Employment Law

California Supreme Court Reverses PAGA Discovery Ruling

By Matthew Golper, Associate, Employment and Labor

Why it matters

On July 13, 2017, the California Supreme Court in Williams v. Superior Court (Marshalls) issued its first opinion addressing the scope of discovery in representative actions brought under the state’s Private Attorneys General Act (Cal. Labor Code §§ 2698 et seq.). In a unanimous decision, the high court reversed a trial court’s discovery order limiting and conditioning discovery of employee contact information in PAGA actions, and held that PAGA plaintiffs have essentially the same broad discovery rights to employer records containing names and contact information for other employees that they would have if the case was filed as a class action.

PAGA has been an increasingly used tool for the California plaintiffs’ bar in employment cases since the California Supreme Court ruled in 2014 that PAGA claims cannot be compelled to individual arbitration. The statute “deputizes” employees to bring claims against their employers on behalf of the state for violations of the California Labor Code which had previously been recoverable only through or by the state’s labor commissioner. The statute can carry expensive penalties for employers, as employees must bring such claims as “representative” actions on behalf of other allegedly aggrieved employees, without having to meet the requirements for class certification.

Previous to this ruling, Williams had been hailed as an important limitation on a plaintiff’s ability to propound burdensome discovery requests on an employer before making a factual showing that “some reason exists to suspect [the employer’s] local practices extend statewide.” In Williams, the plaintiff sought, among other things, contact information for all nonexempt employees in any position at all the employer’s approximately 130 California stores (approximately 16,500 employees), despite the fact that plaintiff had never worked anywhere but the employer’s Costa Mesa location. The trial court and lower appellate court both held that plaintiff would be entitled to such sweeping information only by first showing his claims had some merit. The California Supreme Court rejected such a requirement, endorsing liberal discovery at the onset of a PAGA action, and holding that statewide contact information should be provided before any determination of merit.

The opinion is concerning for employers in that broad (and expensive) discovery rights, like those approved of in Williams, can be used to leverage a company to settle, even when the alleged claims have little or no merit. Moreover, in addition to the burden and expense that come with defending even meritless statewide litigation, the release of employee contact information allows for the potential solicitation of other plaintiffs and the threat of hundreds, if not thousands, of individual claims. The opinion will have broad application in PAGA cases, and may also be used to support discovery of employee names and contact information in class actions and civil litigation, generally.

Detailed discussion

After a little over a year of employment, plaintiff Michael Williams filed a representative action against Marshalls under the Private Attorneys General Act (PAGA), alleging that his former employer failed to provide its employees with meal and rest breaks or premium pay in lieu thereof, among other violations of the state’s Labor Code.

Shortly after bringing his lawsuit, the plaintiff served special interrogatories seeking, among other things, production of the names and contact information of all nonexempt Marshalls employees in California who had worked for the company over a roughly two-year period (approximately 16,500 employees). Marshalls objected to the discovery on the ground it was irrelevant, overbroad and unduly burdensome given that the requests sought information beyond the store at which plaintiff worked and beyond the particular job classification he held. Marshalls also objected on the grounds that the request implicated the privacy rights of its employees and because the plaintiff had provided no proof he actually suffered any injury.

The plaintiff then moved to compel the discovery, arguing the contact information was routinely discoverable in representative employee actions and vital to the prosecution of his PAGA claims.

The trial court granted the motion in part, ordering Marshalls to produce the contact information only for the employees at the Costa Mesa store where the plaintiff worked, and denied production of the contact information of employees at the other 128 Marshalls stores statewide. The trial court added that the plaintiff could renew his bid to get information from the other 128 stores, but that the plaintiff would first have to be deposed so Marshalls could investigate his case and oppose any such renewed bid by showing that the plaintiff’s substantive claims had no factual merit in its opposition to such a motion.

An appellate panel affirmed the order, ruling that discovery of Marshalls’ employees’ contact information statewide was premature.

