2002-11

CALIFORNIA CASES

A. California Supreme Court Holds That Catholic Hospital Is Exempt From Public Policy Claim For Terminating Employee For Using Objectionable Religious Speech

In Silo v. CHW Medical Foundation, et al., 2002 DJDAR 5354 (May 17, 2002) (opinion filed 5/16/2002), the California Supreme Court, ⁽¹⁾ held that as a matter of law CHW Medical Foundation (the "Hospital") could not be held liable for public policy wrongful termination for terminating an employee for engaging in religious speech in the workplace.

Terence Silo began working at the Hospital in 1991 as a file clerk. In 1992, he experienced a religious conversion and began to proselytize at work. In early 1993, Silo was disciplined after an employee complained that Silo had asked one of them not to "use the name of God in vain" and a patient complained that Silo was preaching at him/her. Silo was counseled that he should not use the word "God . . . unless it's off the clock." In April 1993, Silo was terminated because he engaged in three incidents of "Soul Saving" and "preach[ing]" on three occasions despite prior warnings and counseling. Silo sued alleging discrimination in violation of FEHA and for public policy wrongful discharge under Cal. Constitution, Article I, Section 8. ⁽²⁾

The California Supreme Court held that the Hospital could not be held liable for Silo's termination as a matter of law under his public policy claim. Although the Court recognized that article I, section 8 of the California Constitution expresses a fundamental policy against religious discrimination, "the state and federal free exercise and establishment clause gives religious organizations some degree of latitude to choose their employees in order to define their religious mission." The Court further explained that the exemption under FEHA for nonprofit religious organizations from liability is a "legitimate means of promoting the autonomy of religious organizations implicit in the state and federal Constitutions' free exercise and establishment clauses." Thus, the Court concluded that the public policy against religious discrimination under article I, section 8 "must be qualified by the public policy of permitting religious employers considerable discretion to chose employees who will not interfere with their religious mission or message." In the present case, the Court found that "restricting the ability of a religiously affiliated employer to control religious speech at the workplace would not only potentially interfere with its mission, but could excessively entangle the courts in determining what kind of religious speech is appropriate in a religious organization's workplace." ⁽³⁾

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B. Verdict In Favor Of Adult Video Store Employee Claiming Hostile Work Environment and Sexual Orientation Discrimination Affirmed

In Briseno v. Diamond Video World Inc., 99 D.L.R. A-6 (Cal. Ct. App. 5/22/2002) (unpublished opinion filed on 5/15/2002), the California Court of Appeal affirmed the $10,608 jury verdict for sex harassment of a former employee of an adult video store and the $19,123 attorney's fee award. Zachery Briseno, who worked as a sales clerk, alleged that his supervisor, Anna Moore, first began subjecting him to a hostile work environment when she placed him in a "sex harness" that was sold at the store and then displayed in the workplace a photo she took of him in the harness. He further claims that on 11 occasions, Moore used a "horse riding crop" on his buttocks when he made mistakes on the cash register. He testified that he complied with the treatment because he feared losing his job. Moore also allegedly placed a collar around his neck and attached a leash and that she also asked him to apply sex balm lotion to his genitals. Briseno further claimed that Moore, a lesbian, referred to him as a "breeder" because of his heterosexuality and said to another gay employee that they would "break him in."

After plaintiff presented his case, the trial court determined that Briseno was not fired because he was heterosexual. While Briseno originally did not allege sex harassment, Briseno was allowed to amend his complaint to include a hostile work environment claim. The trial judge reportedly said, "I don't think he wanted to get trussed up in this sexual swing and have his picture taken. I think he was required to do it." The Court of Appeal agreed and affirmed the verdict.

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CIRCUIT CASES

In Freeman v. Oakland Unified School District, 2002 DJDAR 5750 (9^th Cir. 5/24/2002) (opinion filed on 5/23/2002), the Ninth Circuit ⁽⁴⁾ held that summary judgment was properly granted in favor of the school district on the grounds that plaintiff failed to properly exhaust his administrative remedy. In his EEOC Charge, Freeman solely claimed that there was discrimination in the context of an election for the Faculty Advisory Council, an annual election among school faculty to select representatives on matters relating to the operation of the school. In his suit, Freeman claimed that the school district engaged in various discriminatory acts relating to teaching assignments, class size and the handling of a dispute regarding over the length of the work day.

