Employment Law

California Jury Awards Record $185M Verdict to Female Employee

Why it matters: A California jury made national headlines and terrified employers across the country when it awarded $185 million in punitive damages (and less than $1 million in compensatories) to a female employee who alleged gender and pregnancy discrimination against AutoZone. The plaintiff told the jury that she was encouraged to step down from a managerial position when she became pregnant; when she refused to do so and complained about the discrimination she faced, she was first demoted and later terminated. Jurors awarded her a total of $872,719 in compensatory damages and then returned to deliberate on punitives, deciding on $185 million – what is being called the largest verdict ever for an individual in an employment case. In a statement, AutoZone said it intends to appeal the record-setting verdict. The staggering dollar amount of the settlement should reiterate the importance for employers of complying with antidiscrimination laws.

Detailed Discussion

Rosario Juarez began working for a National City, California AutoZone in 2000 as a customer service representative. She was promoted to parts sales manager and then to the position of store manager in October 2001. In November 2005, she informed her district manager that she was pregnant.

According to her federal court complaint and trial testimony, Juarez was encouraged to step down from her managerial position and told that she would not be able to handle the responsibilities of both motherhood and running the store. When she refused to resign and returned to work after her son’s birth in May, she faced continued discrimination.

Juarez was demoted and filed a claim with the state’s Department of Fair Employment and Housing alleging gender and pregnancy discrimination. She was terminated in 2008 after an envelope filled with cash was misplaced and Juarez was blamed for the loss, an event she characterized as retaliation for her complaint with the state agency. She filed suit against AutoZone and the case went to trial in November.

At trial, Juarez told jurors that she repeatedly complained about discrimination at the company and contended the company had a “glass ceiling” limiting women to lower-level positions. She presented evidence that of 98 AutoZone stores in the San Diego area, just 10 had female managers.

In support of her allegations, a former district manager testified that high-level executives at the company held a meeting to celebrate the expiration of a previous settlement that required AutoZone to promote women and track the promotions. He also informed the jury that he was offered a promotion if he fired all the women in his stores and testified that a company vice president criticized him for having too many women in management positions, saying: “What are we running here, a boutique? Get rid of those women.”

AutoZone defended the allegations by claiming Juarez was demoted for poor performance and failure to meet expectations, as well as the disappearing cash. But she presented testimony from the employee that investigated the cash loss admitting that she never believed Juarez took the money and thought the company was targeting Juarez.

After two weeks of trial, the jury awarded Juarez $872,719.52 in total compensatory damages. Three days later, jurors added an additional $185 million – more than 200 times the compensatory amount – in punitive damages.

AutoZone released a statement indicating its intent to appeal the verdict. “We believe this verdict could not be based on the evidence or logic, and we plan to proceed with all legal remedies,” a spokesperson stated.

To read the verdict form for compensatory damages in Juarez v. AutoZone Stores, Inc., click here.

To read the verdict form for punitive damages, click here.

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Judge Should Decide “Gateway Issue” of Class or Representative Arbitration, California Appellate Court Rules

Why it matters: In the latest decision out of California addressing the issue of non-bilateral arbitration in the employment context, an appellate panel held that a judge should make the decision of whether classwide or representative arbitration is appropriate when the agreement itself is silent. An employer moved to compel individual arbitration when an employee filed a putative class action suit and a Private Attorney General Act (PAGA) claim alleging labor code violations. A trial court granted the motion to compel but ruled that the arbitrator should determine whether or not to hear the class and PAGA representative claims because the agreement itself was silent. The panel reversed. Characterizing the question as a “gateway issue,” the court said class and representative actions present more than just procedural differences from bilateral arbitration and therefore need to be decided by a judge.

Detailed Discussion

As an employee of Garden Fresh Restaurant Corporation from 2006 to 2013, Alicia Moreno signed two arbitration agreements. After she stopped working at the company, she filed a putative class action alleging various labor code violations, including the failure to pay overtime wages and the failure to provide accurate itemized wage statements. Her complaint included a representative claim pursuant to PAGA.

Garden Fresh moved to compel arbitration on an individual basis. A trial court split the difference, granting the motion to compel but referring the entire matter to the arbitrator. The appellate panel reached a contrary conclusion.

