Labor and Employment Law

Newly-Published Labor and Employment Law Cases

June 2024

Bristol SL Holdings v. CIGNA Health & Life (9th Cir. 23-55019 5/31/24) ERISA

Affirming summary judgment for defendants, the court held that the Employee Retirement Income Security Act of 1974 preempted claims that a health plan administrator’s denial of reimbursements violated state law. The plaintiff drug treatment center argued that its calls to the plan administrator verifying out-of-network coverage and seeking authorization to provide health services created independent contractual obligations. The court held plaintiff’s state law claims for breach of contract and promissory estoppel were preempted by ERISA because they had both a “reference to” and an “impermissible connection with” the ERISA plans that the defendants administered.

Bercy v. City of Phoenix (9th Cir. 22-16463 5/30/24) Hostile Work Environment Damages | Bankruptcy Estate

Bercy brought a hostile work environment claim against her employer, the City of Phoenix, alleging a single course of conduct that continued over a period of nearly two years. She filed her bankruptcy petition within that two-year period. She thus sought damages on a claim for alleged harm arising from discriminatory conduct that occurred in part after she filed for bankruptcy. The parties correctly agreed that a claim based on conduct before the petition, and any damages resulting from that conduct, belonged to the bankruptcy estate. Because the plaintiff could have brought her claim at the time of her bankruptcy petition, and any subsequent damages were sufficiently rooted in prebankruptcy incidents, the court held that the entire claim belonged to the bankruptcy estate under 11 U.S.C. section 541(a)(1).

Soto v. Super. Ct. (CA4/2 E081902 5/29/24) CalSTRS | Statutory Reimbursement of Disability Benefits

Soto was injured during a routine medical procedure. She sued her medical providers for medical malpractice and obtained disability retirement benefits from the California State Teachers’ Retirement System. After Soto received a settlement in the medical malpractice case, CalSTRS sought reimbursement of the disability benefits it had paid to Soto. The court held that Education Code section 24500 grants CalSTRS “a right of subrogation” for disability retirement payments. The court also found Civil Code section 3333.1 did not bar CalSTRS’ claim because the medical malpractice defendants did not introduce evidence of Soto’s disability retirement benefits at trial, a requirement under the statute for a benefit payor’s right of subrogation to be extinguished.

Cook v. University of Southern California et al. (CA2/4 B330640 5/24/24) Arbitration | Unconscionability

The court affirmed denial of USC’s petition to compel arbitration. As a condition of employment with USC, Cook signed an arbitration agreement that required arbitration “of all claims, whether or not arising out of Employee’s University employment, remuneration or termination, that the Employee may have against the University or any of its related entities.” By its terms, the agreement “shall survive the termination of Employee’s employment, and may only be revoked or modified in a written agreement . . . signed by the President of the University.” The court found the agreement unconscionable because it applied to claims beyond those arising out of Cook’s employment and lasted for an infinite duration. The court also found lack of mutuality because any related entity could compel Cook to arbitrate but, under California law, Cook would have to prove a related entity received a benefit from the agreement to compel the entity to arbitrate.

Coinbase, Inc. v. Suski (US 23–3 per curiam 5/23/24) Arbitrability Disputes in Multiple Contracts

Coinbase had two contracts with respondents. The first contract, the user agreement respondents agreed to when they created their accounts, contained a clause delegating to an arbitrator all issues of whether a dispute between Coinbase and respondents is subject to arbitration. The second contract, the rules for a promotional sweepstakes respondents entered, contained a forum selection clause granting California courts sole jurisdiction over any controversies regarding the sweepstakes. Where parties have agreed to two contracts—one sending arbitrability disputes to arbitration, and the other either explicitly or implicitly sending arbitrability disputes to the courts—a court must decide which contract governs. Only if the court determines that the contract containing the delegation clause governs may the dispute over arbitrability be decided by an arbitrator.

