California and U.S. Supreme Courts Address Retaliation Claims in Employment Suits

July 1, 2002

By: Barbara L. McCully

Damages Under Title VII Are Available For Time-Barred Acts Under Hostile Work Environment Claim

Title VII provides that a plaintiff shall file an employment discrimination charge with the Equal Employment Opportunity Commission ("EEOC") within either 180 or 300 days of an alleged unlawful employment practice. In an exceptionally confusing opinion, National Railroad Passenger Corporation v. Morgan, 2002 DJDAR 6371, the United States Supreme Court made a distinction between "discrete act" claims and "hostile work environment" claims.

In a case arising in California, the Court held that "discrete" discriminatory or retaliatory acts are not actionable if they are not filed within the statutory time period, even though they are related to acts alleged in timely-filed charges. The fact that past discriminatory acts had occurred and the employer knew of their occurrence, would not bar employees from filing charges about related discrete acts as long as the acts were independently discriminatory. (An employee alleging a discrete acts theory of liability is not precluded from using the prior acts as background evidence to support the timely-filed claims.)

In contrast, the Supreme Court found that because "hostile work environment" claims cannot be said to occur on a particular day, it does not matter that a number of the acts occurred outside the statutory time period, so that the employee may receive damages for all alleged wrongful acts, including those which would be time-barred under discrete acts theory of liability. The explanation for this is that this distinction while a hostile work environment is predicated on separate, although repeated, conduct, such incidences taken by themselves may not amount to a "discrete act" of discrimination or retaliation.

To determine whether otherwise time-barred acts are actionable under a "hostile work environement" theory, a court must first determine if such a claim exists by reviewing all of the circumstances. What was the frequency and severity of the conduct? Was it physically threatening or merely an offensive utterance? Did the conduct unreasonably interfere with an employee's work performance? Thereafter, the court must determine whether these complaints "are part of the same actionable hostile work environment practice, and if so, whether any act falls within the statutory time period."

Recognizing that it might be unfair to subject employers to liability for "hostile work environment" claims that extend over long periods of time, the Supreme Court reminded that an employer may defend against such claims by raising a laches, waiver, or estoppel, where it is shown that an employee did not act with diligence and the lack of diligence prejudiced the employer.

No Violation Of The Fair Employment And Housing Act For Age Discrimination With Regard To Employee Benefits

In Esberg v. Union Oil Co. of California, 2002 DJDAR 7073, the California Supreme Court held that an employer did not violate the Fair Employment and Housing Act ("FEHA") when it denied educational assistance benefits to a 56 year old employee because the age discrimination provisions of the FEHA do not encompass employee benefits.

In Esberg, plaintiff's supervisor told a group of employees that if any of them had not received an undergraduate degree, they should obtain one. Plaintiff applied for and obtained approval for educational aid from defendant to obtain a bachelor of science degree. Thereafter, plaintiff sought tuition reimbursement to obtain a Master of Business Administration degree. However, he was told that, because he was 56 years old, he was "too old to invest in" and he was denied funding. However, Defendant employer granted such aid for the MBA program for three younger employees, including one who was over forty years old.

Plaintiff filed a complaint alleging, among other things, that his employer violated the age discrimination provisions of the FEHA. Although the jury returned a verdict in plaintiff's favor, the trial court granted defendant's motion for judgment notwithstanding the verdict on the ground that denial of an employment benefit violated neither the FEHA nor public policy against age discrimination in employment. The Court of Appeal agreed with the trial court and the Supreme Court affirmed.

In so holding, the California Supreme Court noted that the FEHA has two separate provisions regarding employment discrimination. Government Code section 12941 prohibits an employer from discriminating with regard to the "terms, conditions, or privileges of employment because of an employee's race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex or sexual orientation." On the other hand, section 12941, which specifically addresses age discrimination, only makes it "an unlawful employment practice for an employer to refuse to hire or employ, or to discharge, dismiss, reduce, suspend, or demote, any individual over the age of forty on the ground of age . . . ". In addition, section 12941.1 provides that the use of salary as the basis for differentiating between employees when terminating employment may be found to amount to age discrimination if use of salary as a criterion adversely impacts older workers as a group.

Recognizing that neither section 12941 or section 12941.1 prohibits age discrimination "in the terms, conditions, or privileges of employment", plaintiff relied on a regulation issued by the Fair Employment Housing Commission which provides that age discrimination " . . . may be established by showing that . . . employee's age over forty was considered in the denial of an employment benefit." It was plaintiff's contention that the administrative regulation was valid and reasonably necessary to effectuate the purposes of the FEHA.

Unlike the United States Supreme Court in Chevron U.S.A., Inc. v. Echazabal (see accompanying article regarding recent cases under the ADA), the California Supreme Court found that the regulation was invalid. While recognizing that the Commission had the authority to issue regulations concerning matters contained in the FEHA, the Court found that the regulation at issue was inconsistent with the terms and intent of the FEHA. Because the Court was not reviewing "the wisdom of the Legislature's decision" . . . not to include employee benefits in the age discrimination prohibition of section 12941, the Court found that the clear language of section 12941 mandated a finding in the employer's favor.

