By Ann Kane Smith and Breann Y. Swann
Thelen Reid Brown Raysman & Steiner LLP


HARASSMENT

Employers May Be Held Liable for Harassment of Employees by Third Parties

There once was a time when the scope of employer liability for harassment was fairly limited and encompassed only harassment perpetrated by the employer itself or its supervisory employees. Those days are long gone. In Galdamez v. Potter, 415 F.3d 1015 (9th Cir. 2005), the court significantly expanded the scope of employer liability for harassment by holding that employers may be held liable for harassment of their employees by third parties such as customers and community members. This decision has created an affirmative duty for employers to investigate and remedy harassment of their employees by third parties, which considerably increases the employers' already sizeable duty to prevent and remedy harassment in the workplace.

In Galdamez, the plaintiff sued her employer, the United States Postal Service, for race, color and/or national origin discrimination in violation of Title VII. The plaintiff, a native of Honduras who speaks English with a discernible accent, alleged that she suffered harassment and unwarranted discipline at the hands of her supervisors, customers and community members on account of her Honduran background. The jury ultimately returned a verdict for the Postal Service on the grounds that the plaintiff failed to establish that her national origin was a motivating factor in any actionable adverse employment action taken against her by her supervisors.

After the jury verdict, the plaintiff moved for a new trial on the grounds that the District Court erred by refusing to give a requested jury instruction on the Postal Service's potential liability for failing to investigate and remedy harassment by customers and community members. The District Court denied plaintiff's motion for three reasons:

	1.	Title VII does not provide an independent claim for failure to investigate and remedy racial or national origin harassment by third parties. Rather, the employer's failure to investigate or remedy harassment by third parties must be motivated by racial animus in order to be actionable.
	2.	Galdamez was responsible for remedying any alleged harassment herself because she was a management-level employee.
	3.	The evidence did not support the requested instruction.

The Court of Appeals rejected all three rationales. The court held that an employer may be liable for actionable harassment of an employee by third parties if it ratified or condoned the conduct by failing to investigate and remedy the harassment after learning of it. The court also held that management-level employees such as plaintiff are entitled to the same amount of protection from harassment as any other employee and that the evidence of racial harassment of plaintiff by customers and community members supported a jury instruction on the liability of the Postal Service for such harassment.

The holding effectively creates a stand-alone claim under Title VII for an employer's failure to investigate and remedy harassment of its employees by third parties, such as customers and community members, even if the employer's failure is not motivated by an improper animus. Thus, employers now are responsible for controlling not only the actions of their own agents and employees but also those of third parties. This places a great burden on employers to respond effectively to complaints of harassment by their employees regardless of the employer's relationship to the alleged harasser.


Offensive Conduct Unrelated on Its Face to Sex May Constitute Sexual Harassment or Discrimination

The 9th Circuit also broadened the definition of sex-based harassment and discrimination under Title VII in Equal Employment Opportunity Commission v. National Education Assn., Alaska, 422 F.3d 840 (9th Cir. 2005). The definition was expanded to include not only behaviors that are facially gender-based or motivated by gender bias but also facially gender-neutral behaviors with no discriminatory animus that are subjectively experienced differently by members of the opposite sex.

The court concluded that a qualitative and quantitative difference between the treatment of men and women in the workplace is enough to support a claim of sexual harassment or discrimination in violation of Title VII even if there is no direct evidence that the alleged conduct or the motivating intent behind that conduct was sex-specific.

The plaintiffs were all female employees of the National Education Assn., Alaska who were supervised by Thomas Harvey. The plaintiffs proffered evidence that Harvey frequently shouted at female employees in a loud, profane and hostile manner for little or no reason. They also demonstrated that Harvey repeatedly exhibited signs of physical aggression toward female employees such as lunging across tables, shaking his fists at them and grabbing their shoulders from behind while yelling at them. In addition, a male employee of NEA-Alaska "testified, without prompting, to the 'general fear of the women at [their] office.' "

The District Court granted the defendants' motions for summary judgment on grounds that a reasonable jury could not find that the harassment alleged by the plaintiffs was "because of sex" within the meaning of Title VII. The District Court explained that the absence of any evidence Harvey committed overtly gender-specific acts was fatal to the plaintiffs' case because the "because of sex" element of a Title VII harassment claim requires that the behavior in question be either sexual in nature or motivated by sexual animus. The District Court believed that to establish their claim, the plaintiffs would have to present evidence that Harvey's exchanges with the plaintiffs were motivated by lust or a desire to drive women out of the organization.

The Court of Appeals reversed, holding that there is no requirement that the hostile acts forming the basis of a Title VII claim be "overtly sex- or gender-specific." Rather, the court held that "direct comparative evidence about how the alleged harasser treated members of both sexes is always an available evidentiary route." The court ruled that the operative question in a Title VII sex-based harassment or discrimination case is whether members of one sex are made to suffer disadvantageous terms or conditions of employment that are not imposed upon members of the opposite sex -- i.e., if the sexes are subjected to "differential" treatment.