Campbell v. L.A. Unified School Dist. (CA2/8 B321756, filed 5/1/24, pub. 5/22/24) Teacher Dismissal

After an 11-day administrative hearing upheld Campbell’s termination, she filed a petition for writ of mandate challenging the decision. The trial court, exercising its independent judgment, affirmed the administrative decision. The appellate court affirmed also, finding Campbell failed to demonstrate reversible error. The court found no prejudicial error from the administrative decision citing incorrect statutory provisions. The court could not review Campbell’s sufficiency of the evidence argument because she did not set forth all material evidence in her briefs. Finally, the court rejected Campbell’s argument that the administrative decision misapplied precedent holding that the number of absences is not determinative because the District proved that circumstances other than Campbell’s excessive absences supported her termination.

Ververka v. Dept. of Veterans Affairs (CA1/1 A163571, filed 5/6/24, pub. 5/22/24) Whistleblower | Lab. Code section 1102.5

Ververka alleged the California Department of Veterans Affairs violated Labor Code section 1102.5 by terminating him for whistleblowing. A jury found CalVet was not liable because it proved it would have made the same decision to terminate him for non-retaliatory reasons. The appellate court affirmed, rejecting Ververka’s argument that, as under the Fair Employment and Housing Act, an employer’s “same decision” showing under Labor Code section 1102.6 precludes only an award of damages and reinstatement, and he thus was entitled to declaratory relief and reasonable attorney fees and costs. The court instead held that an employer’s “same decision” showing under Labor Code section 1102.6 provides a complete defense to liability.

Mar v. Perkins (CA2/7 B327665 5/22/24) Arbitration | Mutual Assent

The trial court denied defendants’ petition to compel arbitration of Mar’s action for buyout of his partnership interest. The appellate court affirmed, finding no mutual assent to arbitrate because Mar promptly rejected the arbitration agreement when it was presented to him, and thus his continuing to work for defendants for 19 more months did not constitute assent to the arbitration agreement.

Hernandez v. Sohnen Enterprises (CA2/5 B323303 5/22/24) Arbitration | FAA Preemption

After Sohnen failed to pay arbitration costs within 30 days of the due date, Hernandez filed a motion to withdraw from arbitration and litigate in state court as permitted under Code of Civil Procedure section 1281.97. The trial court found the employer breached the arbitration agreement and granted the motion. The appellate court concluded that an order granting a motion under section 1281.97 to withdraw from arbitration and proceed in court is appealable. The court reversed on the merits, holding that because the arbitration agreement was governed by both the substantive and procedural provisions of the Federal Arbitration Act, rather than California’s arbitration law, the procedures of section 1281.97 did not apply and the order must be reversed. Alternatively, the court held that when an agreement falls within the scope of the FAA and does not expressly adopt California arbitration laws, the FAA preempts the provisions of section 1281.97 that mandate findings of breach and waiver.

Campbell v. L.A. Unified School Dist. (CA2/8 B320442, filed 5/1/24, pub. 5/21/24) Race Discrimination | Procedural Deficiencies

Campbell’s amended complaint alleged the District racially discriminated against her and retaliated against her in violation of Labor Code sections 1102.5 and 1106, and the Fair Employment and Housing Act. The court found Campbell failed to satisfy the government claim presentation requirement for her Labor Code claims because none of her complaints went to the right people or contained the information required by statute. The court found Campbell’s FEHA claims untimely because, as required by the FEHA at the time, they were not filed within one year after she received her right to sue notice from the Department of Fair Employment and Housing.

Cal. Specialty Insulation, Inc. v. Allied World Surplus Lines Ins. (CA2/7 B324805 5/17/24) Negligence | Indemnification of Employment Contractor

Allied World issued a general liability insurance policy to CSI that excluded from coverage bodily injury to the employees of any “contractor.” Citing the exclusion, Allied World refused to defend and indemnify CSI against a negligence claim following a construction site accident. The court affirmed the trial court’s ruling that the term “contractor” in the exclusion was ambiguous and that, based on CSI’s reasonable expectations, the exclusion did not apply to the negligence claim in question.

