Jury Verdict For Plaintiff On FEHA Harassment Claim Is Reversed For Insufficient Evidence, Because It Was Based On Conduct Within The Scope Of Supervisor’s Business And Management Responsibilities.

            In Roby v. McKesson HBOC, Inc., 2006 DJDAR 16848 (Cal.App. 3rd Dist. Dec. 26, 2006)( ), the California Court of Appeal found insufficient evidence to sustain a jury verdict for the plaintiff on her cause of action for mental disability harassment under the state Fair Employment and Housing Act, Cal. Gov’t Code § 12940 et seq. (FEHA).  The court held that supervisory actions within the scope of a supervisor’s business and management duties, or necessary to carry out the duties of the business and personnel management, may be found to be discriminatory, but cannot be used to impose personal liability on a supervisor for harassment.  The employer did not appeal from the verdict for the plaintiff on several other causes of action.  In an unpublished portion of the opinion, the court reduced the original monetary verdict of nearly $19,000,000 to $3,405,000.

            Plaintiff Sharlene Roby had been a long-term McKesson employee with good attendance and an excellent performance record until she developed panic disorder in early 1998.  Roby’s panic attacks were accompanied by physical symptoms such as difficulty breathing, uncontrollable shaking, scratching or picking at her arms until they bled, and profuse sweating.  Because of medication she was taking for this condition, she developed an unpleasant body odor.  Her supervisor at the time would have Roby take a break and try to calm her down.  However, she missed work on at least four or five occasions because of the panic attacks and her supervisor became concerned that it was affecting her job performance.

            In April 1999, Roby was assigned a new supervisor, Karen Schoener.  Roby’s outgoing supervisor was concerned about the assignment of Schoener to Roby because there was great animosity between the two women.  In late 1998, McKesson had instituted a new attendance policy under which an employee could be terminated if she accumulated too many “occasions” or absences within a specified period.  Although McKesson allowed employees to take excused time off under the federal Family and Medical Leave Act (FMLA), the absences were counted as occasions unless the employee specifically requested the FMLA paperwork.  McKesson’s employee handbook did not explain an employee’s FMLA rights.  Except for one 5-day absence for which Roby filled out FMLA paperwork, her absences were always treated as occasions, regardless of the reason.  The evidence showed that McKesson treated other employees far more leniently.  Roby’s complaints that she was not being treated the same as other sick and injured employees were met with indifference. 

            Schoener openly displayed her dislike of Roby.  She did not return Roby’s greetings and would sometimes turn her back on her.  She referred to Roby’s job as a “no-brainer.”  Every month, Roby would bring a McDonald’s apple pie for all of her subordinates, except Roby.  She would also bring souvenirs back from her vacations and give them to every coworker, except Roby.  Schoener made Roby cover the telephones during the office Christmas party and would loudly reprimand Roby in front of her colleagues.  Schoener also made negative comments about Roby’s body odor and sometimes showed a look of disgust as Roby walked by. 

            In April 1999, Roby received a disciplinary warning for excessive absences.  Roby told supervisor Diane Saamer that the absences were related to her panic disorder and that she was trying to get her condition stabilized.  Roby continued to take days off because of her panic disorder.  Several of her absences were accompanied by a note from her psychiatrist verifying that she was ill and unable to work.  On April 13, 2000, after subsequent unscheduled absences earlier in the year, Roby was told she was subject to termination for abuse of the absence program.  Roby complained that the absence policy was not applied fairly because other employees suffering from medical conditions received more leeway.  Roby was suspended with pay on April 13 and told that her supervisors would investigate the facts and let her know their final decision.  The next day, Roby was terminated.  She filed a written grievance asserting that her absences during the prior twelve months were all related to her illness on file.  McKesson’s investigation amounted to nothing more than counting up the number of Roby’s absences and reaffirming its decision to fire her.  In upholding the termination, McKesson did not consider whether the absences would be excused under the FMLA, since Roby had filled out FMLA paperwork in only one instance. 