On July 13, 2017, however, the California Supreme Court reversed those decisions, holding that the “default position” must be that contact information is within a representative action’s proper scope of discovery given PAGA’s public policy goals:

“Our prior decisions and those of the Courts of Appeal firmly establish that in non-PAGA class actions, the contact information of those a plaintiff purports to represent is routinely discoverable as an essential prerequisite to effectively seeking group relief, without any requirement that the plaintiff first show good cause. Nothing in the characteristics of a PAGA suit, essentially a qui tam action filed on behalf of the state to assist it with labor law enforcement, affords a basis for restricting discovery more narrowly. Such discovery, is ‘routinely discoverable as an essential prerequisite to effectively seeking group relief,’ without any preliminary showing of good cause, as a ‘first step to identifying other aggrieved employees and obtaining admissible evidence of the violations and policies alleged in the complaint.’”

In rendering its unanimous ruling, the court rejected Marshalls’ argument that PAGA plaintiffs should have to offer some prima facie showing of the merits of the alleged violations before such broad discovery is permitted: “California law has long made clear that to require a party to supply proof of any claims or defenses as a condition of discovery in support of those claims or defenses is to place the cart before the horse.”

With respect to privacy concerns, the court held that while personal contact information is private, the disclosure of it in this context is not a “serious invasion of privacy.” The court did note, however, that in this instance the plaintiff was “willing to accept as a condition of disclosure, and share the costs of, a Belaire-West notice to employees affording them an opportunity to opt out of having their information shared” and that trial courts “may issue protective orders conditioning discovery ‘on terms and conditions that are just,’ such as requiring confidentiality and prohibiting use outside of the case.”

In sum, the court, in reversing the trial court’s discovery order denying plaintiff’s motion seeking contact information, held that the interrogatory “sought information within, not exceeding, the legitimate scope of discovery” and that “the trial court had no discretion to disregard the allegations of the complaint making this case a statewide representative action from its inception.”

To read the Supreme Court’s Opinion in Williams v. Marshalls of CA, click here.

back to top

New California Guidance on Gender Identity Issues

Why it matters

California’s Fair Employment and Housing Council released new regulations that took effect July 1, 2017, attempting to provide guidance to employers on gender identity issues in the workplace. The regulations address several topics, from definitions of terms such as “gender identity” and “transitioning” to the use of facilities, reminding employers that they must abide by how the employee identifies, regardless of the employee’s sex assigned at birth. One section of the guidance discusses record keeping, explaining the prohibition on requiring employees to identify their gender identity, although employers may still ask workers to voluntarily provide this information. In addition to noting that it is unlawful for employers to impose any physical appearance, grooming or dress standard that is inconsistent with an individual’s gender identity or gender expression, the guidance notes that employee choice generally controls with regard to pronoun and name preferences. Employers should carefully review the new regulations and ensure compliance.

Detailed discussion

On July 1, 2017, new regulations related to employment discrimination were implemented by the California Fair Employment and Housing Council (FEHC) following a yearlong process of public comment and input.

“These regulations address issues of increasing importance to Californians,” Kevin Kish, director of the California Department of Fair Employment and Housing (DFEH), said in a statement about the regulations. “We encourage employers and employees alike to take note of the Council’s work in providing clarification and guidance in these areas of law.”

The regulations include six definitions, including modifications to the meaning of “gender expression” and “gender identity,” which now means “each person’s internal understanding of their gender, or the perception of a person’s gender identity, which may include male, female, a combination of male and female, neither male nor female, a gender different from the person’s sex assigned at birth, or transgender.”

A new definition was added for the term “transitioning,” as “a process some transgender people go through to begin living as the gender with which they identify, rather than the sex assigned to them at birth. This process may include, but is not limited to, changes in name and pronoun usage, facility usage, participation in employer-sponsored activities (e.g. sports teams, team-building projects, or volunteering), or undergoing hormone therapy, surgeries, or other medical procedures.”

Addressing the terms, conditions and privileges of employment, the sex of an employee shall have no bearing on issues such as compensation and fringe benefits, the FEHC wrote, and employers must make reasonable accommodations to alter working conditions if they pose a greater danger to the health, safety or reproductive functions of employees of one sex than they pose to individuals of another sex.

The new regulations make clear that “[e]qual access to comparable, safe, and adequate facilities shall be provided to employees without regard to the sex of the employee.” Workers should be permitted to use facilities that correspond to their gender identity or gender expression, and employers with single-occupancy facilities shall use gender-neutral signage (such as “Unisex,” “All Gender” or “Gender Neutral”), in line with California’s new law.