Al Shikha v. Lyft, Inc. (CA2/3 B321882 5/17/24) Negligence | Employer Duty to Screen Criminal Records of Riders

Al Shikha was working as a Lyft driver when a passenger attacked him, stabbing his hand and legs. It was later discovered the passenger had a criminal record. Al Shikha sued Lyft for negligence based on its failure to conduct criminal background checks on all passengers. The court affirmed the trial court’s grant of Lyft’s motion for judgment on the pleadings, finding Lyft’s legal duty to its drivers does not extend to conducting criminal background checks on all riders seeking to use the service.

Garcia v. Stoneledge Furniture LLC (CA1/3 A166785 5/17/24) Arbitration

The court affirmed the trial court’s denial of defendants’ petition to compel arbitration of Garcia’s claims arising out of her employment. The court found the arbitration agreement’s delegation clause did not extend to the issue of whether a valid arbitration agreement existed, noting that delegation of arbitrability questions to an arbitrator presupposes the existence of a valid arbitration agreement between the parties. The court went on to find no valid agreement to arbitrate existed because defendants failed to authenticate Garcia’s purported signature on the agreement.

Hoglund v. Sierra Nevada Memorial-Miners Hospital (CA3 C097065 5/17/24) FEHA Standard of Review | Tax Neutralization Award

Applying substantial evidence review to the verdict after a bench trial, the court affirmed the trial court’s rulings that Hoglund proved age discrimination, harassment, and wrongful termination in violation of the Fair Employment and Housing Act. The court declined to address defendants’ argument that the damages awarded were excessive because defendants did not bring a motion for new trial on that ground. The court also rejected defendants’ challenge to the trial court’s statement of decision. The court affirmed the award of $958,297 in attorney fees. The court also denied Hoglund’s cross-appeal, finding no basis to overturn the trial court’s determination that she presented insufficient evidence to support a tax neutralization or “gross up” award to offset the tax consequences of the lump sum damages award.

Hittle v. City of Stockton (9th Cir. 22-15485 5/17/24) Employment Discrimination | Religion

The panel filed an amended opinion and an order denying panel rehearing and rehearing en banc. Hittle alleged that he was terminated from his position as Fire Chief for the City of Stockton based upon his religion and, specifically, his attendance at a religious leadership event. The panel concluded that Hittle failed to present sufficient direct evidence of discriminatory animus in defendants’ statements and the City’s notice of intent to remove him from City service. Hittle also failed to present sufficient specific and substantial circumstantial evidence of religious animus by defendants. The district court’s grant of summary judgment in defendants’ favor was appropriate where defendants’ legitimate, non-discriminatory reasons for firing Hittle were sufficient to rebut his evidence of discrimination, and he failed to persuasively argue that these non-discriminatory reasons were pretextual. In dissent from the denial of rehearing en banc, four judges would have reversed the grant of summary judgment on various grounds.

Harrow v. Department of Defense (US 23–21 per curiam 5/16/24) Merit Systems Protection Board | Appeal Deadline Not Jurisdictional

5 U.S.C. section 7703(b)(1) says that an appeal of a Merit Systems Protection Board decision to the Federal Circuit Court of Appeals “shall be filed within 60 days after the Board issues notice of the final order.” Harrow did not learn of the Board’s decision in his case until after the 60-day period to appeal had run. The Federal Circuit denied his request to equitably toll the filing deadline, finding it was an unalterable jurisdictional requirement. The Supreme Court held the deadline was not jurisdictional because section 7703(b)(1) does not speak to the court’s jurisdiction, as required under the Court’s precedent for a filing deadline to be jurisdictional.

Smith v. Spizzirri (US  22–1218 per curiam 5/16/24) Arbitration and Stay

Section 3 of the Federal Arbitration Act says that a court “shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” Here the district court ordered plaintiffs’ claims to arbitration and dismissed the case without prejudice, despite plaintiffs requesting a stay of the court proceedings. The Ninth Circuit affirmed. The Supreme Court reversed, holding that section 3 requires a district court to issue a stay upon a party’s request and the district court thus lacked discretion to dismiss the suit.

