "clearly set out a prima facie case for retaliation" despite the fact her amended complaint did not include a retaliation claim among its numbered causes of action. Tang undertook protected conduct by submitting her complaint to human resources and her termination occurred just four months later. In addition, several emails about Tang's allegedly poor performance were forwarded to human resources immediately after she made her complaint and the employer "declined to clarify the precise circumstances of Tang's termination," the court said.

"Because the record raises a triable issue as to whether Tang suffered sexual harassment and retaliation, the judgment is vacated and the case remanded for further proceedings consistent with this opinion," the panel concluded.

To read the opinion in Tang v. Citizens Bank, click here.

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Indefinite Leave Not Required, Second Circuit Rules

Why it matters

Indefinite leave was not required as an accommodation for an employee being treated for cancer, the Second Circuit Court of Appeals has ruled. Mirelle Vangas was diagnosed with cancer in March 2010 and immediately went on 12 weeks of Family and Medical Leave Act (FMLA) leave. When she suffered treatment complications, her employer extended her leave until August 30. Just prior to her scheduled return, she began experiencing new symptoms and was unable to return to work, leaving a voicemail for her supervisor that she did not know when she would be back to work. Vangas was terminated when she did not report for work as scheduled. She then sued under New York state law and a jury awarded her damages of more than $500,000. Arguing that it had not violated its duty to provide a reasonable accommodation—particularly as the plaintiff had received five months of medical leave—the employer appealed. A three-judge panel agreed and reversed the verdict. Vangas was incapable of performing the essential functions of her job at the time of termination, the court noted, so her messages could only be construed as a request for indefinite leave, "which as a matter of law is not a reasonable accommodation."

Detailed discussion

In March 2010, Mirelle Vangas was diagnosed with cancer. An employee of Montefiore Medical Center since 1989, she went on immediate Family and Medical Leave Act (FMLA) leave, with her three-month leave period ending in June. The FMLA forms she filled out for her employer indicated that she would need to be medically cleared prior to returning to work.

Vangas was briefly hospitalized in June due to a complication with her treatment and the parties moved her return date until July 19. She did not return on that date and Montefiore unilaterally extended her leave. Vangas's doctor then indicated that she could return to work on August 30. But in late August, she began to experience new symptoms including blurred vision, headaches, dizziness, and facial swelling.

One week prior to her scheduled return, Vangas visited her doctor, who filled out additional FMLA paperwork stating that the duration of her condition was "unknown." The day before she was supposed to return, Vangas left a voicemail message saying she would not be returning on August 30. When she did not report for work, Vangas was terminated.

She filed suit alleging violations of New York State Human Rights Law (NYSHRL) and a federal jury found in her favor, awarding damages of $541,000. Montefiore appealed and the Second Circuit Court of Appeals reversed, finding that no reasonable accommodation was possible under the circumstances.

To succeed on her NYSHRL claim, Vangas had to prove that she had a disability, the employer had notice of her disability, with reasonable accommodation she could perform the essential functions of her job, and the employer refused to make such accommodation.

While the plaintiff had no problem demonstrating the first two requirements, she failed to establish the others, the panel said. "At the time of her final request for leave and termination, Vangas was incapable of performing the essential functions of her job," the court wrote. "She was not medically cleared to return to work and admitted that she could not do so. Therefore, at that time, the only possible accommodation was an extension of leave, as she was incapable of working, in any capacity, whether at home or in the office."

Vangas did not request an extension of leave for a specific time period, the court noted, but simply informed her employer that she was not feeling well, would not be returning to work on August 30, and could not give Montefiore a date for her return to work. The correct interpretation of these actions: a request for "an indefinite leave extension, which as a matter of law is not a reasonable accommodation," the panel said.

The court was not persuaded by Vangas' reliance on a prior Second Circuit case, Graves v. Finch Pruyn & Co., where a plaintiff requested "a couple of weeks" additional leave and the court found it to be a reasonable accommodation. "To hold that Vangas's vague statements were not an unreasonable request for indefinite leave would extend the Graves holding to the point where it would conflict with New York law," the court said. "It is clear from the record that on August 29, 2010, when Vangas informed [Montefiore] that she would not be returning to work the next day, she had no idea how long she would be out of work or how long it would take to determine how long she would be out of work."

No finite amount of leave was requested "and it was unknown whether after an extension of leave Vangas would be able to return to work; her symptoms and prognosis were too uncertain," the panel added, whether in the office or at home. "Because there was no reasonable accommodation requested that would have allowed Vangas to perform the essential functions of her job, [Montefiore] did not violate the NYSHRL in terminating Vangas and no reasonable juror could have concluded otherwise."

To read the decision in Vangas v. Montefiore Medical Center, click here.