Employers may not require employees to undergo or provide proof of any medical treatment or procedure in order to use the facilities designated for use by a particular gender, nor may employers require an employee to use a particular facility. To respect the privacy interests of all employees, however, employers may stagger the schedules for showering, install shower curtains or use locking toilet stalls, the regulations said.

The fact that an individual is transgender or gender nonconforming, or that the individual’s sex assigned at birth is different from the sex required for the job, will not justify the application of the bona fide occupational qualification defense, the regulations explicitly stated. “Employers shall permit employees to perform jobs or duties that correspond to the employee’s gender identity or gender expression, regardless of the employee’s assigned sex at birth,” according to the regulations.

As for physical appearance, grooming and dress standards, the guidance established that it “is unlawful to impose upon an applicant or employee any physical appearance, grooming, or dress standard which is inconsistent with an individual’s gender identity or gender expression, unless the employer can establish business necessity.”

Employers should defer to the employee’s preferred name and gender identity absent a legally mandated obligation otherwise, the regulations explained, although an employer may request an applicant to identify gender solely on a voluntary basis for record-keeping purposes.

Additional rights were noted, including that it “is unlawful for employers and other covered entities to inquire about or require documentation or proof of an individual’s sex, gender, gender identity, or gender expression as a condition of employment.” However, employers can make “a reasonable and confidential inquiry of an employee for the sole purpose of ensuring access to comparable, safe, and adequate multi-user facilities.”

Further, when an employee initiates communication with the employer regarding working conditions, nothing precludes the parties from communicating about sex, gender, gender identity or gender expression issues.

To read the Fair Employment & Housing Council Regulations Regarding Transgender Identity and Expression, click here.

back to top

EEOC Charge Claims Title VII Discrimination Against Fathers

Why it matters

In a new charge filed with the Equal Employment Opportunity Commission (EEOC), an employee of J.P. Morgan Chase & Company (JPMC) alleged his employer engages in discrimination in violation of Title VII by denying fathers paid parental leave on the same terms as mothers. The complainant—a fraud investigator with two young children—began working for the company in 2010. He claimed that JPMC designates biological mothers as the default primary caregivers, making them eligible for 16 weeks of paid parental leave, while presumptively considering fathers to be nonprimary caregivers and eligible for only two weeks of paid parental leave. This sex-based stereotyping violates federal and state law, the employee alleged. “When I found out how J.P. Morgan’s parental leave policy was actually implemented, I was shocked,” the complainant said in a press release about his charge. “It was like something out of the 1950s. Just because I’m a father, not a mother, it shouldn’t prevent me from being the primary caregiver for my baby. I hope that J.P. Morgan will change this policy and show its support for all parents who work for the company.” Filed on behalf of all fathers who were or will be subject to the same allegedly discriminatory policy, the charge requests an investigation into all the claims on a classwide basis, as well as injunctive relief and monetary damages.

Detailed discussion

Derek Rotondo began working for J.P. Morgan Chase & Company (JPMC) in 2010, holding several different positions over the years as a fraud investigator. During his tenure, he had two children with his wife: one born in May 2015 and a second born in June 2017. Although he was eligible for and took paid parental leave under his employer’s policies, “I have been limited in the amount of paid parental leave I have been eligible to take because of my sex,” he told the EEOC in his charge of discrimination.

Rotondo alleged that JPMC runs afoul of both state law and Title VII with its policy of presumptively treating and qualifying biological mothers as primary caregivers automatically eligible for 16 weeks of paid parental leave and presumptively treating fathers as nonprimary caregivers eligible for only two weeks of leave.

Fathers may be treated as primary caregivers if they demonstrate either that their spouse or domestic partner has returned to work or that they are the spouse or domestic partner of a mother who is medically incapable of any care of the child. Mothers who work for the company are not required to make such a showing, Rotondo said.

The complainant told the EEOC that he did not qualify for either exception when his child was born in June because his wife was recovering well from childbirth and, as a teacher who had the summer off, had not yet gone back to work. “I would prefer to be the primary caregiver for my son and take the full 16 weeks of paid time off, until September 26, 2017,” he wrote. “But because of JPMC’s discriminatory and unlawful policy, I have not been approved to be the primary caregiver, and I am only eligible to take paid parental leave until June 21, 2017.”

Rotondo instead planned to take additional weeks of leave pursuant to the Family and Medical Leave Act to extend his time with his new child, using accrued paid time off in order to continue receiving pay during that leave.