            Roby’s lawsuit against McKesson and Schoener was tried to a jury on causes of action for wrongful termination in violation of public policy, as well as statutory FEHA claims for disparate treatment based on mental disability, disability discrimination, failure to accommodate, and hostile work environment harassment.  Roby prevailed on all claims.  The jury awarded her $3,511,000 in compensatory damages against McKesson and $500,000 against Schoener, as well as $15,000,000 in punitive damages against McKesson and $3,000 against Schoener.  The defendants appealed only from the verdict on the harassment claim and the awards of compensatory and punitive damages.

            The Court of Appeal found that the verdicts against McKesson and Schoener for hostile work environment harassment were not supported by substantial evidence.  To establish harassment based upon a hostile work environment, a plaintiff must “demonstrate that the conduct complained of was severe enough or sufficiently pervasive to alter the conditions of employment and create a work environment that qualifies as hostile or abusive to employees because of their [mental disability].”  The harassment cannot be occasional, isolated, sporadic, or trivial, but, rather, must consist of a concerted pattern of harassment of a repeated, routine or generalized nature.  Moreover, the harassment must satisfy an objective and a subjective standard.  A plaintiff must prove “that the defendant’s conduct would have interfered with a reasonable employee’s work performance and would have seriously affected the psychological well-being of a reasonable employee and that [he] was actually offended.”

            Because commonly necessary personnel management actions necessary to carry out the duties of business and personnel management will not support a harassment claim under Reno v. Baird, 18 Cal. 4th 640 (1998), the court concluded that most of the harassment alleged by Roby was conduct that fell within the scope of Schoener’s business and management duties.  Conduct such as selecting Roby’s job assignments, ignoring her at staff meetings, portraying her job responsibilities in a negative light, or reprimanding her in connection with her work performance cannot be used to support a hostile work environment claim.  The court observed that when “Reno-protected conduct is sifted out, what we have left is evidence that Schoener treated Roby with general scorn and contempt and fail to show any sympathy for her disability.  This is not sufficient to create liability for harassment based on a hostile work environment.”  The court further noted that the FEHA “is not intended to protect employees from rude, boorish, obnoxious behavior by their supervisors.”  No matter how unpleasant Schoener’s behavior towards Roby may have been, “her conduct cannot be deemed harassment unless it was based on and directed toward Roby’s mental disability.  The conduct must not only be severe or pervasive, it must be also be tinged with discriminatory animus.” 

            With the exception of Schoener’s occasional negative comments about Roby’s sweating and body odor, the court found none of the alleged behavior to be harassment colored by discriminatory animus.  As for the body odor comments, because the unpleasant odor disturbed Roby’s fellow employees and thus affected the work environment, the court found that Schoener’s admonitions to Roby to bathe more frequently had a reasonable relationship to her management duties and cannot be classified as harassment.

            Although the evidence showed that Schoener disliked Roby, shunned her, and showed no compassion for her condition, “neither cold indifference nor lack of sensitivity toward a disabled employee can be alchemized into a claim of hostile work environment.  If such were the case, virtually every case of disability discrimination could be parlayed into a supplementary damage claim for harassment.”  (Emphasis added.)

            Roby also claimed that Schoener’s behavior aggravated her symptoms and left her emotionally destroyed.  The court commented, however, that Roby, who was already emotionally frail from the effects of her psychological disorder, was highly susceptible to even the slightest display of antipathy.  To be actionable, the objectionable environment “must be both objectively and subjectively offensive, one that a reasonable person would find hostile or abusive and one that the victim in fact did perceive to be so.”  Thus, a plaintiff who subjectively perceives the workplace as hostile or abusive will not prevail under the FEHA, if a reasonable person in plaintiff’s position, considering all of the circumstances, would not share the same perception. 

            Based on the foregoing, the court found there was insufficient evidence to support a finding that Schoener engaged in discriminatory harassment and, thus, the harassment verdict against McKesson failed as well.

            The unpublished portion of the court’s opinion includes a lengthy discussion regarding duplicative non-economic damage awards.  (A request to publish these portions of the decision has been filed and is pending.)  The court found that, aside from the harassment cause of action, the jury had improperly allocated damages for a single compensable injury, i.e. the violation of plaintiff’s primary right to continued employment despite her mental disability, among alternative legal theories of liability.  The court concluded that any judgment that duplicates an item of damage in this manner constitutes overcompensation.  The court thus reduced the original verdict of $3,511,000 in compensatory damages to $1,405,000. 

