2005-5

HIV-Positive Applicants Who Were Denied Jobs as Flight Attendants Can Sue Airline for Discrimination

In Leonel v. American Airlines, Inc., DJDAR 2652 (9th Cir. No. 03-15890, March 4, 2005), the Ninth Circuit Court of Appeals reversed the summary judgments for American Airlines ("American") on the appellants' Fair Employment and Housing Act ("FEHA"), Americans with Disabilities Act ("ADA"), privacy, and Unfair Competition Law ("UCL") claims finding that the company did not establish at the summary judgment stage that it could not reasonably have completed the applicants' background checks prior to subjecting the applicants to medical examinations.

I. Factual Background

Appellants Walber Leonel, Richard Branton, and Vincent Fusco, all participated in American's standard application process for flight attendant positions in 1998 and 1999. Leonel, Branton, & Fusco flew to American's headquarters in Dallas, TX at American's expense on March 25,1998, June 25,1998, and May 27, 1999 respectively. Upon arrival, each participated in group interviews and then, after being chosen to progress, participated in individual interviews. Immediately after these individual interviews, American extended the appellants conditional offers of employment. In pertinent part, the offer stated "our offer is contingent upon your successful completion of a drug test, medical examination, and a satisfactory background check."

Once the conditional offers of employment were made, representatives from American directed the appellants to the company's medical department for examination. Upon arrival, appellants were instructed to fill out a series of forms, including a "Notice and Acknowledgment of Drug Test," which informed them that they would be asked to provide a urine specimen that would be tested for proscribed drugs. During the medical examination, American also required the appellants to complete a detailed medical history form that inquired as to whether appellants suffered from any known blood disorders, including HIV or AIDS. This form also required the applicants to list all medications currently being taken. At the time American requested the appellants for this information, each appellant was aware of his HIV-positive status. Further, at this time, no appellant identified the fact that they were taking with medications used to treat HIV.

After the written portion of the medical examination was complete, American nurses drew blood from each applicant. Unlike the "Notice and Acknowledgment" offered for the urinalysis procedure, American provided no explanation, nor did it seek written consent, for why the blood was to be drawn. Significantly, American did not disclose, even upon applicant request, the fact that a Complete Blood Count (CBC) would be run on the blood samples. For example, when appellant Fusco inquired as to what the drawn blood would be used for, the nurse simply replied "anemia."

Subsequent to the medical examination, the full blood work-up revealed that all three appellants had elevated CBC counts. American wrote the appellants and requested an explanation for the CBC results. At this juncture, all appellants, acting through their personal physicians, disclosed for the first time to American their HIV-positive status and the medications presently being taken for treatment that likely affected the CBC test. Upon learning that appellants were infected with HIV, American's medical department advised the airline's recruiting department that the appellants did not meet American's medical guidelines. The medical department stated that the grounds on which the appellants failed to satisfy the guidelines was their non-disclosure of HIV-positive status during the medical investigation. Based upon the medical department's findings, American wrote the appellants and rescinded their conditional offers of employment.

II. Procedural Disposition

The appellants, all California residents, challenged American's medical inquiries and examinations pursuant to the ADA, 42 U.S.C. ?12101 et seq. (1999), and the FEHA, Cal. Gov't. Code ?12900 et. seq. (1999). The appellants argued that American was not permitted to require them to disclose their personal medical information prior to American completing its non-medical background checks of them. Additionally, the appellants asserted that American violated their right to privacy guaranteed by the California Constitution as well as California's Unfair Competition law.

The District Court granted American's motion for summary judgment on all claims. The Ninth Circuit reversed, finding that the appellants had raised material issues of fact as to all claims. (1)

III. ADA and FEHA Claims

The court first concluded that there were genuine issues of material fact as to whether American's actions ran afoul of both the ADA and the FEHA. The court reasoned that both acts prohibit employers from refusing to hire job applications whose disabilities would not prevent them from performing the essential functions of the job with reasonable accommodations. To this end, the court noted that the ADA and the FEHA not only bar intentional discrimination, but also regulate the sequence of employers' hiring processes. As such, the court concluded, both statutes prohibit medical examinations and inquiries until after the employer has made a "real" job offer to the applicant. Relying on the EEOC Technical Assistance Manual on Employment Provisions of the ADA, the court defined a "real" job offer as an offer made after the employer has completed all non-medical components of its application process. The court did note that this sequence could be deviated from if an employer was able to demonstrate that it could not reasonably have conducted the medical prior to issuing the offer.