The Ninth Circuit held that plaintiff failed to exhaust his administrative remedies because the EEOC charge did not allege any discrimination with respect to teaching assignments, class size and workday issues. The Court did not find that the allegations in the EEOC Charge were like or reasonably related to those in the Complaint. The Court also did not find a reasonable EEOC investigation of the charge would have focused on anything beyond the issue regarding the Faculty Advisory Council election. Similarly, the Court held that the continuing violation theory could not save plaintiff's Complaint. The Charge only alleged one type of discriminatory act. There were no allegations of a pattern or practice of discriminatory conduct. Thus, the Court held that the district court did not have subject matter jurisdiction over plaintiff's Complaint based on his failure to exhaust.

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B. Ninth Circuit Holds That Employer's Switch To Less Favorable Benefits Package Does Not Constitute Violation Under The FMLA

In Funkhouser, et al. v. Wells Fargo Bank, N.A., 2002 DJDAR 5299 (9^th Cir. 5/16/2002) (opinion filed on 5/15/2002), the Ninth Circuit ⁽⁵⁾ held that Wells Fargo did not violate the FMLA when it reduced its sick day and vacation policy benefits after it merged with Northwest Bank in 1998. Prior to the merger, employees earned one sick day per month and any unused sick days could be carried over to succeeding years, but employees could take no more than 120 days per year. Also, employees earned between 5 and 25 days of paid vacation per year depending upon seniority. After the merger, Wells Fargo adopted a Paid Time Off (PTO) program and a Short Term Disability (STD) program. Under the PTO program, employees are allowed between 25 and 35 days annually for sick and vacation time, but only five unused days can be carried over to the succeeding year and must be used by March 15 of such year. Under the STD program, employees may take up to 21 weeks per year for absences due to employee illness. STD days are paid at either 65% or full pay depending on seniority. After the change, plaintiffs sued Wells Fargo for allegedly violating the FMLA and for breach of contract.

The district court dismissed the FMLA claim finding no violation. The district court found that plaintiff's breach of contract claim was not preempted by ERISA and declined to exercise supplemental jurisdiction.

The Ninth Circuit affirmed and held that Wells Fargo did not violate the FMLA by offering less favorable benefits package. The Court held that, "An employer may freely change its program, even if the change results in a reduction in benefits." The Court further explained that, "An employer complies with the FMLA so long as it meets or exceeds the statute's minimum requirements." The Court found that the FMLA does not create an entitlement to accrued sick time and that Wells Fargo's post-merger benefits package exceeds the FMLA's minimum leave requirements.

With respect to the contract claim, Wells Fargo argued that the district court was without jurisdiction to rule on the ERISA preemption issue because it ultimately declined to exercise supplemental jurisdiction. The Ninth Circuit rejected this argument and held that the district court had jurisdiction to consider whether the claim was completely preempted by ERISA. The trial court was "obligated to consider complete preemption to determine whether a federal question existed." The Ninth Circuit further held that the contract claim was not preempted by ERISA because the pre-merger policies fell within the "payroll practices" exception to "employee benefit plans." The Court also held that mere reference to the pre-merger plan to calculate potential damages does not result in ERISA preemption.

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C. Eleventh Circuit Holds That Employees' Refusal To Sign Mandatory Arbitration Agreements Is Not A Protected Activity To Support A Retaliation Claim Under Title VII

In Weeks v. Harden Manufacturing Corp., 102 D.L.R. A-1 (11^th Cir. 5/28/02) (opinion filed 5/22/2002), the Eleventh Circuit held that plaintiffs could not state a retaliation claim because they did not engage in any protected activity. Plaintiffs worked for Harden Manufacturing until after they refused to sign a new compulsory arbitration policy issued by the Company as part of its revised handbook. The Company required all employees to agree to the arbitration provision as a condition of continued employment. Plaintiffs claimed that the Company violated Title VII, ADEA and ADA by terminating their employment for refusing to sign an arbitration agreement which they believed to be unenforceable. In agreeing with the Company, the Eleventh Circuit held that plaintiffs "could not have 'reasonably believed' that [the] agreement was an unlawful employment practice at the time they refused to agree to the policy." The Court recognized that arbitration agreements have now received "near universal approval." Moreover, the Court found that nothing in Title VII, the ADEA and ADA identifies compulsory arbitration agreements to be an unlawful employment practice."