            In another unpublished portion of its decision, the court found the $15,000,000 punitive damages award was excessive and reduced it to $2,000,000.  The original verdict of $3,511,000 in compensatory damages and $15,000,000 punitive damages yielded a ratio of 4.272 to 1.  The court found that a 4 to 1 ratio does not fall within constitutional limits in this case because: (1) the original punitive damage award was based on the jury’s determination that McKesson was guilty of harassment, a finding that was rejected on appeal; (2) the compensatory damage verdict in the case, even after the appellate court’s reductions, is substantially large enough to reflect indignation at McKesson’s conduct; and (3) the size of the punitive damage award “dwarfs the maximum civil FEHA penalties for the same wrongful conduct.”  The court concluded that a “pro tanto reduction” of punitive damages to reflect the same ratio as the original jury award would not comport with due process.

A Class Action Waiver In An Employee Arbitration Agreement Is Enforceable Where Plaintiff Failed To Prove The Action Involved Only Small Amounts Of Individual Damages.

            In Konig v. U-Haul Company of California, 2006 DJDAR 16494 (Cal. App. 2nd Dist. Dec. 19, 2006)( ), the California Court of Appeal affirmed a trial court’s order granting defendant U-Haul Company of California’s motion to compel arbitration and dismissing plaintiff’s class action claims, and held that a class action waiver in U-Haul’s employee arbitration agreement was not substantively unconscionable absent proof that only small amounts of individual damages per class member were involved.

            Plaintiff Ron Konig filed a proposed class action for unpaid wages and unfair business practices against his former employer, U-Haul.  The complaint alleged various violations of the California Labor Code and the Business and Professions Code.  Konig alleged that U-Haul failed to pay its employees overtime and accrued vacation.  He asserted that U-Haul had a corporate policy and practice of improperly classifying employees engaged in service oriented duties and tasks as “sales,” so as to call these members of the class “outside sales persons” and classify them as exempt employees.  The complaint alleged that class members were regularly required to work more than 40 hours in a week and/or eight hours in a day without overtime compensation and that U-Haul did not allow its employees to take meal and rest breaks.  Konig sought damages on behalf of himself and similarly situated current and former U-Haul employees.  Konig explicitly alleged his claims were typical of all other class members.

            U-Haul moved to compel arbitration based on the company’s arbitration policy that was acknowledged and signed by Konig.  The policy stated that the decision to accept employment with U-Haul constituted the individual’s agreement to be bound by the arbitration policy.  The policy bound both Konig and U-Haul to use the U-Haul Arbitration Policy as the sole means of resolving any employment related disputes.  Pursuant to the policy, both parties agreed to “forego and waive any right to join or consolidate claims in arbitration with others or to make claims in arbitration as a representative or as a member of a class or in a private attorney general capacity, unless such procedures are agreed to by both you and [defendant].”

            There was also an employee arbitration agreement to be signed by each employee.  This agreement provided in part:  “I understand that final and binding arbitration will be the sole and exclusive remedy for any such claim or dispute against [defendant] ... and that, by agreeing to use arbitration to resolve my dispute, both [defendant] and I agree to forego any right we each may have had . . .  to bring claims on a representative, class member basis, or as a private attorney general.”  In support of the motion to compel arbitration, defendant presented evidence that Konig had “accepted the written terms” [of the U-Haul Arbitration Policy] as a “condition of his employment” in July 2003.  U-Haul terminated Konig in July 2004.

            Konig filed a complaint with the Department of Fair Employment and Housing. alleging he was terminated for complaining about harassment and unprofessional behavior in violation of the California Fair Employment and Housing Act.  In opposition to U-Haul’s motion to compel arbitration, Konig argued that: (1) he never signed the arbitration agreement; (2) his alleged signature on the document was a forgery; (3) the standard arbitration agreement drafted by defendant is procedurally unconscionable;  and (4) the arbitration agreement is substantively unconscionable in that it prohibits class actions, lacks mutuality, and requires employees to pay fees.  Konig further argued that the case was controlled by Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005), which concluded that the United States Arbitration Act did not preempt a finding that the arbitration provision is unconscionable.  U-Haul asserted that Konig’s claims regarding his signature were meritless and, even if he did not sign the arbitration agreement, he consented to its terms by electing to accept the benefits of employment, with knowledge that it was a condition of his continued employment.  The trial court issued an order compelling arbitration and Konig appealed.