Diaz v. Macys West Stores, Inc. (9th Cir. 22-56209 5/10/24) PAGA | Arbitration

The trial court granted Macys’ motion to compel arbitration of Diaz’s individual Private Attorneys General Act claims. It also ordered the parties to arbitrate her non-individual PAGA claims and closed the case. The appellate court found it had jurisdiction to review the trial court’s order because the lower court had dismissed all claims rather than staying all or some claims pending arbitration. The appellate court found the parties’ arbitration agreement did not indicate an intent to arbitrate class or representative claims, and remanded the matter with instructions to treat the non-arbitrable claims consistent with Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104.

Bafford v. Admin Comm. Of the Northrop Grumman Plan (9th Cir. 22-55634 5/9/24) ERISA

The court found that plaintiffs’ amended complaint sufficiently alleged a claim for failure to provide them pension benefit statements every three years or with annual notices of the availability of such statements, as required by 29 U.S.C. section 1025(a)(1)(B)(i). The court also found plaintiffs stated a claim under 29 U.S.C. section 1025(a)(1)(B)(ii) because (1) provision of substantially inaccurate pension benefit statements is cognizable under that section and (2) plaintiffs adequately pleaded an ERISA violation based on their allegation that they made written requests sufficient to trigger the duty to produce pension benefit statements. The court reversed the trial court’s dismissal of plaintiffs’ claims and remanded for further proceedings.

Naranjo v. Spectrum Security Services, Inc. (SC S279397 5/6/24) Penalties | Wage Statements

Labor Code section 226 requires employers to provide their employees with written wage statements listing gross and net wages earned, hourly pay rates, hours worked, and other employment-related information. In the case of a “knowing and intentional failure . . . to comply” with Labor Code section 226, the law provides for statutory penalties of up to $4,000, or the employee’s actual damages if they exceed the statutory penalties. Under long established law, an employer cannot incur civil or criminal penalties for the willful nonpayment of wages when the employer reasonably and in good faith disputes that wages are due. If an employer reasonably and in good faith believed it was providing a complete and accurate wage statement in compliance with the requirements of section 226, then it has not knowingly and intentionally failed to comply with the wage statement law.

Reynosa v. Superior Court (CA5 F086342 5/6/24) Arbitration | Late Fees

Code of Civil Procedure section 1281.98 provides if fees or costs required to continue an arbitration proceeding are not paid within 30 days after the due date, the drafting party is in material breach of the arbitration agreement and waives its right to compel the other party to proceed with arbitration. Section 1281.98 further provides that unless the arbitration agreement states the number of days in which fees or costs are to be paid, the arbitration provider must issue all invoices as due upon receipt. Any extension of the due date must be agreed upon by all parties. Here, the arbitration provider sent an invoice on December 12, 2022, saying fees were due upon receipt, but also sent an email to the parties’ counsel saying fees were due by February 23, 2023. The employer paid the fees on February 22, 2023. The court reversed the trial court’s finding that the parties had agreed to the later payment date, and held the employer waived its right to proceed with the arbitration by not paying fees within 30 days of receiving the invoice.

Valley Hosp. Med. Ctr., Inc. v. NLRB (9th Cir. 22-1804 5/6/24) Union Dues Checkoff

The panel denied Valley Hospital’s petition for rehearing en banc and issued an amended opinion. In a prior decision, the court had remanded this matter back to the National Labor Relations Board to better explain its decision that an employer may cease union dues checkoff after the expiration of a collective bargaining agreement (CBA). On remand, the Board reversed its position and held that an employer must continue union dues checkoff after CBA expiration. The court held its remand order did not foreclose the Board’s reconsideration of the underlying rule, and the Board therefore was not bound by the court’s prior decision. The court further held that the Board followed a proper decisionmaking process on remand by providing a reasoned explanation for overruling its prior decision, and applied a permissible interpretation of the National Labor Relations Act.

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