The Supreme Court also rejected plaintiff's claim that denial of educational assistance on the basis of age violated a fundamental public policy and, thus, constituted a tort for which damages were recoverable. In so holding, the Supreme Court reiterated that because a violation of public policy violation claim must be based on a specific constitutional or statutory provision, a public policy law claim is subject to the same statutory limitations affecting the nature and scope of the statutory prohibition. Because the FEHA does not prohibit employers from denying benefits on the basis of age, plaintiff could not base his common law claim for denial of the same benefits.

Claims For Retaliation Under Labor Code Section 132a For Filing Worker's Compensation Action May Be Pre-Empted By Erisa

In Navarro v. A&A Farming, 2002 WL 236699 (Cal.W.C.A.B.), 67 Cal.Comp. Cases 145, the California Worker's Compensation Appeals Board abrogated a long line of cases by finding that claims brought under Labor Code section 132A (prohibiting an employer from discriminating or retaliating against an employee for advising about or filing a worker's compensation claim or testifying in connection with a worker's compensation proceeding) is pre-empted by ERISA where the basis of the discrimination or retaliation involves benefits governed by ERISA. Although the case is not a published appellate decision, it follows a federal district court case that is published and is citable.

In Navarro, the employer, A&A Farming, participated in a multi-employer trust that provided medical, dental, vision and other benefits to the employees of participating employees. The Trust, which was funded in part by employer contributions, was an employee welfare benefit plan within the meaning of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. '1001 et seq.

Under the terms of the Trust, the employer could establish a general policy to continue contributions to the Trust on behalf of a disabled employee for up to 180 days after the employee became disabled and ceased active work. At the time A&A Farming joined the Trust it adopted a policy providing that it would continue to make contributions to the Trust for its disabled employees for a period of 90 days, whether or not the disability was work-related.

The applicant sustained several industrial injuries to his back and as a result of those injuries stopped working on April 5, 2000 and had back surgery. He never returned to work at A&A after April 5, 2000 although he would have done so if he were physically able. While actively working he contributed $20 per month to the Trust. After he stopped working, A&A made the contributions on his behalf for the months of May, June and July in accordance with its continuation policy. Applicant sent his check for $20 for each of these months plus the month of August 2000.

By letter dated August 15, 2000, A&A returned applicant's check for August stating that it would provide medical coverage for disabled employees only for a period of 90 days after the commencement of leave due to disability. Continuation of the health coverage was offered under COBRA.

The applicant filed a 132a discrimination claim, contending that the failure to continue contributing to the Trust on his behalf while he was temporarily disabled on an industrial basis constituted unlawful discrimination in violation of section 132a.

The WCAB examined a number of Supreme Court cases that establish that ERISA preempts any state law discrimination claim "where the existence of, the implementation of, or the specific terms of an employer's ERISA plan are central to (indeed, critical to) that claim":

The clear import of the foregoing Supreme Court cases leaves little doubt that applicant's section 132a claim is preempted by ERISA.

ERISA does not itself proscribe discrimination in the provision of employee benefits and section 132a cannot make unlawful a failure or refusal to provide ERISA-regulated benefits where such failure or refusal is not prohibited by federal law. Moreover, to conclude section 132a was not preempted would be inconsistent with the reservation to Federal authority the sole power to regulate employee benefits plans and inconsistent with Congress's intention to 'eliminate the threat of conflicting state and local regulation.

The WCAB also noted that in a recent federal court case, Scotti v. Los Robles Regional Center (C.D.Cal. 2000) 117 F.Supp.2d 982, the court dismissed a 132a claim as preempted by ERISA involving the discontinuing funding of an employee's group health benefits when the employee was on leave of absence greater than six months. The court in Scotti pointed out that "even indirect state action affecting private [ERISA plans] may impermissibly encroach on an exclusively federal area,' and that 'a direct relationship to a plan need not be established because an indirect relation to a plan is sufficient to establish preemption."

Based on its analysis of the cases, the WCAB concluded:

". . . that applicant's section 132a claim 'relates to' his employer's ERISA plan and is preempted by ERISA. In essence, he is asserting that his employer's action in setting up, executing, and administering the terms of its ERISA plan discriminated against him as an industrially-injured worker because, but for his injury, he would have continued working and he would have continued receiving health benefits under the ERISA plan. Thus, applicant's section 132a claim is directly premised upon the existence of his employer's ERISA plan and upon his employer's refusal (pursuant to the terms of the ERISA plan) to continue its plan contributions on his behalf."

Individuals May Be Liable For Retaliatory Conduct

In the first California appellate court decision to address this question, Walrath v. Sprinkel, 2002 DAR 7561, the court held that individual supervisors are liable for retaliation.

In a terse and unanalytical opinion, the appellate court distinguished Reno v. Baird 18 C4th 640, 663-664 (1998), finding that the Fair Employment and Housing Act (FEHA) "retaliation" provision applies to "any person," as opposed to only an "employer."