The court went on to hold that a determination regarding "differential" treatment should be made by analyzing the qualitative and quantitative differences between the treatment of men and women in the workplace. For purposes of the qualitative prong of the analysis, the court held that the fact a purported harasser was equally degrading to both men and women does not defeat a claim that the genders were treated differently because there may be a subjective difference between the way the degradation was perceived and experienced by the different genders according to the "reasonable woman" standard. For example, if a supervisor were equally degrading and hostile toward his male and female subordinates but the female subordinates were more deeply affected by the behavior in accordance with the reasonable woman standard, a trier of fact could conclude that the women were treated "differently" and that "differential" treatment could form the basis for a Title VII claim of discrimination or harassment on the basis of sex.

Similarly, with respect to the quantitative prong of the analysis, the court held that a finding of disproportionate facially gender-neutral hostility toward women cannot be defeated simply by showing that there was an unbalanced distribution of men and women in the workplace (i.e., more women than men) that may have created an illusion of disparate treatment where one did not exist. Therefore, even if the disparity between the amount of hostility directed toward women and men in the workplace is incidental to the fact that there are simply more women in the workplace and, thus, women as a group receive a greater amount of hostile treatment than men as a group, this would still be enough to support a finding of differential treatment for purposes of a Title VII claim.

The ruling broadens the definition of sex discrimination and harassment under Title VII to the point that a theoretical plaintiff who works under a supervisor who subjects all of his subordinates, regardless of gender, to the same amount of gender-neutral hostility could establish a claim for sex-based harassment or discrimination by alleging that he or she subjectively experienced the hostility differently due to his or her gender and, thus, was subjected to "differential" treatment on the basis of sex in violation of Title VII. Further, under the quantitative analysis, differential treatment can be found even when the disproportionate amount of hostility directed toward one gender is simply incidental to the fact that more members of one gender work under the ill-mannered supervisor.

This ruling creates a multitude of problems for employers who now potentially will be liable under a sex-based discrimination or harassment theory for any hostile behavior by its supervisors, even when the behavior itself and the intent motivating it have no relation to sex-based bias or animus.


RETALIATION

The Terms "Protected Activity" and "Adverse Employment Action" Should Be Broadly Defined for Purposes of Retaliation Claims

In order to state a claim for retaliation, an employee must establish that she participated in a protected activity and later was subjected to an adverse employment action because of that protected activity. In Yanowitz v. L'Oreal USA, Inc., 36 Cal. 4th 1028 (2005), the California Supreme Court analyzed the meaning of the terms "protected activity" and "adverse employment action" as they apply in the retaliation context and concluded that the terms should be broadly defined. The court effectively expanded the universe of behaviors and actions that constitute "protected activities" and "adverse employment actions" and made it easier for employees to establish retaliatory conduct.

In Yanowitz, the plaintiff's male supervisor instructed her to terminate a female sales associate because the supervisor did not believe that the sales associate was physically attractive. The plaintiff refused to follow the order because she believed that doing so would be an act of unlawful discrimination. The plaintiff did not, however, inform anyone of this belief. Nonetheless, she later claimed that she was subjected to retaliatory scrutiny and adverse employment action as a result of her protesting the purportedly discriminatory behavior. L'Oreal argued that the plaintiff could not meet her burden of establishing that she engaged in a protected activity because she never actually complained of discrimination but simply refused without explanation to follow her supervisor's order.

The court rejected L'Oreal's argument and held that the plaintiff's refusal to terminate the employee, along with her repeated requests that her supervisor articulate an adequate reason for wanting to terminate the sales associate, were sufficient to constitute a protected activity for purposes of a retaliation claim under the Fair Employment and Housing Act.

The court explained that, standing on its own, an employee's belief that her employer is engaging in unlawful activity is not sufficient to establish that the employee engaged in a protected activity for purposes of a retaliation claim. It reasoned, however, that an employee need not actually complain of discrimination in any specific language so long as she adequately communicates her belief that the employer is engaging in unlawful conduct. Accordingly, the court concluded that clear manifestations of a belief that the employer is acting improperly, such as the plaintiff's refusal to obey her supervisor's order and her repeated requests that the supervisor give her a legitimate reason for the termination, are sufficient to constitute a complaint of discrimination and, thus, a "protected activity" for purposes of a retaliation claim.

The effect of this holding is an increased burden on employers to consider carefully the motivating reasons for their employees' behavior. In the wake of Yanowitz, employers cannot simply take insubordination on its face and react accordingly. Instead, employers must now consider whether the employee believes the employer is engaging in unlawful conduct. Employers no longer have the benefit of expecting an employee to articulate such a belief but instead must be prepared to take a proactive approach and interpret the behavior of their employees in order to discern the motivation for their insubordinate behavior.


