May 8, 2024

April 2024 Case Summaries

Muldrow v. City of St. Louis, 144 S.Ct. 967 (2024)

See our in-depth analysis Supreme Court Lowers the Bar for Challenging Discriminatory Job Transfers Under Title VII.

Bissonnette v. LePage Bakeries Park St. LLC, 144 S.Ct. 905 (2024)

See our in-depth analysis Federal Arbitration Act’s Interstate Commerce Exemption Applies Outside the “Transportation Industry.”

Mattioda v. Nelson, 98 F.4th 1164 (9th Cir. 2024)

Summary: Disability-based harassment claims are available under the Americans with Disabilities Act and the Rehabilitation Act.

Facts: Plaintiff Dr. Andrew Mattioda sued his employer, Defendants the National Aeronautics and Space Administration (“NASA”) and its administrator, under the Rehabilitation Act of 1973 for, among other things, disability-based harassment. He alleged that he was subjected to a hostile work environment after he told his supervisors that he had physical disabilities related to his hips and spine that required him to buy premium-class airline tickets for flights more than one hour long so he could avoid prolonged sitting and change positions and stretch frequently, and requested as a reasonable accommodation that he receive upgraded airline tickets for work travel. Plaintiff alleged that he was subject to derogatory comments from his supervisors, that supervisors inhibited his work opportunities, that he received unwarranted negative job reviews, and that he was met with resistance to his accommodation requests. He also claimed that he was discriminated against because of his disability when he was passed over for a promotion to a senior scientist position, even though he acknowledged that the scientist selected for the position “ha[d] significantly more experience and publications, noting that because [the selected scientist] entered the field early on, his publications were the first in the novel field.” The district court dismissed the harassment claim for failure to state a claim and granted summary judgment against Plaintiff on his discrimination claim. Plaintiff appealed from both orders.     

Court’s Decision: The Court of Appeals for the Ninth Circuit reversed the dismissal of the disability harassment claim and affirmed the summary judgment on the disability discrimination claim. As to the disability harassment claim, the court held, as a matter of first impression in the Ninth Circuit, that disability-based harassment claims are available under the Americans with Disabilities Act (“ADA”) and the Rehabilitation Act. The ADA was modeled after Title VII of the Civil Rights Act of 1964, under which a plaintiff may bring a hostile-work-environment claim.  And the Rehabilitation Act is materially identical to the ADA. So, by extension, a hostile-work-environment claim is cognizable under all three statutes. Turning to the facts, the court found that Plaintiff had alleged sufficient facts to state a hostile-work-environment claim, in particular noting that Plaintiff had alleged that his supervisor made a series of harassing comments over a course of years, including denigrating Plaintiff as lazy and using his disabilities to avoid work, after Plaintiff had disclosed his disabilities. As to the disability discrimination claim, the court held that summary judgment for NASA was proper because Plaintiff “repeatedly conceded that NASA’s non-discriminatory reason for not selecting him for the position – that [the selected scientist] was more qualified for the selective position – is valid.” 

Practical Implications: Though it has long been the law in California that disability-based harassment claims are actionable, this case presents an important reminder that “harassment” is not limited to sexual harassment. Though sexual harassment may be the most visible form of harassment in the public consciousness, employers must remember that they have an obligation to prevent harassment based on any protected characteristic, not just sex.         

Shah v. Skill Inc., 101 Cal. App. 5th 285 (2024)

Summary: Stock options are not “wages” under the Labor Code.

Facts: Plaintiff Gautam Shah filed a lawsuit against Defendant Skillz Inc. for breach of contract, alleging that Defendant did not have cause to terminate his employment and wrongfully prevented him from exercising stock options that he had earned as an employee. Plaintiff also alleged breach of the implied covenant of good faith and fair dealing, wrongful termination, retaliation, and conversion. After a jury found in favor of Plaintiff and awarded him more than $11.5 million in damages for lost stock options, Defendant filed a motion for judgment notwithstanding the verdict. The trial court denied the motion but conditioned the denial on Plaintiff’s acceptance of a remittitur in the amount of $4,358,358. Plaintiff accepted the remittitur, and the court entered judgment in that amount for Plaintiff. Both parties appealed. Defendant contended, in relevant part, that the damages awarded to Plaintiff were “contrary to law” because they were not measured as of the date of breach, requiring either a lower award or a new trial on damages. Plaintiff contended that the jury verdict of more than $11.5 million should be reinstated because of errors in the trial court’s new trial orders and remittitur, and that the court erred in dismissing his tort claims before trial because his stock options were “wages” under the California Labor Code.

