Labor & Employment Update: October 1998

Federal Court Holds That Managers May Be Individually Liable For Violations Of The Family and Medical Leave Act
In an issue of first impression, a Federal trial court has concluded that the Family and Medical Leave Act ("FMLA") extends potential liability to individual managers as well as employers. Mercer v. Bordan, 98 Daily Journal D.A.R. 10084.
Plaintiff Michael Mercer sued his employer and managers, claiming that their refusal to allow him to take time off from work to care for his wife during a dangerous pregnancy violated the FMLA. The individual managerial employees moved to dismiss the claim, contending that individuals could not be liable under the FMLA.
The court rejected that argument, and ruled that the employee could proceed directly against the managers. In ruling, the court noted that the FMLA defines "employer" as "any person who acts, directly or indirectly, in the interest of an employer to any of the employees of such employer." Focusing on this definition, the court analyzed the definitions of "employer" contained in various statutes pertaining to employment practices and focused on cases which determined whether liability extends to managerial employees. The court found that the definition of "employer" contained in the Family and Medical Leave Act is identical to the definition of "employer" in the Fair Labor Standards Act. Since the Fair Labor Standards Act permits individual liability, the court held that the Family Medical and Leave Act also permits an employee to sue an individual manager.
Although this decision may be appealed, the impact of this case on supervisors could be far reaching. Unlike claims for employment discrimination, where individual supervisors are generally not liable for managerial or administrative decisions, this ruling, if followed could impose individual liability for simple personnel decisions and give plaintiffs potential leverage in actions arising under the FMLA.

Claim For Discrimination Based On Work-Related Disability Not Barred By Workers' Compensation Exclusivity
The California Supreme Court recently held that a former employee terminated after returning to work from a work-related injury was not barred by workers' compensation exclusivity from suing her former employer for discrimination based on physical disability. City of Moorpark v. Superior Court, 98 C.D.O.S. 6367, No. S057121 (Cal. 8/17/98).
City of Moorpark involved an action for wrongful termination brought by Theresa Dillon, a former administrative secretary for the City of Moorpark. After she recovered from knee surgery and her doctor released her to return to work, her supervisor terminated her employment, informing her that her residual disability prevented her from performing her essential job functions. Ms. Dillon then informed a higher supervisor that she could perform her job and wanted to return to work. However, she was again told that she could not have her job back. After receiving a right to sue letter from the Department of Fair Employment and Housing, Ms. Dillon filed suit against the City and her two supervisors alleging, among other things, causes of action for discrimination in violation of California's Fair Employment and Housing Act ("FEHA") and wrongful termination in violation of public policy. The City moved to dismiss her causes of action for discrimination and wrongful termination, arguing that because Ms. Dillon's injuries were work-related, Labor Code Section 132(a) provided her with an exclusive remedy.
Labor Code Section 132(a) prohibits an employer from discharging, threatening to discharge, or discriminating in any way against an employee who files an application or who makes known their intention to file an application against their employer for compensation. It provides that an employer who engages in such conduct is guilty of a misdemeanor and the employees' compensation shall be increased by one-half, but in no event more than ten thousand dollars. A terminated employee who successfully pursues a Section 132(a) is entitled to reinstatement and reimbursement for lost wages and work benefits caused by the acts of the employer.
Although previous appellate decisions had ruled that Section 132(a) was the sole remedy when an employee with a work-related injury who asserted a compensation claim was discharged, the Supreme Court ruled that it was not. The Court noted that Section 132(a) did not itself contain an exclusive remedy clause and, more importantly, the general exclusive remedy provisions of the workers' compensation law expressly did not apply to Section 132(a).
Additionally, the Court noted that nothing in the Government Code suggested that the Fair Employment and Housing Act ("FEHA") only applied to physical or mental disabilities that are unrelated to work. Therefore, the Court concluded, Section 132(a) did not preclude for Ms. Dillon from pursuing her claims for wrongful termination. The Court, however, noted that because the standards for establishing disability discrimination under the FEHA may well be different than under Section 132(a), a decision in an employee's favor on a Section 132(a) petition would not establish a FEHA violation. The Court also noted that to the extent Section 132(a) and the FEHA overlap, an employee could not recover multiple damages for the same injuries under both theories.

