2007-22

Hotel Lawfully Fired Front Desk Supervisor For Wearing Union Button

 In Sheraton Universal Hotel, a case handled by BRG&S partner Matt Wakefield, the National Labor Relations Board (“NLRB” or “Board”) ruled that the Sheraton Universal Hotel did not violate the National Labor Relations Act (“NLRA”) when it fired Front Desk Supervisor Kevin Grace, who had contacted a union about providing representation after refusing to stop wearing a union button while on duty. The dispute centered on whether Grace was a “supervisor” within the meaning of the NLRA, because supervisors are not protected under the NLRA. The NLRB overturned a decision by an administrative law judge (“ALJ”) and found that Grace was a supervisor; thus, his termination did not violate the NLRA.

 In May 2004, Grace contacted UNITE HERE Local 11 about union representation for Front Desk Supervisors. He then signed an authorization card. On June 25, 2004, Grace wore a button stating “Local 11, Hotel Employees & Restaurant Employees Union, Los Angeles” on his jacket lapel while on duty at the front desk. Director of Rooms Tony Fernandez told Grace it was not appropriate for Grace to wear the button because he was a part of management. Grace refused to remove the button, and Fernandez fired him for insubordination. The ALJ found that the Hotel committed an unfair labor practice by firing Grace because of his union activity, and found that the Hotel failed to carry its burden of proving that he was a supervisor unprotected by the NLRA. The Board disagreed.

 The NLRB determined that Grace was not protected for engaging in union activity because he had the authority to effectively recommend discipline of other front desk employees and to effectively recommend against hiring applicants. The recommendation on hiring constituted “secondary indicia” of supervisory status. The Board noted that Front Desk Supervisors are responsible for coaching and counseling employees who violate hotel policies, procedures, or standards and for warning them that they could be disciplined for another similar violation. They document coach-and-counsel sessions by sending e-mails to upper management. Those e-mails eventually are placed in the respective employee’s personnel file. The Hotel uses corrective action notices to impose a verbal warning, a written warning, a final written warning, a suspension, or a termination. Two coach-and-counsel sessions on the same type of behavior result in a verbal warning. Grace conducted a total of four coach-and-counsel sessions, and one employee received a written warning as a result of Grace’s recommendation.

 Grace’s responsibilities also included reviewing job applications and resumes, interviewing applicants and making hiring recommendations. When Grace recommended hiring an applicant, Fernandez then conducted a second interview. Fernandez testified that he would not hire a particular applicant if Grace recommended against it. Grace also received a higher wage than the guest service agents and the service promise agents, attended management meetings, and received management memoranda. At the start of his employment, he signed two documents that only supervisors and managers were required to sign. The Hotel assigned Grace an e-mail account, which only supervisors and managers received. Also, Grace’s name tag included his first and last name and title, whereas other front desk employees’ tags only included their first name.

Bona Fide Disability Plan Deducting Salary On First Day of Leave Does Not Violate “Salary Basis Test”

 In Sumuel v. Advo, Inc., the California Court of Appeal held that a bona fide disability plan deducting employees’ salaries does not violate the “salary basis test” under the Fair Labor Standards Act (“FLSA”) and California state labor regulations for determining whether an employee is exempt from overtime pay requirements.

 ADVO, Inc.’s 170 California employees were paid on a salary basis and treated as exempt from overtime. ADVO gave its employees an unlimited number of sick days with pay unless the employee was absent for more than seven consecutive days. In those cases, the employees could apply for State Disability Insurance (“SDI”) benefits. If the employee also qualified under ADVO’s third party disability insurer, the combination of SDI benefits and ADVO disability benefits would equal the employee’s base salary. ADVO’s disability program imposed a seven-day waiting period before an employee qualified for SDI. An employee who was out sick for part of the week received the full week’s pay. However, if the employee knew that he was going to be out for more than seven consecutive days, the employee was removed from the regular payroll effective the first day of the illness. This ensured that an employee’s eligibility for salary replacement benefits would not be delayed. Occasionally, an employee who returned to work after disability leave experienced delays in receiving their full salary due to processing delays.

 Plaintiffs filed a class action suit, alleging overtime violations and misclassifications of class members from overtime requirements. The trial court granted summary judgment for ADVO, and the Court of Appeal affirmed.

 Subject to certain exceptions, the FLSA and the California Division of Labor Standards Enforcement prohibit reductions to a salaried employee’s pay due to “variations in the quality or quantity of work performed.” An employer may deduct a salaried employee’s pay “if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by both sickness and disability.” To be considered “bona fide” under federal law, the plan must, in good faith, (1) be communicated to eligible employees, (2) be administered impartially, and (3) not evade the obligation to pay exempt employees on a salary basis.

