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Labor & Employment Update: March 1998

This article was edited and reviewed by FindLaw Attorney Writers | Last reviewed March 26, 2008

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In this issue:
California Legislature Considers Possible Restrictions Against Economic Layoff Of Older Workers
Last summer, in Marks v. Loral Corporation, 57 Cal. App. 4th 30 (1997), a California court of appeal held that employers may prefer workers with lower salaries to workers with higher ones, even if the preference disproportionately affects older, generally higher paid workers. SeeLabor & Employment Update, October 1997. The court reasoned that compensation levels "go to the very core of operating any enterprise" and that "cost-based layoffs often constitute perfectly rational business practices grounded in employers' concern for economic viability."

In response, both the California Senate and Assembly are considering bills that would reverse the Marks decision and prohibit employers from using salary to differentiate among employees when making adverse employment decisions that affect employees over 40. The Senate Bill, SB 1098, as presently amended, would prevent employers from discharging, dismissing, reducing, suspending, or demoting any individual over the age of 40 on grounds that a younger employee would perform the job for a lower salary. The Assembly Bill, AB 1643, as presently amended, would prohibit employers from using salary to differentiate between employees when terminating employment, if use of salary as a criterion disproportionately affects older workers as a group.

Presently, to succeed on an age discrimination claim, an employee must prove that age played a role in the adverse employment decision at issue. The current version of the Assembly Bill would place greater restrictions on employers by prohibiting any employment rule or practice that has an "unreasonably disproportionate impact on older workers," regardless of the actual motivation or intent underlying the decision. Enactment of the Assembly Bill could call into question all rules and procedures that adversely affect older workers, and could require that the employer establish a bona fide business necessity for the rule or procedure at issue; the fact that age considerations played no role in adoption of the rule or procedure at issue would provide no defense to an age discrimination action. We will keep you updated concerning the progress of these bills.

Supreme Court Allows Employee To Keep Cash And Sue If Age Discrimination Release Does Not Comply With ADEA
Federal law provides that a release of federal age discrimination claims is not enforceable unless the release complies with the specific provisions of the Age Discrimination in Employment Act (ADEA). The United States Supreme Court recently decided that an age discrimination release which does not comply with the ADEA cannot be enforced, even if the employee decides to keep the money paid by the employer for the release.

In Oubre v. Entergy Operations, Inc., 118 S.Ct. 838 (1998), the employee, Oubre, received a poor performance review and was provided two options: continued employment with specific performance standards or a voluntary severance package. The company offered to pay Oubre $6,258 in return for a release of all claims against the employer. The employer gave Oubre 14 days to consider the severance agreement, during which time Oubre consulted with an attorney and decided to accept the severance package. Oubre signed a release of all claims and received $6,258. After receiving her severance payments, Oubre filed suit against the employer alleging age discrimination in violation of the ADEA.

The release of age discrimination claims signed by Oubre did not comply with the ADEA, as it failed to provide a 21-day consideration period, and a seven-day revocation period specifically required by the statute. (Specific ADEA requirements for releases are discussed in theCounselor's Corner section of this month's Update.) The ADEA provides that an individual may not waive any right or claim for age discrimination made unless the waiver is "knowing and voluntary," and specifies criteria for satisfying the knowing and voluntary standard, including the twenty-one and seven day periods mentioned above. Oubre's employer argued that despite the severance agreement's non-compliance with ADEA criteria, the release should be enforced because Oubre accepted all the payments called for in the severance agreement before making any objection to the release, and did not attempt to return the severance amount before filing suit.

The United States Supreme Court rejected Entergy's argument and permitted Oubre to pursue her age discrimination claims, despite accepting the money. The release was unenforceable to the extent it applied to ADEA claims, regardless of whether Oubre retained the amount paid for the release. Because the provisions of the ADEA apply to all workers over the age of 40, employers should take extra precautions where seeking to obtain a general release of any employee age 40 or over. Counsel should be consulted if any questions regarding the validity of a release exist.

A Good Faith Belief That Misconduct Occurred Satisfies The "Good Cause" Requirement Of An Implied Contract Claim
In a long awaited decision, Cotran v. Rollins Hudig Hall International, Inc., 17 Cal. 4th 93 (1998), California's Supreme Court decided that if an employer conducts a thorough investigation and terminates an employee for misconduct after reasonably concluding that the employee committed the misconduct, that employer has the right to terminate the employee. Prior to this decision, several appellate courts had held that the employer, in any subsequent lawsuit, must prove that the employee actually is guilty of the misconduct, and that the employer's good faith conclusion of guilt was no defense to the employee's breach of contract claim.

