April 30, 2019

Key California Employment Law Cases: March 2019

This month’s key employment law cases address the religious organization exemption under Title VII of the Civil Rights Act and arbitration agreements.

Garcia v. Salvation Army, 918 F.3d 997 (9th Cir. 2019)

Summary:  Defendant, a religious nonprofit organization, fell within the religious organization exemption of Title VII because although a portion of its annual income comes from the exchange of goods and services, it gives goods and services away or charges nominal fees.

Facts:  Plaintiff was hired by defendant Salvation Army as an assistant to the pastor.  A new pastor took over and reassigned plaintiff to a social services coordinator position.  Plaintiff and her husband stopped attending the Salvation Army’s religious services, but she continued her work as social services coordinator.  Two years later, a client filed a complaint against plaintiff.  The pastor refused to share the complaint with plaintiff, claiming it was confidential.  Plaintiff filed an internal grievance against the pastor, claiming she was discriminated against, excluded, and isolated at work since leaving the church.  Plaintiff filed complaints with the Equal Employment Opportunity Commission (“EEOC”) and Arizona state authorities for religious discrimination and retaliation.  Following a lengthy period of medical leave, defendant terminated plaintiff after she failed to report to work despite being cleared by her doctor without restrictions.  Plaintiff filed a second complaint with the EEOC and state authorities alleging that, by declining to disclose the client complaint, defendant failed to accommodate her disability.  Plaintiff then filed two lawsuits against defendant for violation of Title VII of the Civil Rights Act of 1964 (“Title VII”), and violation of the Americans with Disabilities Act (“ADA”), which were consolidated.  Plaintiff alleged that defendant subjected her to a hostile work environment because she stopped attending religious services, and retaliated against her for filing a grievance complaining of religious-based mistreatment.  Plaintiff further alleged that the stress from the hostile work environment caused her to suffer health problems, which defendant failed to accommodate.  The federal district court granted summary judgment in favor of defendant, holding that Title VII’s religious organization exemption protected defendant from suit, even if it failed to timely assert the defense, because the defense is jurisdictional and cannot be forfeited.  The court also dismissed the ADA claims on the merits.

Court’s Decision:  The Court of Appeals for the Ninth Circuit affirmed.  First, the Ninth Circuit confirmed that the religious organization exemption applies to the Salvation Army because its purpose and character are primarily religious.  The fact that it makes a percentage of its total income from the exchange of goods or services does not preclude the application of the defense because it is a nonprofit organization that gives many of its services away, or charges a nominal fee.  Second, the court rejected plaintiff’s argument that the defense did not reach her claims because it only applies to hiring and firing decisions.  Third, the defense is not jurisdictional and can be forfeited because it limits entitlement to relief in a narrow class of cases, not the authority of federal courts to adjudicate claims under Title VII.  However, in the absence of a showing of prejudice, an affirmative defense may be raised for the first time at summary judgment.  Plaintiff’s only asserted prejudice was that she could not take discovery of defendant’s religious focus and mission.  The court rejected this argument because plaintiff was intimately familiar with the Salvation Army.  Finally, defendant engaged in the interactive process while plaintiff was disabled, and once plaintiff was released to work by her doctor without restrictions, she no longer suffered from a disability.  Plaintiff then failed to provide supporting medical documentation of any ongoing disability despite multiple requests.  Defendant was not required to continue an interactive process in such circumstances.

Practical Implications:  The religious organization exemption under Title VII applies to more than traditional houses of worship but may extend to religious charities and other nonprofit organizations.


Salgado v. Carrows Rests., Inc., 33 Cal. App. 5th 356, 244 Cal. Rptr. 3d 849 (2019)

Summary:  Arbitration agreement signed after initial filing of plaintiff’s suit did not preclude its enforceability, where language in agreement was broad enough to encompass prior claims, but defendant’s knowledge of plaintiff’s representation by counsel may affect enforceability.

Facts:  Plaintiff filed a lawsuit alleging employment discrimination and violation of civil rights against defendant employer, Food Management Partners dba Carrows Restaurant.  Plaintiff subsequently amended her complaint to add the true parties in interest, defendants Carrows Restaurants, Inc. and Catalina Restaurant Group, Inc.  Defendants moved to compel arbitration on the ground that plaintiff entered into a binding and enforceable agreement to arbitrate all claims arising out of her employment.  The agreement relied upon was entered into after plaintiff filed her lawsuit but before she amended her complaint to add defendants.  Plaintiff opposed the motion on the grounds that her lawsuit was filed before she signed the arbitration agreement and that the agreement was not retroactive.  Defendants argued that they were not added as parties to the action until after the agreement was signed, and claimed they did not know of the existence of the lawsuit when the agreement was signed.  The trial court denied the motion, finding that the arbitration agreement did not apply to a suit filed before its execution.

Court’s Decision:  The California Court of Appeal reversed, finding that the language of the arbitration agreement was broad enough to apply to suits filed prior to the signing of the agreement.  An arbitration agreement may be applied retroactively to transactions that occurred prior to the execution of the agreement, but factual issues must be decided before determining whether a particular case must be arbitrated.  Here, the agreement provided that it applied to all disputes which may arise out of or be related in any way to plaintiff’s employment, and that the parties agreed that any claim either party may have against each other shall be submitted to binding arbitration.  The phrase “or be related in any way to” was sufficiently broad to include past disputes.  In addition, there was no qualifying language limiting or restricting the age of the claim.  However, on remand the trial court needed to determine whether defendants knew or should have known plaintiff was represented by counsel when she signed the agreement.

Practical Implications:  Employers considering an arbitration agreement can word it to encompass an employee’s prior claims.  However, employers should be cautious about doing so when the employee is represented by counsel.