 The court found that ADVO’s disability plan qualified as a bona fide plan. To satisfy the requirement of communication, an employer need not explain every detail of the plan to employees. Instead, the employer must make a good faith effort to explain the plan. The plaintiffs contended that ADVO failed to satisfy this element since it mischaracterized the plan as “company-paid” benefits rather than a combination of SDI and company benefits. The court rejected plaintiffs’ argument. Although ADVO’s actions may have been “a poor human resources practice,” they did not qualify as a bad faith attempt to deprive its employees of benefits.

 Plaintiffs also failed to show that ADVO did not administer the plan impartially. There was evidence that several employees on maternity leave improperly used vacation pay to bridge the seven-day waiting period. However, this failed to demonstrate that the plan was “administered in a manner that deliberately favored some employees over others.” The court noted that ADVO ensured impartial administration of the plan by contracting with a third party to review all disability claims.

 Lastly, plaintiffs failed to offer evidence that the plan deliberately failed to pay exempt employees on a salary basis. The court stated that “[t]he salary basis test is not intended as an overtime trap for employers who offer such a benefit for a legitimate business reason, just because its design or implementation leaves something to be desired.”

 Plaintiffs tried to argue that the plan did not qualify as a bona fide plan under state law because it relied on state disability insurance. As support for this claim, they cited DLSE Manual Section 51.6.16.1, which states that state-required disability insurance benefits do not qualify as a bona fide plan. The court interpreted the provision to apply only when the employer exclusively relies upon the SDI program to pay disability benefits. In this case, ADVO’s plan combined both SDI and company-paid benefits. Thus, it fell within the DLSE parameters for a bona fide plan.

Statistical Evidence Of Discrimination Found To Create A Triable Factual Issue, Despite Small Sample Size

 In Reid v. Google, Inc., the California Court of Appeal reversed summary judgment for Google, Inc., as to the plaintiff’s discrimination claims, but held that the plaintiff lacked standing under California’s Unfair Competition Law (“UCL”) to challenge Google’s hiring and promotion practices.

 Plaintiff Brian Reid was 52 years old when he was hired by Google as the Director of Operations and Director of Engineering in 2002. Reid was allegedly the target of age-related comments. Urs Hoelzle, a supervisor, told Reid that he was “slow,” “fuzzy,” “sluggish” and his ideas were “obsolete” and “too old to matter.” His colleagues labeled him an “old fuddy-duddy.” Google’s Vice-President of Engineering, Wayne Rosing, eventually moved Reid from Director of Operations and Director of Engineering to developing and implementing a Masters program in engineering. Reid was not given a budget or staff to support the program. A 38 year-old employee replaced Reid as Director of Operations; a 32 year-old took over Reid’s duties as Director of Engineering. On February 13, 2004, Rosing terminated Reid because he was not a “cultural fit.” After his termination, Reid spoke to other department heads but was told there were no job openings.

 Reid filed suit against Google, alleging 12 causes of action. The lower court granted Google’s motion to strike allegations of unlawful hiring and promotion under the UCL. It also found that Google established a legitimate, nondiscriminatory reason for the termination and granted summary judgment for Google on all of Reid’s remaining causes of action.

 The Court of Appeal found that Reid lacked standing to challenge Google’s hiring and promotion practices under the UCL as amended by Proposition 64, because Reid was not injured by Google’s hiring or promotion practices. But the court reversed summary judgment on Reid’s remaining claims.

 The court found that several pieces of evidence created a triable issue of whether Google was motivated by a discriminatory animus. First, Reid offered expert testimony showing a statistically significant negative correlation between age and performance ratings of Google employees. This evidence raised a triable issue of material fact, especially since Google failed to offer evidence to contradict expert testimony that Reid offered on this issue. Although Google argued that the statistical sample size was too small to support an inference of discrimination, the court found that this went to the weight of the evidence, not its admissibility. Second, Reid provided examples of age-related comments, including Rosing’s statement that Reid was not a “cultural fit.” By themselves, these isolated remarks may not be sufficient, but an inference is created when the remarks are combined with statistical evidence that older workers were being replaced with younger workers. In this case, an employee 15 years Reid’s junior replaced him as Director of Operations and an employee 21 years Reid’s junior replaced him as Director of Engineering. Third, a triable issue may be created when an employee is moved to a newly created position and terminated shortly thereafter. Lastly, the court found Google’s changing rationales for Reid’s termination suspect. Reid alleged that upon termination, Rosing told him that he was not a cultural fit but the Masters program would continue. Google later changed its reason to job performance and the elimination of the Masters program.

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