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D. Seventh Circuit Holds That Environmental Service Manager With Arthritis Failed To Show Pretext Despite His Termination's Close Proximity To His Knee Surgery

In Dvorak v. Mostardi Platt Assocs. Inc., 96 D.L.R. A-9 (7^th Cir. 5/17/02) (opinion filed 5/10/2002), the Seventh Circuit held that summary judgment was properly granted where no reasonable jury could find that the Company's reasons for terminating plaintiff were a pretext for disability discrimination. In 1996-97, Kevin Dvorak experienced health problems relating to his arthritis which required him to take many days off. By March 1997, Dvorak had exhausted his sick leave and had to use two weeks of vacation time to undergo arthroscopic knee surgery. Prior to Dvorak's taking his leave for the surgery, management asked him to prepare a plan on how to improve results within his department. Upon his return in early April 1997, Dvorak submitted a plan that "read more like a tirade against the company than like a constructive proposal for improving work unit performance." After management met with Dvorak regarding the plan, the Company decided that given Dvorak's disability, performance and attitude, he should be placed on a temporary medical leave of absence under the FMLA on April 3, 1997. When Dvorak resisted, he was told that his leave was mandatory and to clear out his desk.

Dvorak claimed that he was terminated on April 3 although he was in contact with the Company about processing his leave of absence through May 1997. During this time period, the Company discovered that Dvorak had tampered with a Company laptop, that the customer's database had been improperly stored on the computer hard drive, and that he had used the computer for personal purposes, including sending messages critical of the Company to a competitor. The Company sent two letters to Dvorak in May attempting to discuss the foregoing issues, but Dvorak did not respond. On May 28, the Company sent Dvorak a letter indicating that he was fired citing his misuse of the laptop and the April 1 memorandum.

In affirming summary judgment, the Eleventh Circuit explained that although the termination happened in close proximity to Dvorak's knee operation and arthritis flare-ups, Dvorak failed to raise a jury issue that the adverse employment action was motivated by unlawful discrimination. The Court found that Dvorak failed to show that the Company decision makers did not believe that his job performance was subpar or that they were not genuinely concerned about Dvorak's misuse of a company laptop. The Court explained, "It does not mater whether the employer was ultimately wrong or unfair in the determination, nor whether a jury in the company's shoes would have fired him."

Dvorak argued that his termination was effective April 3 and therefore, the Company could not rely on the misuse of the computer as a reason for the termination. The Court disagreed and held that the legal test for date of discharge is when an employee received "unequivocal notice of termination." Here, the Company placed Dvorak on FMLA leave which is only available to its "employees" and the Company continued to remain in contact with him after April 3. While Dvorak was ordered to clean out his desk, the Court found that such order alone is simply not sufficient to show that the earlier date was his termination date.

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E. Seventh Circuit Affirms Summary Judgment Based On Employee's Failure to Show Pretext In Race Discrimination and Retaliation Case

In Wells v. Unisource Worldwide Inc., 95 D.L.R. A-4 (7^th Cir. 5/16/02) (opinion filed on 5/10/02), the Seventh Circuit affirmed the granting of summary judgment in a race discrimination and retaliation case filed by a former African-American credit administrator. Unisource, which sold janitorial cleaning products in Illinois and Wisconsin, had two credit administrators who were both located in Illinois. One of them was Anna Wells and the other was Betsy Novinski, who is Caucasian.

In 2000, Unisource decided to relocate its credit administrators to handle only local customer accounts. Upon learning of the decision, Novinski immediately applied for another position in the Illinois facility. Wells delayed, and when she applied for an Illinois position, she was rejected. The position required 3 to 5 year of commercial credit experience and was awarded to a Caucasian woman with 10 years of experience handling 7-figure accounts. Wells only had 13 months of experience in commercial credit and only in the 4 to 5 figure range. Wells applied for other positions and was denied all of them. Wells requested Unisource to create a part-time position for her in Illinois, which was also turned down. When Wells' position was transferred to Wisconsin, she refused to go and was fired.