The Leonel Court reasoned that American arguably violated the principles of the ADA and FEHA in two significant ways. First, American conducted the medical examination before completing all other aspects of the application process. The court noted the policy significance of this course of action. According to the court, American, by not completing all relevant non-medical aspects of the application process, was essentially depriving the appellants of the opportunity to know with more certainty whether they were being rejected for legitimate reasons such as insufficient skills or lack of experience. Second, at the summary judgment stage, American failed to demonstrate that it could not have reasonably have completed the background checks before initiating the medical examination process. Accordingly, summary judgment with respect to the appellants' FEHA and ADA claims were reversed.

IV. California Right To Privacy

The court also found that material issues of genuine fact may exist as to whether that the drawing of the appellants blood violated the California constitutional right to privacy. The court began by noting that pursuant to Hill v. Nat'l Collegiate Athletic Assn, 865 P.2d 633, 657 (Cal. 1994), the drawing and testing of blood implicates a legally protected privacy interest. As the Hill court noted, "a person's medical profile is an area of privacy infinitely more intimate, more personal in quality and nature than many areas already judicially recognized and protected." Id. at 658. Here, the court reasoned that the blood test may have infringed upon a reasonably held expectation of privacy. In reaching this decision, the court noted that American "ushered" the appellants into the medical department and immediately subjected them to blood tests. Significantly, the court noted that the nurses charged with drawing the appellants' blood did so without first gaining written consent or informing the appellants of what the blood would be tested for. Particularly alarming to the court was the fact that in one case, the nurse lied to an applicant by saying that the blood was only being tested for anemia. Accordingly, summary judgment was reversed as to appellants privacy claims.

V. Unfair Competition Law Claims

The court also found that summary judgment was improperly granted as to appellants unfair competition claims. The court noted that California defines unfair competition to include any "unlawful, unfair, or fraudulent business practice, including actions of employers taken with respect to employees." Cal. Bus. & Prof. Code ? 17200 et seq. (emphasis added). As such, under the statute, unfair competition encompasses anything "that can properly be called a business practice, which at the same time is forbidden by law." The court noted that the UCL effectively borrows the alleged violations from other sources and makes those practices actionable under the UCL. Here, the fact that appellants raised material issues of fact as to whether the medical examinations were unlawful under the ADA, the FEHA, and the California Constitution validated the UCL claim predicated upon those other potentially meritorious claims.

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Female Employee Failed to Show that Discontinuation of Training Program was Motivated by Gender Bias

In Moderno v. Salt River Project, 2005 DJDAR 3093 (9th Cir. No. 03-16173, March 15, 2005), the Ninth Circuit affirmed the lower court's summary judgment dismissing appellant's claim under Title VII of the Civil Rights Act of 1964 finding that Moderno failed to demonstrate that the decision to discontinue an experimental training program was motivated by gender bias.

In November 1998, the Salt River Project ("SRP") notified five male electricians who were working in the Facilities Services Department that they were going to be laid off due to a restructuring of the department. IBEW Local 266 ("Union") representatives acting on behalf of those Facility Services Department electricians ("male electricians") inquired as to whether they could be relocated to the Facility Locating Department ("FLD"). Unfortunately, at the time, the male electricians were not qualified to be employed in the FLD as they lacked experience handling "high voltages" necessary to serve an "operations journeymen," positions SRP needed to fill.

To remedy this situation, the Union and SRP agreed to experiment with a trial on-the-job training program for the male electricians. According to the agreement, the male electricians would receive the training necessary to become a journeymen and, in the event positions became available, the male electricians would be permitted to bid for open positions. The agreement reached between the Union and SRP specifically stated that it, "is entered into on a non-precedential basis and neither party may use any factors indigenous to this particular matter as precedent setter for any future incidents . . . ."

In November 1998, SRP began the experimental program with the male electricians. Pursuant to the terms of the agreement, the male electricians began on-the-job training at the FLD. Significantly, although the male electricians commenced employment with the FLD at the "serviceman" level of experience, they were immediately compensated at the higher "journeyman" level. Ultimately, the male electricians who completed the training received permanent "journeyman" positions with the FLD.

Sylvia Moderno was hired by SRP in 1987 as a temporary electrician in the Groundwater Services Department ("GSD"). She became a regular employee in April 1988. Later that year, SRP concluded that two electricians were not needed for the projected work load in the GSD and Moderno was reassigned to perform non-electrical work. Despite this change in duty, Moderno continued to receive journeyman wages.

Later in 1988, Moderno was informed by SRP that there was a possibility that she would be laid off from her position in the GSD due to a decreased need for electricians. Following the notice of possible layoff, Moderno bid on several positions outside of the GSD including a position in the FLD. Moderno did not receive the position. Subsequently, on May 17, 1999, Moderno was laid off. This termination occurred six months after the male electricians were notified that they were to be laid off from the FSD.