"Adverse Employment Actions" Are Employment Actions That Have a Substantial Material Effect on the Terms and Conditions of Employment

The Yanowitz court defined "adverse employment action" in a way that significantly expanded the universe of employer actions that can support a claim for retaliation. The decision sets forth a clear, operative definition of "adverse employment action" for purposes of retaliation claims under FEHA and, in doing so, answers the many questions raised by prior cases, such as Pinero v. Specialty Restaurants Corp., 130 Cal. App. 4th 635 (2005).

In Pinero, the court explained that for purposes of retaliation cases, courts generally define "adverse employment action" in one of three ways. The first group of courts define an adverse employment action as an ultimate employment decision such as termination or hiring. The second group of courts define an adverse employment action as a serious employment decision that materially and detrimentally affects employment. The third group of courts define an adverse employment action as any employment decision that would deter an employee from exercising his or her rights.

The Pinero court explained that California had not yet definitively concluded which standard should be used.

Months later in Yanowitz, the Supreme Court defined "adverse employment action" as an action that materially affects the terms and conditions of employment. The court explained that employer actions which are merely upsetting to the employee and do not meaningfully affect the terms, conditions or privileges of his or her employment are not adverse employment actions while actions that have a detrimental effect on the employee's performance or potential for advancement are considered adverse employment actions for purposes of establishing unlawful retaliation.

Interestingly, the court held an employee need not establish that any action taken against her, when considered alone, constitutes an adverse employment action. Rather, an employee can establish there was an adverse employment action taken against her by showing that she suffered a series of minor actions that, as a whole, had the requisite material affect on the terms, conditions and privileges of her employment. Specifically, the court held the employer's refusal to provide the plaintiff with resources, its solicitation of complaints about the plaintiff from other employees, its undeserved negative performance evaluations and criticism of plaintiff, and its refusal to allow the plaintiff to rebut the criticism collectively constituted an adverse employment action for purposes of her retaliation claim.

The broad definitions of "protected activity" and "adverse employment action" set down by the Yanowitz court significantly lower the bar for employees asserting retaliation claims. This increases employers' potential liability and places a greater burden on them to be proactive in ferreting out unarticulated complaints of unlawful behavior and preventing even minor retaliatory behaviors that may constitute a materially adverse employment action when considered as a collective whole.


AMERICANS WITH DISABILITIES ACT

Testimony of Plaintiff Is Sufficient to Establish Genuine Issue of Material Fact Regarding Impairment of Major Life Activities

Before Head v. Glacier Northwest, Inc., 413 F.3d 1053 (9th Cir. 2005), a plaintiff pursuing a disability discrimination cause of action was required to establish impairment of major life activities through comparative or medical evidence. Now, a purportedly disabled plaintiff can establish such impairment exclusively through his or her own testimony. This dramatically reduces the evidentiary burden on plaintiffs.

The plaintiff in Head was diagnosed with depression or bipolar disorder in early 2001, and his employer was aware of the purported condition. In late June 2001, the plaintiff was terminated for getting a loader he was operating stuck in the mud. Plaintiff sued for disability discrimination. The District Court entered partial summary judgment in favor of the defendant on grounds that the plaintiff failed to produce comparative or medical evidence that his purported disability substantially impaired his major life activities and, thus, failed to raise a genuine issue of material fact as to substantial impairment.

In reviewing, the 9th Circuit held that the Americans with Disabilities Act does not require a plaintiff to set forth comparative or medical evidence to prove substantial impairment. Rather, ADA allows a plaintiff to establish substantial impairment through his or her own testimony alone.

The Head decision makes it much easier for employees to establish that they suffer from a disability that substantially impairs major life activities, which, in turn, makes it easier for the employee to establish a cause of action for disability discrimination under the Americans With Disabilities Act. This means that more meritless disability discrimination claims will survive the summary judgment phase because plaintiffs essentially will be able to rely on unsubstantiated testimony alone.


WAGE AND HOUR

Corporate Officers and Directors Cannot Be Held Individually Liable for Wage Claims

In Reynolds v. Bement, 36 Cal. 4th 1075 (2005), the California Supreme Court held that corporate directors and officers cannot be held individually liable for violation of wage and hour laws. The mere fact that an officer or director exercises control over company activities does not make him liable for wage and hour violations that are only properly attributable to the employer itself.

The plaintiff in Reynolds sued his former employer and eight individual officers and directors on the grounds that he was misclassified as exempt and was the victim of wage-and-hour-law violations. Each of the individual defendants was dismissed on the grounds that it would be improper to allow a plaintiff to sue individual agents of the employer on his claims for overtime and other wage and hour claims.