JPMC’s pattern, practice or policy “constitutes a sex-based classification that treats biological fathers in a manner that, but for their sex, would be different, and therefore violates federal and state law,” the complainant wrote. “JPMC’s pattern, practice, or policy … also relies upon and enforces a sex-based stereotype that women are and should be caretakers of children, and that women do and should remain at home to care for a child following the child’s birth, while men are not and should not be caretakers and instead do and should return to work shortly after the birth of a child. This sex-based stereotyping violates federal and state law.”

Rotondo requested “all injunctive, equitable, legal, and/or monetary relief or damages for me and other fathers” in the United States who currently work or previously worked for JPMC, asking that the EEOC investigate all his claims on a classwide basis.

To read the charge, click here.

back to top

Desire for ‘New Face’ Not Age Discrimination

Why it matters

Does a supervisor’s comment about a “new face” constitute age bias? The U.S. Court of Appeals, Eighth Circuit answered in the negative in a case where the plaintiff accused his employer of violating the Age Discrimination in Employment Act after his supervisor made the comment and the plaintiff was subsequently terminated. James Aulick alleged that in 2012, his new supervisor issued a memo expressing disappointment with his division’s performance, suggesting the company should explore other managerial options. When an outside individual was hired for the role, the supervisor stated it was based in part on a desire for a “new face.” After Aulick was terminated in 2013—at the age of 63—he sued, pointing to the comment as evidence of age bias. But the federal appellate panel disagreed, affirming a district court’s grant of summary judgment. “The comment about a ‘new face’ was facially and contextually neutral when made to Aulick,” the Eighth Circuit wrote. “No reasonable fact finder could hold otherwise.”

Detailed discussion

An information technology professional, James Aulick was hired by Skybridge Americas when it purchased the company he worked for in 2011. The company comprised a warehouse and distribution business that fulfills orders (where Aulick worked as the senior IT director) and a call center business.

In 2012, the Skybridge CEO submitted a memorandum on the fulfillment division, writing that management was not optimum, discussing Aulick’s shortcomings as a leader and suggesting that “other alternatives for management of IT” be explored. The company also conducted an external audit and decided to combine the separate IT departments of the fulfillment business and the call center into a single unit overseen by a chief technology officer (CTO).

Aulick, who knew that one person had already been offered the job and had turned it down, interviewed for the new position. He was told, “The job is yours to lose,” but was also cautioned that he was “not guaranteed to get this position.” When an external candidate was selected, the CEO repeated the phrase “new face” four times, leading Aulick to believe that the comment was related to his age.

A few months later, Aulick and two other employees, all of whom were over the age of 60, were terminated. Aulick sued, alleging that Skybridge violated the Age Discrimination in Employment Act (ADEA) as well as state law in its failure to hire him for the CTO position and its subsequent termination of him.

A district court granted summary judgment in favor of the employer, and the U.S. Court of Appeals, Eighth Circuit affirmed.

Aulick first tried to demonstrate direct evidence of discriminatory animus based on the CEO’s repeated use of the term “new face,” but the court was not persuaded. “The comment about a ‘new face’ was facially and contextually neutral when made to Aulick,” the panel wrote. “No reasonable fact finder could hold otherwise.”

The plaintiff then attempted to rely on circumstantial evidence after the court found that Skybridge articulated legitimate, nondiscriminatory reasons for selecting another candidate and terminating Aulick. As evidence of pretext, Aulick pointed to the fact that no one at Skybridge accepted responsibility for the decision to terminate him, with various executives giving contradictory statements as to who fired him.

“No reasonable juror, however, could infer pretext from these facts because there has been no substantial change in the reason given for Aulick’s termination,” the court said. “Aulick’s argument centers on the issue of who made the decision to terminate him. But the analysis at the pretext stage revolves around why an employment decision was made. The reasons given for Skybridge’s employment decisions concerning Aulick have remained constant.”

The employer’s reasons for hiring the external candidate were based on his experience with both call centers and fulfillment businesses, while Aulick had never worked with the call center. Once the CTO position (created as a result of “an independent audit and not animus”) was filled, Aulick’s job was superfluous, the court added. “The record also shows that [the company] had hired three new executives over the age of 57 in the two years prior to Aulick’s termination, further undercutting any claim of age discrimination.”