Emphasizing that arbitrators derive their powers from the parties’ voluntary submission of disputes for resolution in a nonjudicial forum, the court explained that arbitrators only have the power to decide an issue if the parties have authorized the arbitrator to do so.

Instead, “questions of arbitrability,” or “gateway issues,” must be decided by courts.

Although a plurality of the U.S. Supreme Court found that the availability of class arbitration is not a question of arbitrability in Green Tree Financial Corp. v. Bazzle, subsequent high court precedent has cast doubt on that position, the California appellate panel noted. Just last term, the Justices wrote in Oxford Health Plans LLC v. Sutter that they have “not yet decided whether the availability of class arbitration” is a question for a court or an arbitrator to resolve.

“Our reading of recent United States Supreme Court precedent persuades us that the availability of class and/or representative arbitrability is a question of arbitrability, and is therefore a gateway issue for a court to decide, in the absence of a clear indication that the parties intended otherwise, rather than a subsidiary one for an arbitrator to decide,” the panel concluded.

The shift from individual to class or representative arbitration “fundamentally changes the nature of the arbitration proceeding and significantly expands its scope,” the court wrote, and “the differences between bilateral and classwide arbitration are so significant that they may be classified as ‘fundamental.’ ”

For example, if the question of whether the parties agreed to class and/or representative arbitration were sent to an arbitrator, that decision would be unreviewable; if the matter proceeded to arbitration on a class or representative basis, the result of the “potentially high-stakes proceeding” would also be unreviewable, the court said. And a class or representative claim would make for a slower, costlier process, forfeiting the quick and cheap nature of arbitration.

Class and representative arbitration also raise “significant due process concerns,” the panel noted, with an arbitrator’s decision binding not just the parties to the arbitration agreement but potentially thousands of employees and, in the case of a PAGA representative action, the state as well.

Although the seminal California Supreme Court decision in Iskanian v. CLS Transportation carved out an exception for employees to bring PAGA claims in court, the panel said the holding did not provide direct guidance on the issue before it. The opinion raised a number of possible issues – including the possibility that a court could never compel arbitration of a PAGA claim unless the state entered into an arbitration agreement with the defendant – but the panel left it to the trial court to consider whether Moreno’s PAGA claim was arbitrable under the authority of Iskanian.

“Although a class and/or representative action has often been thought of as merely a procedural device, we interpret the United States Supreme Court’s analysis regarding the incompatibility of this procedural device with the attributes of arbitration as suggesting that the Supreme Court views the question whether anything other than simple, bilateral arbitration is available where the arbitration agreement between the parties is silent on the matter as being much more than a mere ‘procedural’ question,” the court wrote. “We therefore conclude that the question whether an arbitration agreement permits class and/or representative arbitration is a gateway issue, and is thus reserved ‘for judicial determination [u]nless the parties clearly and unmistakably provide otherwise.’ ”

The panel remanded the case to the trial court for a determination of whether the parties consented to class and/or representative arbitration, as well as the effect of Iskanian on Moreno’s PAGA claim.

To read the opinion in Garden Fresh Restaurant v. Superior Court of San Diego, click here.

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New Employee-Friendly Laws Introduced in the California Legislature and Passed by the San Francisco Board of Supervisors

Why it matters: Just in time for the holidays, a San Diego lawmaker announced her plans to introduce a bill under which employers would have to pay twice the normal wages to employees who work on Thanksgiving and Christmas. Assemblywoman Lorena Gonzalez (D-San Diego) expressed concern about the rise in businesses that are open on the holidays and the possibility of retribution for employees that refuse to work. In other California legislative news, the San Francisco Board of Supervisors enacted a pair of ordinances with a year-round impact. Touted as first-of-its-kind legislation, the so-called “Retail Workers’ Bill of Rights” mandates that all “formula retail stores” must provide a predictable work schedule for employees and offer additional hours of work to part-time employees before hiring new workers, among other requirements.

Detailed Discussion

In recent years, more and more businesses have elected to remain open on major holidays such as Thanksgiving and Christmas. “If it’s so important to force employees to work on a traditional family holiday, it’s only decent to compensate them fairly,” Assemblywoman Lorena Gonzalez said in a press release.