EMPLOYEE MEAL AND REST PERIODS

Employees Subject to Collective Bargaining Agreement Are Protected by State Laws Regulating Employee Meal and Rest Periods

In Valles v. Ivy Hill Corp., 410 F. 3d 1071 (2005), the 9th Circuit held that, contrary to popular belief, California laws governing employee meal and rest periods also apply to employees whose terms of employment are subject to collective bargaining agreements. The court held that an employee's right to meal and rest periods cannot be waived, regardless of any contrary language in a collective bargaining agreement. Such state-law rights are non-negotiable and non-waivable, as are the penalties associated with failure to provide meal and rest periods.

The plaintiffs sued their employer for violation of Labor Code and wage regulations regarding meal and rest periods. The employer removed the action to federal court on grounds that the plaintiffs' claims were pre-empted by federal labor law because plaintiffs' employment was governed by a collective bargaining agreement.

The 9th Circuit held that the plaintiffs were entitled to state law protections regarding meal and rest periods even though they were subject to a collective bargaining agreement. The 9th Circuit remanded the case to state court for that reason.

The Valles case means employers have less latitude to negotiate with their unionized employees.


Legislature May Not Approve Collective Bargaining Agreements Requiring State Employers to Make Permanent Appointments and Promotions Based Solely on Seniority

For more than 70 years, the California Constitution has included a "merit principle" designed to "eliminate the spoils system of political patronage from state employment and to ensure that appointments and promotions in state service be made solely on the basis of merit." California State Personnel Board v. California State Employees Association, Local 100 SEIU, AFL-CIO, 36 Cal.4th 758 (2005).

In that case, the California Supreme Court held that collective bargaining agreements providing for promotions on the basis of seniority regardless of the comparative merit of the eligible candidates violate the merit principle.

The State Personnel Board filed a petition for writ of mandate to enjoin the California State Employees Association and the Department of Personnel Administration from implementing the "post and bid" programs set forth in the collective bargaining agreements that CSEA and DPA had negotiated for state employee Bargaining Units 1, 4 and 11. The program provides that the permanent appointment and promotion of certain classes of state employees into post and bid positions be based on seniority in state service. Generally, when state employees are vying for a job position, they must undergo a competitive examination, after which the best candidate for the position is selected based on merit. Under the post and bid programs, however, state employees are hired into certain positions based solely on seniority in state service. 1/ Plaintiffs objected to implementation of the programs on grounds that they violate the merit principles in the California Constitution.

The defendants contended that the post and bid programs did not violate the Constitution for two main reasons:

		The seniority-based selection procedure occurs during the hiring phase after administration of competitive examinations and after employees have been divided according to the rule of three ranks; and
		The contractual trial periods and statutory probationary periods enforced after the candidate has been hired ensure that qualified employees are selected for the positions. 2/

The Supreme Court rejected the defendants' first argument, holding that the merit principle applies to the hiring and promotion phase of the hiring process as well as to the initial screening process. The court wrote:

Even though the post and bid programs preserve the rule of three ranks, their seniority-based selection procedures leave no room at the post examination hiring phase for comparatively evaluating employees who meet the threshold requirements for eligibility and ranking. By dictating an absolute seniority preference in hiring and foreclosing appointing powers from interviewing eligible candidates and considering a broader and more meaningful range of merit-based criteria as appropriate to determine the candidate most qualified for a posted position, the programs undermine the constitutional mandate that appointments and promotions be based on merit.

The court rejected the defendants' second argument on grounds that the trial and probationary periods "are operative only after state resources have been needlessly consumed in selecting and training the unfit employee and do nothing to mitigate the further time and resources that presumably will be spent finding and training a replacement."

The court found the post and bid programs violate the California Constitution. Accordingly, the Legislature no longer may approve collective bargaining agreements that require state employers to make permanent appointments and offer promotions based solely on the seniority status of eligible candidates.

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For more information about the issues covered in this report, please contact Ann Kane Smith in our Los Angeles office at 213-576-8036 or aksmith@thelen.com, Breann Y. Swann in our Los Angeles office at 213-576-8056 or bswann@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.





ENDNOTES

1/

Employees seeking post and bid positions were required to meet certain minimum eligibility requirements, some of which were determined through competitive examination, but after the minimum eligibility requirements had been met, the employees were not evaluated or considered based on merit but rather were automatically placed into the positions according to seniority.

2/

Amicus curiae California Correctional Peace Officers' Assn. asserted that post and bid programs are constitutional because seniority is a recognized merit factor that is properly considered during the hiring process. The court rejected this argument on grounds that seniority should not be the only factor that administrators are allowed to consider when hiring candidates for post-and-bid positions.

©2006 Thelen Reid Brown Raysman & Steiner LLP