Wells claimed that she was discriminated against on the basis of her race and was retaliated against because she filed a discrimination claim two years ago. In proving her discrimination claim, she offered the following evidence: a testimony by a co-worker who said a decisionmaker had a "problem with" African Americans; no White credit administrators were transferred; and that the reasons for hiring the more experienced commercial credit manager were pretextual. The Court found that the plaintiff failed to provide sufficient evidence to defeat summary judgment. The Court held that, "Conclusory assertions about a decision-maker's racial prejudice are insufficient to establish pretext." The Court found that Novinski's position was also transferred to Wisconsin and that the other credit administrators whose positions were not transferred were not similarly situated. Finally, the Court found the marked differences in the qualifications of Wells and the Caucasian woman hired for the commercial credit position were not pretextual.

As for Wells' retaliation claim, the Court recognized that it has been consistently held that "a one-year lapse between the protected expression and the employee's termination, standing alone, [is] too attenuated to raise an inference of discrimination." Here, there was a two-year lapse. The Court also dismissed Well's conspiracy theory-that the Company decided to fire her when she filed her discrimination complaint in 1998, promoted her a year later, and waited another year before transferring her position to Wisconsin.

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F. Eleventh Circuit Holds That Employee Is Judicially Estopped From Claiming Damages In Discrimination Suit Because Employee Failed to Disclose Suit As An Asset In His Bankruptcy Proceeding

In Burnes et al. v. Pemco Aeroplex Inc., 101 D.L.R. A-1 (11^th Cir. 5/24/02) (opinion filed on 5/20/02), the Eleventh Circuit held that one of the plaintiffs, Levi Billups, was barred from pursuing damages in his discrimination suit under the doctrine of judicial estoppel. In July 1997, Billups filed a Chapter 13 bankruptcy. Six months later, he filed an administrative charge of discrimination against his employer. One year later, he and 35 other employees filed an employment discrimination suit against Pemco. Billups never amended his Chapter 13 bankruptcy forms to include the lawsuit. When he was ordered to update his schedules upon conversion of his bankruptcy to Chapter 7 in 2000, Billups still did not report the lawsuit. In 2001, Billups received a "no asset" complete discharge of his debts in excess of $38,000. Shortly thereafter, Pemco moved for summary judgment claiming that Billups is judicially estopped from pursuing his discrimination claim because he failed to disclose it to the bankruptcy court, which was granted.

The Eleventh Circuit affirmed and held that Billups was estopped from pursuing his discrimination claim to the extent that he is claiming damages, but may pursue his claim for injunctive relief. The Court held that in order to assert judicial estoppel, a party must show that "the allegedly inconsistent positions were (1) made under oath in a prior proceeding and (2) calculated to make a mockery of the judicial system." Here, Billups' bankruptcy forms were all signed under oath and Billups had a continuing duty to update the forms as circumstances change. Billups argued that judicial estoppel should not be invoked because Pemco has not been prejudiced. The Court disagreed and stated that the doctrine "protects the integrity of the judicial system, not the litigants." Billups also argued that the omission was an inadvertent error. The Court found that "deliberate or intentional manipulation can be inferred from the record." Finally, Billups requested that he should be allowed to reopen the bankruptcy proceeding to amend his filings. The Court denied the request and held that to do so would only encourage debtors to disclose potential assets only if they are caught concealing them.

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1. Opinion was written by Moreno, J., with George, Kennard, Baxter, Werdegar, Chin and Brown concurring.

2. At trial, Silo was awarded $6,305 in economic damages and $1 in noneconomic damages. Silo was also awarded $155,245.75 in attorney's fees.

3. The Court acknowledged the 1999 amendment of FEHA's definition of "employer" to include a religious corporation or association with respect to persons employed to perform duties, other than religious duties, at a health care facility operated by the religious association/corporation for the provision of health care that is not restricted to adherents of the religion that established the association/corporation. Because Silo's termination preceded the 1999 amendment, the Court found the amendment inapplicable.

4. Opinion by Tallman, with O'Scannlain and King concurring.

5. Opinion by O'Scannlain, with Fletcher and Berzon concurring.

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