Labor & Employment Update: January 1998

You Snooze, You Lose - Employer Loses Right To Arbitrate Because Of Delay

Employers throughout the country are implementing arbitration programs to resolve workplace disputes regarding issues such as wrongful termination, sexual harassment and employment discrimination. In a recent California decision the court ruled that if an employer that has put in place an arbitration policy fails to promptly request arbitration after an employee files a civil suit against the employer, the employer loses the right to submit the dispute to arbitration.

In Davis v. Continental Airlines, 69 Cal.Rptr.2d 79 (2d App. Dist. Nov. 17, 1997), Alsenia Davis sued Continental, alleging that she had been sexually harassed by a supervisor. When Continental responded to Davis' Complaint, it argued that Davis failed to follow Continental's three-step "Appeal Procedure" for resolving workplace disputes. Continental did not immediately request that the court order the dispute to arbitration. Instead, Continental proceeded to take the plaintiff's deposition and requested that she turn over nearly 1,600 pages of documents during the discovery phase of litigation. Six months after the lawsuit was filed, the company finally requested that the court order the dispute to arbitration. The trial and appellate courts held that Continental had waived its right to compel arbitration and allowed the employee to continue to pursue her lawsuit against the airline.

According to the appeals court, the trial court could infer from the circumstances that the company had unreasonably delayed its motion to compel arbitration in order to take advantage of pretrial discovery procedures to learn plaintiff's strategies and gather evidence to pin her down to a particular version of the facts. The lesson from this case is that if you have an arbitration agreement in place with an employee who decides to file a lawsuit in court rather than submit the dispute to arbitration, you should immediately request that the court order that the matter be heard by an arbitrator. Any failure to immediately do so may seriously jeopardize your ability to have the matter decided by an arbitrator.

At-Will Employers Have The Right To Unilaterally Change Wage Rate

In a victory for at-will employers and common sense, a California appellate court recently decided that an employer's right to terminate the employment relationship at will includes the right to unilaterally modify other terms of the employment relationship. Although the decision seems a foregone conclusion, DiGiacinto v. Ameriko-Omserv Corp., 69 Cal.Rptr.2d 300 (2d App. Dist., Nov. 25, 1997), presented this issue to a California court of appeal for the first time.

Victor DiGiacinto, who conceded that he was employed at will, alleged that his employer breached a written employment contract with him by unilaterally and without consideration reducing his job responsibilities and his hourly rate of pay. DiGiacinto argued that he had not abandoned his claim for breach of contract by continuing to work for the employer after being issued a letter agreement specifying his new rate of pay, but that he was merely mitigating his damages.

The appellate court held that, as a matter of law, an at-will employee who continues his employment after the employer has given notice of changed terms and condition of employment has accepted the new terms and conditions. Thus, DiGiacinto's objection to his reduction in pay and his refusal to sign the new contract were irrelevant. According to the court, the employer's written notice of DiGiacinto's reduced rate of pay had the effect of terminating his old contract and offering him a contract under new terms, which DiGiacinto accepted by continuing his employment.

Workplace Investigations Conducted By Attorneys May Not Be Privileged

Employers that want their attorneys to conduct investigations of employees' claims such as discrimination or harassment should be aware that those investigations may not be protected by the attorney-client or work product privileges. In Wellpoint Health Networks v. Superior Court, 59 Cal.4th 110 (2d App. Dist., Nov. 13, 1997), a California appellate court held that an employer may waive the attorney-client and work product privileges by putting the investigation at issue in defending a lawsuit based on the employee's claims.

In Wellpoint, an employee claiming racial discrimination and harassment subpoenaed documents created by the employer's attorney during the course of an investigation undertaken in response to the employee's pre-lawsuit complaints. In deciding that the employer may have waived the protection of any attorney-client or work product privilege for those documents, the court emphasized that investigations of harassment claims are not like other pre-litigation investigations, because under both Title VII and California's Fair Employment and Housing Act, an employer may defend a hostile work environment harassment claim by showing that it took prompt remedial action after receiving notice of a complaint of harassment. Thus, if an employer wishes to prevail in a lawsuit by showing that it investigated an employee's complaint and took appropriate action as a result of the investigation, it will have put the adequacy of the investigation directly at issue: the employer then cannot prevent disclosure of information about the investigation by claims of privilege. This case may not have a significant affect on the manner in which workplace investigations are conducted, given that, although most employers consult with legal counsel regarding such investigations, the company itself, rather than outside counsel, generally conducts the investigation. In such situations, employers may continue to discuss the matter with their legal counsel and those communications will continue to be protected by the attorney-client and work product privileges.

EEOC Issues New Guidance for Contingent Workforce

On December 8, 1997, the Equal Employment Opportunity Commission (EEOC) provided guidance on applying federal anti-discrimination laws to temporary or contingent workers. The EEOC expanded its enforcement guidance, according to Chairman Gilbert F. Casellas, because there has been an "explosive growth in the contingent workforce in recent years and a disproportionate number of these workers are women and minorities."

Among the EEOC's conclusions, which will result in expanded coverage and enforcement, are the following:

  1. Either temporary employment agencies that staff temporary workers for their clients or the client employers to whom temporary workers are assigned will be responsible for prohibiting discrimination against their temporary workers on the basis of race, color, religion, sex, national origin, age or disability, depending on which one has the right to control the means and manner of the temporary worker's work performance. If both the agency and the employer jointly control the temporary worker, then both may be held liable as joint employers.
  2. A client employer may still be liable for unlawful discrimination against the temporary worker employed by an employment agency if the employer, through its discriminatory bias, interfered in the temporary worker's employment opportunities by, for example, requesting that the temporary worker be replaced due to the employer's racial bias.

If the EEOC finds that both the agency and employer are responsible for discriminatory harm to the temporary worker, then either or both can be held liable for back pay, front pay and damages. For further information regarding these new guidelines, visit the EEOC website.

Cop's Sensitivity To "Noogie" Is Not A Disability

Just when you thought you had heard about every possible ADA claim . . . along comes the first case based on that old schoolyard terror - the "noogie." Lieutenant Ed Wagner of the West Palm Beach Police Department claimed in a Florida district court that an old neck injury was aggravated by a detective who gave him "noogies" (i.e., ground his knuckles onto Wagner's head while bear-hugging him). Wagner was removed from the SWAT team because of his supervisor's concern that anyone with a sensitive neck could be "ineffective and a detriment to the team." Wagner filed suit under the ADA under a theory of "perceived disability." Judge Federico Moreno dismissed the claim, noting that the ADA covers people who are unable to perform a range of jobs, not those who cannot perform a particular assignment.