Concluding that Aulick failed to show a genuine issue of material fact as to pretext, the panel affirmed summary judgment in favor of Skybridge on both the state and federal age discrimination claims.

To read the opinion in Aulick v. Skybridge Americas, Inc., click here.

back to top

Does Dodd-Frank Protect Internal Whistleblowers?

Why it matters

The Supreme Court has agreed to answer the question of whether the Dodd-Frank Wall Street Reform and Consumer Protection Act provides protections to whistleblowers who file their reports internally and not with the Securities and Exchange Commission (SEC), a question that has split the circuits. In the case before the justices, Paul Somers, vice president of portfolio management at Digital Realty Trust, shared with senior management his concerns about a supervisor’s actions that he believed violated the Sarbanes-Oxley Act. When he was fired not long after, he sued. Digital Realty moved to dismiss, contending that Somers was not entitled to protection from the alleged retaliation because he did not report his concerns to the SEC. A district court denied the motion, and the U.S. Court of Appeals, Ninth Circuit affirmed. Digital Realty filed a writ of certiorari, noting that the Fifth Circuit has reached a contrary conclusion and asking the justices to resolve the problem. The Court agreed to hear the case, with oral argument to be held in the fall.

Detailed discussion

Enacted in 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) contains two provisions related to whistleblowers that have divided courts across the country. Section 78u-6(a)(6) defines a whistleblower as “any individual who provides or two or more individuals acting jointly who provide, information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.”

Separately, Section 78u-6(h)(1)(A) provides whistleblowers with a private right of action against employers who take retaliatory actions against the whistleblower for engaging in certain protected actions, delineated in three subsections. Two subsections specifically reference working with the Securities and Exchange Commission (SEC), while the third provides protections more generally “in making disclosures that are required or protected” under the Sarbanes-Oxley Act, the Securities Exchange Act, “and any other law, rule, or regulation subject to the jurisdiction of the Commission.”

In the case before the Supreme Court, Paul Somers, who began working as a vice president at Digital Realty Trust in 2010, claimed that over the four years he worked for the company, he made several reports to senior management regarding possible securities law violations. He was subsequently fired.

Somers then sued Digital Realty, alleging violations of various state and federal laws, seeking the protections afforded to whistleblowers under Dodd-Frank. Digital Realty moved to dismiss, arguing that because Somers reported the alleged violations only internally and not to the SEC, he was not a “whistleblower” as defined by Dodd-Frank.

The district court denied the motion, and the U.S. Court of Appeals, Ninth Circuit affirmed.

“We agree with the district court that the regulation is consistent with Congress’s overall purpose to protect those who report violations internally as well as those who report to the government,” the federal appellate panel wrote. “This intent is reflected in the language of the specific statutory subdivision in question, which explicitly references internal reporting provisions of Sarbanes-Oxley and the Securities Exchange Act. In view of that language, and the overall operation of the statute, we conclude that the SEC regulation correctly reflects congressional intent to provide protection for those who make internal disclosures as well as to those who make disclosures to the SEC.”

The court noted the existing circuit split on the question, with the Fifth Circuit strictly applying Dodd-Frank’s definition of “whistleblower” to require dismissal of the plaintiff’s action because he did not make his disclosures to the SEC. The Second Circuit has taken the opposite position, viewing the statute itself as ambiguous and deferring to the SEC’s regulation, which interprets the provision to extend protections to all those who make disclosures of suspected violations, whether internally or to the SEC.

Emphasizing the broadening split, Digital Realty filed a writ of certiorari with the Supreme Court. The employer argued that the case presents “a clear and intractable conflict on an important and recurring question of statutory interpretation,” while Somers responded by characterizing the split as “shallow” and the Fifth Circuit as simply an outlier.

The justices granted the petition, agreeing to weigh in on the issue of “[w]hether the anti-retaliation provision for ‘whistleblowers’ in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 extends to individuals who have not reported alleged misconduct to the Securities and Exchange Commission and thus fall outside the Act’s definition of a ‘whistleblower.’”

Oral argument will be held in the fall after the new term begins in October.

To read Digital Realty Trust’s cert petition, click here.

To read Somers’ reply brief, click here.

To read the order list, click here.

back to top



pursuant to New York DR 2-101(f)

© 2024 Manatt, Phelps & Phillips, LLP.

All rights reserved