In Cotran, the employer received complaints from two female employees concerning sexual harassment by a third employee, Cotran. The employer received written statements from the complaining employees, presented the statements to Cotran, and offered Cotran the opportunity to respond. Additionally, the employer conducted an extensive investigation, interviewing 21 people who had worked with Cotran, including five that Cotran requested be included in the interview process. As a result of the investigation, the employer concluded it was more likely than not that the sexual harassment had occurred, and fired Cotran. Cotran then sued his employer for breach of an implied agreement, claiming that the employer did not have cause to terminate him.

At trial, Cotran argued that the employer had impliedly agreed to terminate him only for cause, and that no cause existed because he had not committed sexual harassment. Rather, he argued that he was the victim of a plot by two female coworkers with whom he had consensual relationships, each of whom became vindictive after learning of Cotran's involvement with the other. A jury concluded that Cotran had not, in fact, committed sexual harassment and returned a verdict of 1,780,000 dollars to Cotran. The trial court did not permit the jury to consider whether the employer had a good faith belief that the harassment had occurred, ruling that the jury had to decide instead the question of whether Cotran had in fact been guilty of harassment.

The Supreme Court ruled that the proper question for a jury to consider is whether the employer, after a fair and reasonable investigation, believed in good faith that the misconduct occurred. In order to find cause for termination, the employer must show "fair and honest reasons, regulated by good faith on the part of the employer, that are not trivial, arbitrary or capricious, unrelated to business needs or goals, or pretextual." The employer's conclusion must be backed "by substantial evidence gathered through an adequate investigation that includes notice of the claimed misconduct and a chance for the employee to respond."

The Cotran decision empowers an employer to act upon its good faith conclusion that an employee has engaged in misconduct, if the employer conducts a fair investigation, appropriate for the circumstances, which allows the employee an adequate and fair opportunity to respond to the allegations, and reaches a reasonable conclusion that the misconduct occurred.

The important lesson from this decision is the importance of conducting a thorough investigation of an employee's alleged misconduct. Where an employer conducts an appropriate investigation, it can defend itself against a claimed breach of contract on the basis of its reasonable and good faith belief in the culpability of its employee, even if the employee, as Cotran did, later produces evidence which disputes his guilt. If, on the other hand, an employer makes its decision to terminate without conducting an adequate investigation, it may be held liable to the employee. In the case of Cotran, the difference between an adequate and inadequate investigation amounted to 1,780,000 dollars.

California Court Holds That No Duty To Accommodate Disability Exists Absent Employer's Knowledge Of The Disability
In Pensinger v. Bowsmith, Inc., 60 Cal. App. 4th 709 (1998), a California court of appeal confirmed that an employer must have actual knowledge of a disability before a duty to accommodate that disability arises.

Pensinger had been employed as a sales representative for several years, when a new manager began requiring written sales reports from all salesmen. Pensinger suffered from a learning disorder that impaired his ability to read and to write reports, but had compensated for his reading and writing deficits by providing oral reports and information. Pensinger told the manager that he had problems with reading and writing, but did not tell him that he suffered from a learning disability. The employer terminated Pensinger for his failure to provide the requested written reports.

Although he was not diagnosed with a learning disability until after his termination, and did not inform his employer of any disability, Pensinger argued that his employer's knowledge of his reading and writing problems was sufficient for it to conclude that he suffered from a mental disability, triggering the employer's obligation to offer accommodation. The court rejected Pensinger's argument and held that an employer must have actual knowledge of the disability, not merely knowledge of the problems caused by the disability.

This case offers some solace to employers who terminate employees for performance. or conduct-related reasons, and the employee later claims that the problems were caused by a disability. For example, discipline decisions made prior to obtaining knowledge of a disability need not be undone because the employee subsequently informs the employer that his behavior was caused by a disability. In other circumstances, however, an employer might be considered to have received enough information to trigger its obligation to offer accommodation; thus, while an employer need not be prescient, neither may it ignore clearer signs indicating a disability. In this particular instance, the court concluded that mere difficulty submitting written reports could be caused by reasons other than disability, and that the employer did not have enough knowledge to conclude that Pensinger had a disability.