California Court Grants Employers Greater Latitude In Deciding Which Employees To Lay Off
A California appellate court recently upheld an employer's decision to terminate three employees in a reduction in work force, despite the employees' arguments that they were terminated because of "personal animosity," rather than a legitimate need to reduce the work force. Soliz v. Great Western Bank, 98 C.D.O.S. 7579, No. BC085650 (Cal. Ct. App., 2d Dist., 10/1/98).
Soliz involved an action for wrongful termination brought by three former employees of Great Western Bank after the bank terminated them in a reduction in force. The three employees, Soliz, Levoff, and Kleiner, alleged that the bank's stated reason for their termination (reduction in work force) was a mere pretext, and that they were in fact terminated because their supervisor harbored personal animosity towards them. The trial court found that the employer had good cause to terminate their employment and dismissed the employees' claims. The appellate court upheld the decision.
Each of the employees worked in the branch automation section of the bank. According to the bank, the supervisor and the bank vice president decided to reorganize the section because of an expected decrease in workload. The factors used to determine which employees would be laid off included their overall job performance, the experience and skills of all employees in the section, and whether a particular employee in question worked well with the supervisor and other members of the section. In all, nine positions were eliminated. The plaintiffs disputed the factors which had been considered, contending that they were targeted for termination because of their criticism of their supervisors' management style. The employees disputed that nine positions had been eliminated, citing the fact that one employee had been transferred into the group after their terminations and that two other employees remaining in the section were trained to do the tasks that they had previously been performing.
The appellate court found that the employer had good cause to terminate the employees, as it was undisputed that the bank reduced its work force. The court stated that it was not appropriate to penalize managerial decisions on how to reduce the size of a work force, except to the extent that such decisions or their implementation violated established prohibitions, such as those against discrimination based on gender or race. The court emphasized that cases have uniformly held that a reduction in force or reorganization in itself constitutes good cause to terminate, and ruled that laid off employees could defeat summary judgment only if they could show either (1) a reduction in force did not actually take place or (2) the bank otherwise acted impermissibly in selecting the three employees.
The plaintiffs' evidence indicated, at most, that the reduction in force might have been in a lesser number than nine positions, but did not support a finding that a reduction in force did not occur, or that the reduction was less than three positions. The employees' argument that the true motivation for their layoffs was the "personal animosity" of the supervisor was, under these circumstances, not relevant. The existence of a reduction in force alone established good cause. The court ruled that the decision could only be challenged if it were motivated for some impermissible reason like discrimination, which the three employees did not allege:

"The plaintiff employees' evidence that the bank selected them for layoff because of the "personal animosity" of their supervisor thus could not establish a case of pretext, at least not in the sense that term is used in dis-crimination law, because a layoff on such basis is not legally prohibited."

Federal Appeals Court Extends Supreme Court Rulings To Claims of Racially Hostile Work Environment
Applying recent United States Supreme Court decisions dealing with sexual harassment, a Federal court of appeals has recently ruled that an employer can also be liable for a racially hostile work environment under the standards formed by the Supreme Court. Wright-Simmons v. The City of Oklahoma, 1998 WL 614414, Case. No. 96-6203 (10th Cir. 9/15/98).
Wright-Simmons involved a claim for race discrimination brought by a current employee against the City of Oklahoma, alleging, among other things, that one of her former supervisors created a racially hostile work environment. The trial court dismissed the employee's claim, finding that the plaintiff did not show that her supervisor made more than sporadic racial slurs and that she had therefore failed to establish the existence of a hostile work environment. The appellate court disagreed.
The plaintiff introduced evidence showing that her former supervisor, Armentrout, made racial slurs and racially derogatory comments to plaintiff and other employees, expressing the opinion "that too many blacks worked in the department." The plaintiff complained to a manager of the racist language and conduct, who told her that she would talk to Armentrout, but also told the plaintiff that she should understand that Armentrout grew up in Southern Oklahoma and was not racially sensitive. Although the manager then counseled Armentrout to watch his language, Armentrout took the plaintiff to task for complaining about his conduct to the manager rather than directly to Armentrout himself. Later, after Armentrout received a promotion, he immediately demoted the plaintiff and informed her that she would report to someone else.
The plaintiff later told an employee in the City's personnel department, Berry, that she had been documenting incidents which she believed were discriminatory. Shortly there-after, plaintiff's supervisors contacted Berry to discuss the plaintiff's deteriorating work performance. Berry began an official investigation, which largely confirmed Armentrout's racist conduct. Based upon the investigation, Armentrout was told to resign. The plaintiff sub-sequently filed the lawsuit against the City for permitting a racially hostile environment.
The appeals court concluded that a reasonable jury might find that Armentrout's conduct created a racially hostile work environment and reversed the trial court. The appeals court also ordered the trial court to consider the employers' vicarious liability for the allegedly hostile environment in accordance with recent United States Supreme Court decisions addressing employer liability for sexual harassment.
The court also briefly noted the availability of an affirmative defense based on the Supreme Court's recent Ellerth and Farragher decisions, which an employer may raise against a claim of racial harassment where it can show that the harasser did not take a tangible employment action against the employee. If the employer can show that it exercised reasonable care to prevent and promptly correct any harassing behavior, and show that the plaintiff employee failed to take advantage of any preventive or corrective opportunities provided by the employer, it may be entitled to a judgment in its favor against a claim of racially motivated harassment.