Court’s Decision: In the portions of the opinion certified for publication, the California Court of Appeal held that: (1) under both California and Delaware law, Plaintiff’s damages were properly measured after the date of breach, following Defendant’s IPO; (2) the operative pleading gave Defendant adequate notice that Plaintiff sought damages for the loss of the performance stock options he was granted in late 2016; and (3) stock options are not wages under the Labor Code. First, the court held that under California law, Plaintiff’s damages were not limited to the difference between the exercise price of his stock options and the value of Defendant company’s stock on or near the date of his termination (the date of breach). Specifically, the court found that calculating Plaintiff’s damages as of the date of breach would not compensate him for the damages that were reasonably contemplated or foreseen by both parties at the time of contracting, and that the trial court properly used the price of the stock after the lock-up period ended—when Plaintiff was free to sell the stock for the first time on the open market—to calculate his damages. Second, with regard to the operative pleading, the court found that it gave Defendant adequate notice that Plaintiff sought damages for the loss of performance stock options he was granted in 2016, despite not attaching one of the contracts granting those stock options or expressly alleging a breach of that particular contract. Because Plaintiff’s operative complaint stated that he was seeking restoration of the options granted pursuant to that agreement and included allegations that he was deprived of those additional options, the court held that Plaintiff properly notified Defendant that those stock options were at issue. Third, the court held that stock options are not “wages” under the Labor Code, reasoning that stock options are not “amounts” and “are not money at all,” but instead “are contractual rights to buy shares of stock.” As a result, Plaintiff was not allowed to recover tort damages and attorneys’ fees, but was allowed to maintain a breach of contract claim for the stock options.

Practical Implications: This case presents welcome clarity for employers whose compensation packages include stock options. But the case is also a reminder that as employers continue to develop new and creative compensation packages to attract top talent, it is critical that they think through the potential legal requirements and consequences associated with each form of compensation and, when in doubt, consult counsel. In the world of wage-and-hour compliance, an ounce of prevention really is worth a pound of cure.

Vazquez v. SaniSure Inc., 101 Cal. App. 5th 139 (2024)

Summary: Termination of an employment relationship can revoke an arbitration agreement as to that employment relationship. Where there is no evidence that the parties agreed to arbitrate claims arising from a subsequent relationship, claims arising from that subsequent relationship are not subject to arbitration.

Facts: Plaintiff Jasmin Vazquez began working for Defendant SaniSure Inc. as an at-will employee in July 2019. Plaintiff signed an arbitration agreement to “resolve all disputes that may arise out of or be related in any way to [her] employment.” Plaintiff resigned from Defendant in May 2021, but four months later she negotiated a new employment offer and returned to work for the company. During negotiations, the parties did not discuss whether Plaintiff would be required to sign an arbitration agreement again or whether claims related to her current employment would be subject to her prior arbitration agreement. Plaintiff filed a class action against Defendant for wage-and-hour claims during her second stint of employment. Defendant moved to compel arbitration based on the arbitration agreement Plaintiff signed at the beginning of her first employment. The trial court denied Defendant’s motion because all of Plaintiff’s claims arose out of her second stint of employment, and Defendant could not show that Plaintiff agreed to arbitrate those claims. Defendant appealed.   

Court’s Decision: The California Court of Appeal affirmed. The court gave deference to the trial court’s finding of fact regarding the lack of evidence that the parties agreed that the arbitration agreement Plaintiff signed during her first stint of employment would apply to her second stint. Based on that finding of fact, the court concluded that Defendant did not meet its burden to compel arbitration. The court left open the possibility that parties can agree that an arbitration agreement applies to future or subsequent stints of employment.

Practical Implications: The moral of this story for employers who administer arbitration programs is simple. When rehiring an employee after a break in service, have the employee sign a new arbitration agreement. It will avoid the issue presented in this case, and, more often than not, you will have updated your arbitration agreement since the employee’s first stint, and you will want that most up-to-date agreement to control.