After termination, Moderno made a request to participate in the experimental program offered to the male electricians. SRP denied this request. After consulting with the Union, Moderno agreed to a temporary assignment as a "serviceman" with the FLD and was paid at the "serviceman" level.

On December 2, 1999, Moderno was informed that she would be laid off from her temporary assignment. Subsequent to this layoff, Moderno filed a charge of sex discrimination with the EEOC. The EEOC concluded that "there is reasonable cause to believe [SRP] discriminated against [Moderno] because of her sex, female, when they denied her the opportunity to qualify for a permanent position as an Operations Journeyman." Accordingly, Moderno filed a gender discrimination action in district court pursuant to Title VII.

At the district court level, SRP argued that it had legitimate, nondiscriminatory reasons for its employment decision. First, SRP alleged that it did not want to have to continue paying "journeyman" wages for "serviceman" work. Second, SRP asserted that it declined Moderno's request because the experimental program was still being evaluated and the company had yet to determine if the program was the best method to satisfy its needs for properly trained "operations journeymen."

Moderno alleged that there was sufficient direct and indirect evidence to raise a genuine issue of material fact regarding whether SRP's justification for not extending the program was pretextual. In pertinent part, Moderno offered deposition testimony of one of the male electricians to demonstrate that SRP acted with discriminatory animus. The male electrician testified that he overheard a foreman say, "They bring a woman to do a man's job?" and that his personal opinion was that a female operations journeyman "was totally against what [the FLD] believed in."

Based on this evidence, the district court granted the SRP's motion for summary judgment holding that Moderno failed to present any direct evidence of discriminatory animus and that what indirect evidence was offered was "not specific or substantial."

On appeal to the Ninth Circuit, Moderno asserted that the district court erred in concluding that she did not present sufficient direct or indirect evidence to support the claim that she was discriminated against because of her gender. Moderno asserted that SRP management considered the concerns of FLD foremen and therefore acted unlawfully when SRP refused her request to join the training program.

The court disagreed. First, the court refuted Moderno's direct evidence that SRP refused to extend the program to Moderno because FLD foremen opined to management that women did not belong in the FLD by citing Moderno's very own evidence. Referencing a letter submitted by a member of SRP management to the EEOC which documented the company's concerns about the inadequacies of the training program such as cost and effectiveness, the court concluded that Moderno failed to present any evidence that the alleged comments made by the foremen influenced SRP's decision not to continue the experimental program. Second, the court refuted Moderno's claim that SRP's legitimate reasons were pretextual relying on the fact that Moderno failed to offer any evidence to impeach the legitimate reasons proffered by the SRP. In the court's opinion, Moderno's claim that SRP's business reasons were not credible because the male electricians were all hired as "operations journeymen" after the program overlooked the inherent inadequacies of the system which actually prompted SRP to discontinue the program.

Additionally, the court rejected Moderno's claim that the EEOC's determination that reasonable cause existed to believe that Moderno had been discriminated against creates a genuine issue of material fact as being without merit. The court noted that Moderno failed to cite to a single case holding that a determination letter from the EEOC is sufficient to create a genuine issue of material fact. Ultimately, the court concluded "that [although] a determination from the EEOC is highly probative . . . [it] . . . does not support Ms. Mondero's contention that an EEOC determination letter is somehow a free pass through summary judgment.

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Exhaustion Rule Requires Public Employee to Exhaust Administrative Remedies Before Proceeding to Lawsuit

In Campbell v. Regents of the University of California, 2005 DJDAR 2708 (Supreme Court No. S1132275, March 7, 2005), the California Supreme Court affirmed the trial court's demurrer of a retaliation claim for failure to exhaust administrative remedies created by the Regents of the University of California to handle whistle blower claims.

Janet Campbell was an architect for the University of California, San Francisco ("UCSF"). While employed for the Regents of the University of California, she complained to the University about violations of competitive bidding laws. When no action was taken, Campbell made a report to the Federal Bureau of Investigation. This action resulted in a criminal investigation of UCSF officials.

Thereafter, Campbell's job duties changed and she was assigned to less challenging and "more menial" tasks. Campbell soon went on extended disability leave. Shortly after she returned to work, she was discharged. The Regents blamed her discharge on downsizing. Campbell claimed that less senior and less qualified employees were retained.

Campbell subsequently filed an internal complaint alleging a violation of personnel policies. By letter, she was informed that allegations of retaliation for whistleblowing had to be filed under a specific whistle blower protection procedure, not the general personnel grievance procedure. Instead of refiling the complaint under the Regents' whistle blower protection procedure, Campbell opted to file a complaint in superior court. The Regents demurred, arguing that Campbell's refusal to file a grievance amounted to a failure to exhaust administrative remedies. The trial court sustained the demurrer to Campbell's complaint and the Court of Appeal affirmed the dismissal for failure to exhaust administrative remedies.

