May 6, 2020

Key California Employment Law Cases: April 2020

Anthony v. TRAX Int’l Corp., No. 18-15662, 2020 WL 1898843 (9th Cir. Apr. 17, 2020)

Summary: An employer may use after-acquired evidence to show that a plaintiff is not a qualified individual under the Americans with Disabilities Act.

Facts: Plaintiff filed suit alleging that her former employer, TRAX International Corporation (“TRAX”), a government contractor, had terminated her employment as a technical writer because of her disability in violation of the Americans with Disabilities Act of 1990 (“ADA”). Thereafter, TRAX learned that, contrary to her representation on her employment application, Plaintiff did not have the bachelor’s degree required of all technical writers under the terms of TRAX’s government contract. TRAX moved for summary judgment, arguing, based on this after-acquired evidence, that Plaintiff was not a qualified individual under the ADA. The district court granted summary judgment in favor of TRAX, and Plaintiff appealed.      

Court’s Decision: The Court of Appeals for the Ninth Circuit affirmed. Though after-acquired evidence cannot be used to establish a superseding, non-discriminatory justification for an employer’s challenged actions, this limitation on the use of after-acquired evidence does not extend to evidence used to show that a plaintiff is not a qualified individual under the ADA. Under the two-step qualified individual test promulgated by the Equal Employment Opportunity Commission, “an individual who fails to satisfy the job prerequisites cannot be considered ‘qualified’ within the meaning of the ADA unless she shows that the prerequisite is itself discriminatory in effect.” Because Plaintiff did not have the requisite bachelor’s degree at the time she was terminated, she was not qualified within the meaning of the ADA. 

Practical Implications: Employers defending against ADA claims should consider investigating an employee-plaintiff’s qualifications. If the employer discovers that the employee-plaintiff was actually not qualified for the job, this evidence can be used in the case to eliminate liability under the ADA. 


Colucci v. T-Mobile, USA, No. D075932, 2020 WL 2059849 (Cal. Ct. App. Apr. 29, 2020)

Summary: Second line managers with independent hiring and firing authority, substantial discretionary authority over daily store operations, and responsibility for multiple employees and store locations can be considered managing agents for purposes of determining punitive damages.

Facts: After he was terminated, Plaintiff, a former store manager for T-Mobile, USA (“T-Mobile”), filed a lawsuit against T-Mobile alleging, among other things, retaliation in violation of the California Fair Employment and Housing Act.  District Manager Brian Robson was Plaintiff’s supervisor and made the termination decision. Robson was responsible for operating T-Mobile’s nine stores within his district along with roughly 100 employees working in those stores. After trial, the jury returned a unanimous verdict in Plaintiff’s favor on his retaliation claim, awarding him $1,020,042 in total compensatory damages and $4 million in punitive damages. The trial court denied T-Mobile’s motions for a new trial and for judgment notwithstanding the verdict. T-Mobile appealed the punitive damages award, contending that there was insufficient evidence to support a finding (1) that Robson was a managing agent of T-Mobile, or (2) that he engaged in acts of malice or oppression.

Court’s Decision: The California Court of Appeal reversed the punitive damages portion of the judgment, finding that while punitive damages were supported, the amount exceeded the federal constitutional maximum in this case. The court determined that there was substantial evidence to support an award of punitive damages, rejecting both of T-Mobile’s arguments. First, the court found that there was substantial evidence that Robson was a managing agent of T-Mobile: he was a district manager; he was responsible for managing nine retail stores and 100 employees; individual store managers reported to him, and he, in turn, reported to a senior manager; he had independent, final authority to hire or fire employees within his district; and he had substantial discretionary authority over daily store operations. Second, the court found that there was substantial evidence that Robson acted with malice, fraud, or oppression. That said, the court reduced the punitive damages award to $1,530,063 — a 1.5-to-1 ratio between punitive damages and compensatory damages — on the basis that there was only a low to moderate degree of reprehensibility on T-Mobile’s part and that it appeared that the jury’s compensatory damages award already had a punitive component to it. 

Practical Implications: Employers should be aware that second-line managers with significant independent authority can be considered managing agents for the purpose of exposing the employer to punitive damages in litigation. Effective supervision, training, and guidance of these employees are key to reducing any such exposure.   


McPherson v. EF Intercultural Found., Inc., 47 Cal. App. 5th 243 (2020)

Summary: Employers who claim to provide “unlimited” vacation, but impose limits in practice, may have to pay out accrued, but unused, vacation at termination.