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California Appellate Panel Affirms $16M Discrimination Verdict

Why it matters

A California appellate court affirmed a $16 million verdict for age discrimination and wrongful termination brought by a former manager at a Staples facility in La Mirada. Bobby Dean Nickel claimed that he was terminated in 2011 at age 64 by the national chain because of his age, in violation of California's Fair Employment and Housing Act (FEHA). A state court jury sided with Nickel, awarding him $3 million in compensatory damages and an additional $22.8 million in punitives (reduced by the judge to $13 million). Staples appealed, arguing that Nickel failed to establish his termination was due to age discrimination and that the punitive damages award was excessive. In an unpublished opinion, the three-judge panel said the award was "supported by evidence of plaintiff's emotional and mental harm," and that the jury's use of the multiplier of four was not unconstitutionally high based on the facts. Nickel provided more than sufficient evidence that the employer acted with discriminatory intent, the court said, citing testimony from multiple employees that the plaintiff's supervisor fired him to cut costs by replacing him with a younger, cheaper worker as well as referring to Nickel as an "older goat" and "old coot."

Detailed discussion

A state court jury awarded Bobby Dean Nickel more than $25 million in his lawsuit accusing Staples of age discrimination and wrongful termination. At trial, Nickel presented evidence that his supervisor, Lionel Marrero, was on a mission to cut costs at the La Mirada facility by replacing older, higher paid employees with younger, part-time or temporary workers. Nickel told the jury that Marrero would increase the workload for older employees, force them into retirement, or "write them up" for minor errors to create a basis for their termination.

Nickel said Marrero utilized the last method in his case, when he reported Nickel for stealing a bell pepper from the facility's cafeteria afterhours. Nickel claimed there was an accepted practice of taking food from the cafeteria afterhours and paying for it later, which he had done on prior occasions. But Staples terminated him for taking the 68-cent pepper and Nickel filed suit.

The jury awarded Nickel $3 million in compensatory damages and $22.8 million in punitives, reduced by the trial court judge to $13 million.

On appeal, Staples argued that the plaintiff's unethical behavior and violation of the company's anti-theft policy established a legitimate, nondiscriminatory reason for his termination and that Nickel lacked sufficient evidence of discriminatory animus.

But the California appellate panel disagreed. "Marrero's comments about older employees, made in the context of an intention to eliminate them from the workforce, provided substantial evidence of age-based animus," the court said. Other employees testified as to the "concerted attempt" to get rid of older, higher paid workers, along with comments from Marrero that he wanted to "[t]ake a closer look at the older people," and "[w]e need young energetic people."

In addition, Marrero encouraged the hiring of younger workers and frequently queried older workers on their retirement plans. Former employees took the stand to tell jurors about being pushed out of their jobs or being assigned excessive tasks, making it impossible to complete their work in the allotted time.

Causation was also established by Marrero's behavior and comments, the court said, with testimony that he essentially used human resources as his personal tool for disciplining and removing employees, including the plaintiff, for whose termination he had advocated. Nickel also presented evidence that Marrero targeted him by increasing his workload and referring to him as an "older goat" and an "old coot."

"The evidence showed Defendants used a variety of pretexts to push older workers out of the company," the panel wrote.

Considering the punitive damage award, the court found it was supported by "substantial evidence" of malice and oppression. "[T]he jury heard substantial evidence Staples purposefully terminated Plaintiff because of his age, damaged his reputation, and tried to conceal the discrimination," the court said. "By discharging him based on the bell pepper incident, Staples labeled him a thief, effectively damaging Plaintiff's reputation and future job prospects. A jury could reasonably conclude that Staples had engaged in malice—intentionally hurting Plaintiff through this adverse employment action, motivated by discrimination. Substantial evidence also supports a finding that Staples acted in a base, contemptible, and vile manner when it attempted to conceal the illegal reason for the firing. The evidence that Defendants used the theft as a pretext to deny Plaintiff his right to hold employment free from age discrimination was sufficient for the jury's finding of oppression."

As for the amount of damages, the award did not violate due process. The most important guidepost in the analysis: the degree of reprehensibility, the court said. Nickel suffered from physical harm because the termination impacted his emotional and mental health and the panel found he was financially vulnerable when he was terminated, with the family forced to move to Idaho because they could no longer afford to live in California.

"[T]he harm here can reasonably be construed to be the result of intentional malice, as Staples sought to reduce the cost of its operations by systematically removing older, higher-paid employees, specifically Plaintiff in this case, through discriminatory actions," the panel wrote. "A group of managers participated in the final decision to terminate Plaintiff's lengthy and successful employment at the La Mirada facility over a bell pepper, despite the confusion surrounding whether Plaintiff had actually stolen it and whether he had permission to take food and pay for it later. In so doing, Staples rendered Plaintiff jobless and incapable of obtaining new employment due to his now-tarnished professional reputation. In addition, the record indicates that the discriminatory firing was undertaken in order to reduce overhead costs and make Staples more profitable. This motivation likewise increases Staples' reprehensibility."

The multiplier of four—with the $13 million award roughly four times the $3 million compensatory damages—was not presumptively unconstitutional as a single-digit integer, the court said, as well as supported by the evidence, as "reprehensibility was abundant in the case at bar and weighed in favor of greater punitive damages."

To read the opinion in Nickel v. Staples Contract & Commercial, Inc., click here.

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