The California Supreme Court affirmed the dismissal of the complaint finding that Campbell should have exhausted administrative remedies before bringing suit. The court noted that the Regents' broad powers as a constitutionally-created arm of the state under Cal. Const. art. IX, ? 9 included the authority to create a policy for handling whistle blower claims. Further, the court rejected the architect's assertions that the administrative remedies were inadequate and that administrative jurisdiction was lacking. Rather, the court found that the Regents' Policy and Procedures allowed it to provide the complainant with "any appropriate relief" and to impose any sanctions on the offending employees. Finally, the court noted that neither Cal. Gov't Code ? 12653 (False Claims Act) nor Cal. Lab. Code ? 1102.5 (No retaliation for disclosing violations of the law to government or law enforcement) contained any provision abrogating the exhaustion requirement.

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Arbitration Clause Binds Employee to Arbitrate with Company that Took Over Operations of Employer

In Alliance Title Company Inc. v. Boucher, 2005 DJDAR 2481 (Cal.App. No. B176545, March 2, 2005), the California Court of Appeal reversed the trial court's order denying defendant's petition to compel arbitration, finding that a signatory to an agreement containing an arbitration clause may be compelled to arbitrate his claims against a nonsignatory when the relevant causes of action rely on and presume the existence of the underlying employment contract.

Craig Boucher signed an employment agreement with Financial Title Company ("Financial"), under which he would be employed as senior vice president and division president. Within the first year of his employment with Financial, the company's president informed Boucher that all of Financial's Southern California assets were being transferred to Alliance Title Company. The president additionally informed Boucher that he would no longer be working for Financial, but would be working for Alliance, a company which refused to honor the employment agreement reached between Boucher and Financial. Subsequently, when Boucher refused to enter into a new employment agreement with Alliance, Alliance terminated his employment.

Boucher filed suit in superior court alleging causes of action against both Alliance and Financial for violations of Labor Code sections 201 and 203 and violations of Business and Profession Code sections 17200 et seq. (2) Additionally, Boucher asserted two causes of action against Alliance alone. Those causes of action were for interference with contractual and prospective economic relations. Boucher alleged that Alliance intentionally or negligently disrupted the performance of his employment contract by, among other things, demanding that he disclose confidential information, refusing to provide him with necessary staff and offices, refusing to honor his sales, and demanding that he reject his contract with Financial and enter into a new contract with Alliance. Boucher further alleged that Alliance repeatedly directed him to breach the June 5, 2003 employment agreement and constructively terminated him without cause. In response, Alliance and Financial filed a petition to compel arbitration (3) under the United States Arbitration Act. (9 U.S.C., ? 1 et seq.).

The trial court found that while the United States Arbitration Act was applicable, it did not authorize Alliance to compel arbitration. Accordingly, the trial court granted the petition to compel arbitration as to Financial, but denied it to Alliance. The trial court reasoned that the fundamental point of the "federal decisional authority" was that a plaintiff should not be allowed to circumvent an arbitration clause by naming a nonsignatory as a party. However, here, the plaintiff was employed by a nonsignatory to the employment agreement and therefore should not be compelled to arbitrate by an entity not party to the underlying agreement.

The Court of Appeal disagreed. The court held that a signatory to an agreement containing an arbitration clause may be compelled to arbitrate his claims against a nonsignatory when the relevant causes of action rely on and presume the existence of the contract. The court found that Boucher was equitably estopped from avoiding arbitration of his causes of action against Alliance because his claims were intimately founded in and intertwined with the June 2003 employment agreement. The court further held that even though some of the claims were cast in tort rather than contract did not avoid the arbitration clause.

Accordingly, the court reversed the order denying Alliance's petition to compel arbitration and directed the trial court to enter a new order granting Alliance's petition to compel arbitration.

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1.The Ninth Circuit did affirm summary judgment for one applicant's claim of intentional infliction of emotional distress.

2. Plaintiff alleged causes of action against both Alliance and Financial for: nonpayment of wages in violation of Labor Code section 201; waiting time penalties under Labor Code section 203; breach of the employment contract; breach of the covenant of good faith and fair dealing; and unfair business practices in violation of Business and Professions Code sections 17200 et seq.

3. The arbitration clause stated in pertinent part: "Any dispute or controversy arising under or in connection with this Agreement shall be submitted to binding arbitration in Sacramento County, California, in accordance with the rules of the American Arbitration Association then in effect, and any award entered in such arbitration may be reduced to judgment in any court of competent jurisdiction."