She intends to introduce a legislative proposal that would require California employers to pay employees double when they work on Thanksgiving and Christmas. Gonzalez cited statistics that more than three-fifths of the country’s large employers and one in five small businesses have Thanksgiving shifts.

“Each year it seems like we lose more and more of these family holidays to the demands of work,” Gonzalez said in a statement. “The further expansion of work demands on employees in retail and restaurants, for example, is not being accompanied automatically with a holiday pay premium, and so it’s imperative for employees who are losing out on their Thanksgiving and Christmas holidays to boost their boss’s profits are paid fairly for that sacrifice.”

Three states – Maine, Massachusetts, and Rhode Island – currently have laws on the books banning major retailers from opening on Thanksgiving.

Meanwhile, in San Francisco, the Board of Supervisors sent two ordinances to Mayor Ed Lee for a signature. Both apply to “formula retail stores,” defined as businesses with at least 11 or more stores nationwide and at least 20 or more employees in the city. The Hours and Retention Protections for Formula Retail Employees ordinance requires employers to retain part-time employees in their positions if a company is bought or sold for at least 90 days and mandates that employers offer additional hours of work to part-time employees before hiring new workers.

Pursuant to the second ordinance, the Fair Scheduling and Treatment of Formula Retail Employees, covered entities must provide a written work schedule at least 14 days in advance with a “good faith estimate” of the hours and shifts for each employee. In the event of shift changes or unused on-call shifts, employers must pay employees additional compensation (dubbed “Predictability Pay”) for a schedule change made on less than seven days’ notice.

Notice and record-keeping requirements are included in the laws, which also prohibit retaliation.

Importantly for employers, both ordinances include a private right of action for violations; employers can also face compliance actions and administrative fines from the San Francisco Office of Labor Standards Enforcement.

To read the Hours and Retention Protections for Formula Retail Employees ordinance, click here.

To read the Fair Scheduling and Treatment of Formula Retail Employees ordinance, click here.

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What Did the EEOC Do in 2014?

Why it matters: The Equal Employment Opportunity Commission (EEOC) released its annual report to Congress detailing its enforcement efforts and activity over the prior fiscal year. The 2014 Performance and Accountability Report revealed that the agency filed 133 merits lawsuits over the prior 12 months, made up of 105 individual lawsuits, 11 nonsystemic class suits, and 17 class systemic lawsuits, with Title VII claims forming the basis of the majority of the suits. The agency recovered $22.5 million in monetary relief via litigation and an additional $296.1 million through other enforcement efforts. For employment lawyers, the statistics provide insight into the focus of the EEOC’s enforcement actions and its continued commitment to bring systemic class actions as part of its strategic enforcement plan.

Detailed Discussion

A total of 88,778 private-sector charges of discrimination were filed with the agency in FY 2014, a decrease from 93,727 in FY 2013. The EEOC attributed the decrease, at least in part, to the government shutdown and sequestration. The agency resolved a total of 87,442 charges (also a decrease from the prior year’s resolution of 97,252 charges).

The EEOC kept busy in the courtroom during FY 2014, filing a total of 133 lawsuits. Of those suits, 76 contained Title VII claims, 49 had Americans with Disabilities Act (ADA) allegations, 12 made Age Discrimination in Employment Act (ADEA) claims, 2 had Equal Pay Act (EPA) claims, and 2 made allegations of Genetic Information and Non-Disclosure Act (GINA) violations.

Continuing the agency’s efforts to ensure that at least 20 percent of its cases allege systemic violations, the EEOC filed 17 new systemic suits, a decrease from 21 filed in FY 2013. However, the number of ongoing systemic lawsuits rose from 54 last year to 57 this year.

At the end of FY 2014, the EEOC reported that 228 cases remained on its active docket (with systemic lawsuits constituting roughly 25 percent of the lawsuits).

The report also documented a total of $22.5 million in monetary relief recovered by the agency for charging parties through litigation and an additional $296.1 million collected through mediation, conciliation, and other administrative enforcement efforts – a decrease from FY 2013’s $372.1 million.

To read the EEOC’s FY 2014 Performance and Accountability Report, click here.

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