Asking Secretary for Coffee Does Not Constitute Gender Discrimination (Texas)
In Galdieri-Ambrosini v. National Realty & Dev. Corp., No. 88-96-9447, 1998 WL 50126 (2 Cir. Feb. 4, 1998), the plaintiff, Marilyn Galdieri-Ambrosini, sued her former employer, National Realty, for sex discrimination after she was fired for poor work performance. Ambrosini alleged that Mr. Simon, her supervisor at National Realty, subjected her to gender discrimination by requiring her to conform to a sexual stereotype by performing duties traditionally assigned to females such as calling Simon's dry cleaners and negotiating payment for a lost shirt, typing Simon's personal letters and mortgage applications, setting up an appointment for a cable installer to visit Simon's home, and, on one occasion, bringing Mr. Simon coffee. Ambrosini complained to Mr. Simon and National Realty's office manager about being required to perform such tasks, but no action was taken. A month or so after her second complaint, Ambrosini's employment was terminated.

Ambrosini's claims were presented to a jury, which returned a verdict in her favor in the amount of $100,000.00. But the trial court overturned the verdict on the basis that the plaintiff had not presented sufficient evidence to support her claims. The Second Circuit agreed, holding that while evidence of sexual stereotyping may signal gender discrimination or a hostile work environment based on gender, such as where employers exclude females from a job on the basis that it is not "women's work," the plaintiff failed to establish that such an environment or discrimination existed at National Realty. Noting that the typing, copying, faxing, scheduling appointments, and similar assignments of which Ambrosini complained were "quintessential" secretarial work, the court held there was no evidence that gender played a role in Ambrosini's work assignments or that gender played a role in National Realty's decision to terminate Ambrosini.

Ambrosini also claimed that the favorable treatment of two younger, more attractive secretaries who conformed to female stereotypes strengthened her claims of gender discrimination and caused her work performance to deteriorate. As an example, Ambrosini cited Dana Cinque, a 5'7" blond who tended to dress in short skirts and tight clothing, who, by performing tasks such as bringing her boss coffee and clearing away his coffee mug without being asked, conformed to the sexual stereotype rather than complaining about it. Ambrosini was assigned the task of covering Cinque's phones when Cinque was away from her desk. Cinque was frequently absent, often arriving late and leaving early, and took numerous smoking breaks. Ambrosini complained to her boss that Cinque's frequent absences resulted in more work for Ambrosini, but her boss took no action. Ambrosini alleged that because Cinque and other secretaries conformed to the sexual stereotype, they were treated more favorably than Ambrosini. The court found this argument unpersuasive, stating that Title VII does not impose liability on an employer for preferring an employee who chooses to make an executive's life more pleasant by performing small favors such as bringing him coffee voluntarily.

Finally, the court pointed out that Ambrosini never actually informed her employer that she felt she was being discriminated against on the basis of her sex. While Ambrosini did complain that the lackadaisical attitudes of employees such as Cinque increased her workload, it would have been very difficult for National Realty to conclude that she was actually complaining that she was being subjected to sex discrimination, given that the employees of whom she complained were women. While such evidence would not change the court's decision on her discrimination claim, if Ambrosini had more clearly articulated that she believed she was being subjected to unlawful discrimination, the court may have reached a different conclusion on her claim for retaliatory discharge. Employers should take heed: even unmeritorious claims of unlawful discrimination may support a claim of retaliatory termination.

Supreme Court Reverses 5th Circuit . Same-Sex Harassment Actionable under Title VII (Texas)
On March 4, 1998, a unanimous Supreme Court reversed a Fifth Circuit Court of Appeals ruling which held that same-sex sexual harassment claims are not actionable under Title VII. In Oncale v. Sundowner Offshore Servs., Inc., 118 5 Ct. 998 (1998), the Supreme Court held that Oncale, an oil platform worker who alleged that he was sexually assaulted, battered, touched and threatened with rape by his supervisors, could sue under Title VII for sexual harassment in the workplace.