            The Court of Appeal affirmed the trial court’s order.  The court first addressed the issue of procedural unconscionability, which occurs when there is “oppression” arising from unequal bargaining power or “surprise” from terms buried in a complex printed form.  Because the class action waiver was part of an arbitration agreement imposed as a condition of employment, the employee had no ability to opt out of the provision and no way to negotiate its terms.  Thus, U-Haul’s arbitration clause imposed as a condition of employment was procedurally unconscionable. 

            Substantively unconscionable terms are overly harsh or unfairly one-sided.  Pursuant to Discover Bank, when a class action waiver occurs in a setting where disputes between the contracting parties predictably involve small amounts of damages, and when the party with the superior bargaining power has allegedly engaged in intentional conduct to cheat large numbers of consumers out of individually small sums of money, then the waiver becomes a means to exempt the stronger party from responsibility for any damage it causes the weaker party.  Such waivers are unconscionable under California law.  Although the instant case does not involve a consumer contract, the court found that the unconscionability provisions articulated in Discover Bank apply to all contracts, including arbitration clauses in employment and other agreements.

            The court then determined whether the proposed class members sustained “predictably small amounts of damages,” thus rendering the class action waiver unconscionable.  Konig alleged that U-Haul engaged in a scheme to defraud its employees out of overtime compensation, but he presented no evidence in the trial court that the potential damages and penalties payable to class members would be “predictably ... small.”  Konig thus failed to prove substantive unconscionability.

            Justice Mosk dissented, asserting that factors other than the amount of potential damages can provide a better standard for determining the unconscionability of a class action waiver.  Justice Mosk expressed concern that if class action waivers in employment cases such as this one are validated, such waivers would likely be included in all employment manuals and policies applicable to employees.  He opined that employee class actions would become rare and employees and the courts would be deprived of the beneficial effects of class actions for employee-employer disputes.

Doctor Who Refused To Comply With His Supervisor’s Directive To Be Less Wasteful Of Hospital Resources Was Terminated For Insubordination, Not In Retaliation For Advocating Medically Appropriate Health Care For His Patients.

            In Sarka v. Regents of the University of California, 2007 DJDAR 9 (Cal.App. 2nd Dist. Dec. 28, 2006)( ), the California Court of Appeal affirmed a judgment in favor of an employer, finding that substantial evidence supported termination of a Student Health physician for insubordination in failing to comply with his supervisor’s directions to modify his approach to patient care. 

            George Sarka, M.D. worked as a primary care physician at the Arthur Ashe Student Health and Wellness Center (“SHS”) at UCLA.  Dr. Sarka’s job included various functions including case management, “the judicious use of all resources,” and the “competent provision of personal, medical care, including diagnosis and treatment.”  Compared to his colleagues at SHS, Dr. Sarka was viewed as treating every patient as though the individual was a medical emergency and repeatedly ordering very extensive multiple tests and x-rays of students whom he saw.  A review of Dr. Sarka’s charts showed that his patients generally had conditions that were no more complicated that those seen by this colleagues.  Yet, because of the volume of tests he ordered, including many he ordered to be run immediately, his practices tied up exam rooms, used up resources, threw other clinicians off their schedules, and overwhelmed the clinical support staff.  Dr. Sarka’s use of x-rays posed a particular problem because of the exposure of young, generally healthy students to radiation.  Dr. Sarka’s performance evaluations over his 14 year tenure at the facility reflected the University’s concerns about his practices and his supervisors repeatedly spoke to him directly about his over-use of resources and asked that he modify his management and care-delivery pattern and rely more on his clinical judgment.

