Employment Law Update

On August 27, 1998, the National Labor Relations Board ("NLRB") decided that a non-union employer's maintaining certain "unacceptable conduct" rules in an employee handbook could violate the National Labor Relations Act ("NLRA"). The case arose from an unfair labor practice charge filed by the Bartenders Union against the non-union Lafayette Park Hotel. The union did not contend that the rules were initiated in response to union activity, or even that any employee had been disciplined under the rules for engaging in union activity. Rather, the union argued that the mere presence of the rules violated the NLRA by potentially interfering with or restraining employees in union organizing. The Regional Director agreed with the Union and prosecuted a complaint against the Hotel.

To analyze the challenged rules, the NLRB adopted a balancing test between the undisputed right of self-organization assured to employees under the NLRA and the equally undisputed right of employers to maintain discipline in the work place. Applying this standard, the NLRB concluded that two of the challenged handbook rules unlawfully interfered with employees' right to organize: a rule that prohibited employees from making false, vicious, profane or malicious statements concerning the employer or its employees, and a rule that required all employees to leave the premises immediately after the completion of their shift and not to return until the next scheduled shift.

As to the remainder of the challenged handbook sections, the NLRB concluded that the employer's legitimate business objectives outweighed the employees' organizing rights. The NLRB supported rules which prohibited: being uncooperative with supervisors, employees, guests and/or regulatory agencies or otherwise engaging in conduct that did not support the employer's goals and objectives; divulging hotel-private information; engaging in unlawful or improper conduct off the hotel's premises or during non-working hours which affected employee relationships or the employer's reputation; using the employer's restaurant or cocktail lounge for entertainment without departmental approval; and fraternizing with guests on hotel property.

Lafayette Park Hotel and Bartenders Union Local 2850,
326 NLRB No. 69 (1998)

Supreme Court Rules that Workers' Compensation Is Not the Exclusive Remedy for Discrimination Based on Work-Related Injuries

Resolving conflicting Courts of Appeal decisions, the California Supreme Court has ruled that employees claiming discrimination based on work-related disabilities are not limited to remedies available through the Workers' Compensation system. Several Courts of Appeal had ruled that workers' compensation was the exclusive remedy for work-related disability discrimination claims, precluding lawsuits based on the Fair Employment and Housing Act ("FEHA") or common law. Reversing those decisions in City of Moorpark v. Superior Court, the California Supreme Court ruled that California's workers' compensation law does not preclude an employee from pursuing remedies under the FEHA and common law claims for violation of public policy where work-related disabilities are involved. As a result of this decision, employers now must be aware of the duty to make reasonable accommodation for disabled employees, even when those employees are receiving workers' compensation benefits. In addition, employees disabled by work-related injuries now have available a wider array of remedies for discrimination, including emotional distress damages, punitive damages, and recovery of attorney's fees.

City of Moorpark v. Superior Court, 18 Cal. 4th 1143 (1998)

Two California Decisions Further Clarify Liability of Supervisory Employees

Two recent California Court of Appeal decisions provide further clarification on the issue of supervisorial liability for wrongful termination and sexual harassment. In the first, Halvorsen v. Aramark Uniform Services, Inc., a terminated employee sued his former supervisor for interfering with his at-will employment contract after the supervisor recommended that the employee be terminated. The court held that because there is no reason for the court to examine the employer's motives in terminating an "at-will" employee, there is likewise no reason to examine the motives of the supervisor who advised the employer on the termination decision. The court acknowledged that the law does not clearly define under what circumstances a supervisor who encourages an employer to terminate a "for cause" employee out of self interest or some other personal motive may be held personally liable. The court ruled, however, that in the case of at-will employees, the supervisor's motive is irrelevant.

In the second decision, Carrisales v. Department of Corrections, the Court of Appeal ruled that a supervisor who neither personally participated in sexual harassment, nor substantially assisted or encouraged it, cannot be held personally liable. Carrisales had complained to two supervisors that a coworker had sexually harassed her. Each supervisor took some form of corrective action and eventually, the harassing coworker was allowed to retire. Nonetheless, Carrisales sued her employer, each supervisor, and her coworker for sexual harassment.

California courts have already held that a supervisor who personally participates in sexual harassment or substantially assists another in sexual harassment is personally liable under the FEHA. The court found that Carrisales' supervisors did neither. The court emphasized that supervisors should not be placed at risk of personal liability for making personnel management decisions, and that deciding whether to take action on a sexual harassment complaint is such a decision.

Halvorsen v. Aramark Uniform Services, Inc., 65 Cal. App. 4th 1383 (1998)
Carrisales v. Department of Corrections, 65 Cal. App. 4th 1492 (1998)

Mandatory Arbitration Provision Upheld by California Court

ACalifornia Court of Appeal has held that the Fair Employment and Housing Act ("FEHA") does not preclude the use of mandatory arbitration to resolve claims of employment discrimination and harassment. In 24 Hour Fitness, Inc. v. Superior Court, the court specifically rejected a recent Ninth Circuit Court of Appeal decision, Duffield v. Robertson Stephens & Co., which had refused to enforce a similar provision, widening the current debate in state and federal courts concerning the enforceability of mandatory arbitration agreements.

When Sara Munshaw was hired by 24 Hour Fitness, she signed an agreement to final and binding arbitration of any dispute arising out of her employment. In addition, the 24 Hour Fitness employee handbook broadly defined the disputes subject to arbitration as "every kind or type of dispute including, without limitation, any allegation of wrongful discharge, discrimination, or any injury to your physical, mental or economic interest."

In July 1995, Munshaw quit her job stating that she had been harassed. Claiming that the arbitration agreement was unenforceable, she filed a lawsuit alleging sexual harassment, assault and battery, violation of civil rights and emotional distress.

The Court of Appeal rejected Munshaw's contention, finding the arbitration provision to be even-handed and not unduly harsh. The court also held that even though the supervisors Munshaw sued were not parties to the mandatory arbitration agreement, as agents of the employer they were entitled to the benefit of the agreement to the extent their actions were within the course and scope of their employment. Applying these principles, the court granted summary judgment under the mandatory arbitration provision to 24 Hour Fitness and three of the four individual defendants.

24 Hour Fitness, Inc. v. Superior Court, 66 Cal. App. 4th 1199 (1998)

California Expands Longstanding Laws Regarding Job Applications and Surveillance

Governor Wilson recently signed into law two expansions to longstanding provisions of the California Labor Code. Both of these laws will take effect on January 1, 1999.