Writing for the Court, Justice Scalia pointed out that Title VII's prohibition of discrimination "because of . . . sex" applies to men as well as women and analogized to Supreme Court cases in the racial discrimination context that held that there is no "conclusive presumption that an employer will not discriminate against members of his own race." Noting that "[c]ourts have had little trouble with" the principle that a male supervisor can discriminate against a male employee in other contexts, such as when the employee is passed over for a job promotion, the Court held that male-on-male sexual harassment, too, is actionable under Title VII.

The Court recognized that while male-on-male sexual harassment was not the "principal evil" Congress intended to address in enacting Title VII, "statutory prohibitions often go beyond the principal evil to cover reasonably comparable evils." Consequently, Title VII's prohibition of "discrimination ... because of ... sex" necessarily extends to cover sexual harassment "of any kind that meets the statutory requirements," regardless of the gender of the harasser and victim.

The Court also rejected Fourth Circuit case law that required plaintiffs to prove that a same-sex harasser is homosexual to articulate a claim under Title VII, reiterating that "harassing conduct need not be motivated by sexual desire to support an inference of discrimination on the basis of sex." For example, the Court noted, a woman could be found to impermissibly harass another woman if she harassed the female victim "in such sex-specific and derogatory terms ... as to make it clear that the harasser is motivated by general hostility to the presence of women in the workplace."

Finally, in response to concerns that Title VII may expand into a "general civility code for the American workplace," the Court re-emphasized that Title VII only prohibits behavior that is so offensive that it alters the conditions of the victim's employment. The factfinder in a sexual harassment case is still required to determine that a reasonable person in the plaintiff's position would find his or her workplace abusive. Social context must be taken into account in this deter -mination; the Court noted that a football coach who "smacks a player on the buttocks as he heads onto the field" is not acting in an offensive manner although the same coach, acting in a similar manner towards his secretary, whether the secretary is male or female, could reasonably be determined to be acting abusively. The circumstances of each claim of sexual harassment must be carefully considered by the factfinder to distinguish between true harassment and "simple teasing or roughhousing among members of the same sex."

Providing A "Stress-Free" Workplace Is Not A Reasonable Accommodation Under The ADA (Texas)
The Third Circuit recently held that an employer is not required to provide a stress-free work environment for an employee suffering from depression. In Gaul v. Lucent Technologies, Inc., 134 F.3d 576 (3d Cir. 1998), Gaul, an AT&T employee, was diagnosed with depression, subsequently suffered a nervous breakdown, and was absent from work for approximately three months. Gaul returned to work after recovering from the breakdown and received a two-step promotion in late 1989 or early 1990. In June of 1990 Gaul suffered a relapse due to an unfavorable performance review and again went on disability leave. While on leave, Gaul was contacted by a supervisor in AT&T's Cordless Telephone Department who was interested in having Gaul work on a project for him. After Gaul expressed concern about his inability to work under conditions of "prolonged and inordinate stress," the supervisor assured Gaul that the people in the department would be very supportive. Gaul eventually returned to work in September of 1990.

In December 1991, Gaul was assigned to work with another employee, Donovan Folkes, on the physical design of a telephone. Gaul almost immediately began experiencing difficulties with Folkes, and complained numerous times to Folkes and others. In mid-August 1992, Gaul spoke with and informed the department head that he was "stressed out" and asked to be transferred to another project before he suffered another nervous breakdown. The department head did not transfer Gaul and Gaul again went on disability leave in September 1992.

Gaul filed against AT&T shortly thereafter, claiming that AT&T had violated the Americans with Disabilities Act by failing to accommodate his disability. The district court held that Gaul was not "disabled" under the Act and the Third Circuit affirmed. The court held that Gaul was not a "qualified individual with a disability" under the ADA because he could not perform the essential functions of his job either with or without a reasonable accommodation. The court held that Gaul's suggested accommodation that he be transferred away from any individuals which caused him "prolonged and inordinate stress" was unreasonable as a matter of law. The proposed accommodation "would impose a wholly impractical obligation on AT&T" because compliance with the accommodation would vary from moment to moment depending upon Gaul's stress level which depended, in turn, on an infinite number of variables, most of which were not under AT&T's control. Moreover, the proposed accommodation would impose "extraordinary administrative burdens on AT&T," requiring that Gaul's supervisors take into account Gaul's potential stress level whenever assigning him to teams, planning social events, or changing work locations. Such extraordinary measures are simply not required under the ADA.

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