            Dr. Sarka was ultimately terminated for failing to modify his workplace behavior.  He filed a grievance challenging the decision to discharge him and an administrative fact-finding hearing was conducted by an independent party reviewer (“IPR”).  Dr. Sarka claimed that he was using his best clinical judgment and that he was discharged in retaliation for advocating for his patients in violation of California Business and Professions Code section 2056, which establishes a public policy violation to terminate an employment relationship with or otherwise penalize physicians “principally for advocating for medically appropriate health care.”  He also provided witnesses who testified that he did not over-test or see patients too frequently and that he exercised good clinical judgment.  The IPR concluded that Dr. Sarka was not terminated “principally” or “primarily” because he advocated appropriate health care, but because of his extended lack of compliance with his supervisor’s requests that he modify his practice consistent with that of his physician colleagues at SHS.

            Dr. Sarka sought to overturn the IPR decision by filing a petition for administrative mandamus with the superior court.  The trial court denied the petition and ruled that Dr. Sarka was not terminated for incompetence or for advocating medically appropriate healthcare for his patients, but was fired for insubordination.  The Court of Appeal affirmed the trial court’s judgment in favor of the University.  The court found that Dr. Sarka presented evidence that his performance did not fall below the standard of care, but failed to demonstrate that his refusal to rely more on his own medical and clinical judgment and less on diagnostic testing constituted advocacy for medically appropriate primary care.  Moreover, even if the discharge penalized Dr. Sarka for advocating appropriate medical care, he was not fired “principally” for that reason.

Employee May Count Previous Service With Employer Toward FMLA 12-Month Requirement.

            In Rucker v. Lee Holding Co., 245 DLR E-1 (1st Cir. Dec. 18, 2006), the United States Court of Appeals for the First Circuit held that an employee who had a five-year break in service from his employer and then worked more than 1,250 hours in the seven and a half months after he returned, could maintain his lawsuit for wrongful termination in violation of the federal Family and Medical Leave Act (“FMLA”).

            Plaintiff Kenneth Rucker worked as a car salesman for Lee Auto Malls (Lee) in Maine for five years. He left the company, and five years later rejoined Lee as a full-time employee. Seven months after rejoining Lee, Rucker took medical leave.  Approximately two months later, he was terminated.  Rucker sued, Lee claiming he had been terminated in violation of the FMLA for taking medical leave to which he was entitled.  Lee filed a motion to dismiss asserting that Rucker was not FMLA-eligible because he had not been employed by the company for twelve consecutive months.

            The FMLA provides leave for “eligible employees” with a serious health condition that renders the employee unable to perform his essential job functions.  The statute defines an “eligible employee” as one who has been employed “(i) for at least 12 months by the employer with respect to whom leave is requested . . .; and (ii) for at least 1,250 hours of service with such employer during the previous 12-month period.”  Lee argued that the plain language of the statute did not permit a prior period of employment that was remote in time to be tacked onto the current period.

            Lee further asserted that the Department of Labor’s (“DOL”) regulation addressing the 12-month FMLA requirement supported its position. That regulation provides:  

The 12 months an employee must have been employed by the employer need not be consecutive months.  If an employee is maintained on the payroll for any part of a week, including any periods of paid or unpaid leave (sick, vacation) during which other benefits or compensation are provided by the employer (e.g., workers’ compensation, group health plan benefits, etc.), the week counts as a week of employment. For purposes of determining whether intermittent/occasional/casual employment qualifies as “at least 12 months,” 52 weeks is deemed to be equal to 12 months. 

Lee argued that the second and third sentences of the regulation modify the first sentence and provide the only circumstances under which the 12 months “need not be consecutive months.” Because Rucker had had no “continuing connection” with Lee, such as continuing benefits, during the five years he worked elsewhere, he could not rely on his prior employment to satisfy the 12-month requirement.

            The district court granted Lee’s motion to dismiss, holding that Rucker could not combine his previous period of employment with his more recent period, and thus could not satisfy the FMLA’s 12-month employment requirement.  The appellate court reversed and held that the FMLA’s statutory language was ambiguous as to whether previous periods of employment count toward the 12-month requirement.  The court found, however, that the DOL’s regulation established that previous periods of employment do count and that the first sentence of the regulation, allowing for non-consecutive months, is not limited by the sentences that follow and discuss how to count the weeks of employment.

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