Facts: Plaintiffs were three full-time, exempt, salaried area managers of EF Intercultural Foundation, Inc. (“EF”), a nonprofit that runs educational and cultural exchange programs between the United States and other countries. Company policy purported to allow area managers to take an unlimited amount of time off with pay, and did not provide for accrual of any set number of vacation days. Plaintiffs, all of whom had separated from EF, sued EF alleging it failed to pay them accrued, but unused, vacation wages at the time of separation as required by Labor Code section 227.3. EF argued that section 227.3 does not apply to unlimited vacation policies; plaintiffs earned no vacation time, and thus none vested for purposes of section 227.3 because they did not work in exchange for a promise of a specific amount of vacation. The trial court rejected EF’s argument and, after a bench trial, found that EF had violated section 227.3. EF appealed.

Court’s Decision: The California Court of Appeal affirmed the trial court’s holding that EF owed Plaintiffs vacation wages under section 227.3. The court held that section 227.3 applied to EF’s policy because, although EF called its vacation policy “unlimited” or “uncapped,” in reality it was not. In reaching this conclusion, the court noted that EF’s policy was neither unlimited in practice nor conveyed as unlimited. First, the court found that in practice EF’s vacation policy had an “implied limit.” The record showed that EF generally expected area managers like plaintiffs to take vacation in the range typically available to corporate employees (such as two to six weeks), not an unlimited amount beyond what would normally be available under a traditional accrual policy. Plaintiffs’ own records showed that they only ever took between two and four weeks of vacation per year, and sometimes less. The court also noted that Plaintiffs’ work schedules, which tended to be incredibly heavy (over 100 hours per week during peak season), precluded them from taking advantage of EF’s “purported unlimited time off policy.” Second, the court found that EF did not expressly communicate the “unlimited” nature of its policy to Plaintiffs. Rather, EF conveyed the policy informally through “side conversations” with area managers. Plaintiffs testified that while they understood they could take time off when their schedule permitted, they did not understand the policy to be “unlimited.” The court clarified that it did “not hold that section 227.3 necessarily applies to truly unlimited time off policies,” and set forth several factors for determining whether a time off policy is truly unlimited: the policy (1) clearly provides that employees’ ability to take paid time off is not a form of additional wages for services performed, but perhaps part of the employer’s promise to provide a flexible work schedule — including employees’ ability to decide when and how much time to take off; (2) spells out the rights and obligations of both employee and employer and the consequences of failing to schedule time off; (3) in practice allows sufficient opportunity for employees to take time off, or work fewer hours in lieu of taking time off; and (4) is administered fairly so that it neither becomes a de facto ‘use it or lose it policy’ nor results in inequities, such as where one employee works many hours, taking minimal time off, and another works fewer hours and takes more time off.

Practical Implications: Employers who offer unlimited or uncapped vacation should review their policies and practices to ensure that they satisfy the four factors the court identified as indicative of a truly “unlimited” vacation policy. Employers who fall short may very well find themselves owing a substantial amount of unpaid vacation wages, as well as the various other derivative penalties that may be triggered under California law. Note, however, that even if an employer meets the standard for an “unlimited” vacation policy, it is still not clear whether section 227.3 will apply. The court did not decide that question.   


Luna v. Hansen & Adkins Auto Transp., Inc., No. 18-55804, 2020 WL 1969409 (9th Cir. Apr. 24, 2020)

Summary: Employers may provide a FCRA disclosure alongside other job application materials, provided the disclosure appears in a standalone document; a FCRA authorization need not be contained in a standalone document.   

Facts: Hansen & Adkins (“Hansen”) job applicants were provided a Fair Credit Reporting Act (“FCRA”) disclosure that informed them that Hansen may obtain reports verifying previous employment, previous drug and alcohol test results, and driving records. This disclosure appeared on a separate sheet of paper, but it was provided together with, and at the same time as, other application materials. Applicants were also required to sign an authorization that allowed Hansen to investigate applicants’ previous records of employment. The authorization appeared on a document that included other notices, waivers, and agreements unrelated to acquiring the consumer report. Plaintiff, a former employee of Hansen, filed a putative class action alleging that Hansen violated FCRA by providing the FCRA disclosure simultaneously with other employment materials, and by failing to place the FCRA authorization on a standalone document. The district court granted summary judgment for Hansen, holding that neither practice violated the requirements of FCRA. Plaintiff appealed. 

Court’s Decision: The Court of Appeals for the Ninth Circuit affirmed. FCRA’s requirement that “a disclosure form contain nothing more than the disclosure itself” is a physical requirement, not a temporal one. Accordingly, an employer may provide a FCRA disclosure alongside other application materials, so long as the disclosure is contained in a standalone document and otherwise complies with FCRA. Moreover, because the authorization subsection of FCRA lacks the disclosure subsection’s standalone document requirement, an employer need not present a FCRA authorization as a standalone document. 

Practical Implications: While employers must ensure that their FCRA disclosures are contained in a standalone document, FCRA does not prohibit disseminating the FCRA disclosure to prospective employees together with, and at the same time as, other application materials. A FCRA authorization does not need to be on a standalone document.