Over the past few years, many employers decided that employment arbitration is useful to manage litigation costs. But, two recent decisions may make employers reconsider their decision. For decades arbitration has been the culminating procedure for union grievances of employees subject to collective bargaining agreements. More recently arbitration agreements have been favored in other nonunion employment relationships. Generally, employers make such arbitration agreement a condition of employment without significant concern for their enforceability.

Some recent cases have favored arbitration. In 2000, the California Supreme Court issued Armendariz v. Foundation Health Psychcare Services, Inc. that established specific rules for employment arbitration agreements. Although not considered completely advantageous to employers, the clarifications contained in the case were helpful in drafting enforceable arbitration agreements.

A strategic lawsuit against public participation, or SLAPP suit is generally brought to obtain an economic advantage over the defendant, not to vindicate a legally cognizable right of the plaintiff. Code of Civil Procedure section 425.16, the anti-SLAPP statute, was enacted in 1992 to provide a procedure for expeditiously resolving "nonmeritorious litigation meant to chill the valid exercise of the constitutional rights of freedom of speech and petition in connection with a public issue." Sipple v. Foundation for Nat. Progress (1999) 71 Cal.App.4th 226, 235. The anti-SLAPP statute is the California Legislature's response to meritless lawsuits brought to harass those who have exercised these rights. Church of Scientology, supra, 42 Cal.App.4th at 644. In 1997, the Legislature added a provision mandating that courts “broadly construe” this section to further the legislative goals of encouraging participation in matters of public significance and discouraging abuse of the judicial process. Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 473.California Code of Civil Procedure section 425.16 posits a two-step process for determining whether a cause of action is a SLAPP suit and so subject to a special motion to strike or dismissal of the action. First, the defendant must make a threshold showing that the challenged cause of action is one arising from protected activity. See Code Civ. Proc. § 425.16, subd. (e). If the court finds the defendant has made the requisite showing, the burden shifts to the plaintiff to establish a probability that he or she will prevail on the claim. Ibid. If the plaintiff cannot do so, the court will dismiss the matter.

You may be thinking to yourself that the anti-SLAPP statute has no relevance to your business or company, but does it? Let us suppose that one of your employees, Jane, approaches your Director of Human Resource to file a formal complaint of sexual harassment by one of her supervisors, John. Jane’s report is consistent with the company’s written policies regarding sexual harassment reporting. Based on the report, you hire a consultant to conduct an investigation and determine that there is not enough evidence on either side to substantiate whether the allegations are true or not – the classic “he said, she said.” Out of an abundance of caution, you remind John of your expectations regarding his conduct in the workplace, but take no actions against him.

The company’s sexual harassment policies, including conducting an independent investigation, are consistent with its mandatory duty under the Fair Employment and Housing Act to prevent harassment and discrimination.

Approximately a year later, Jane is served with a civil complaint. To her shock, and the company’s, she is named as the Defendant in the suit, and John, who is no longer with your company, is the Plaintiff. In his Complaint, John alleges causes of action for Defamation, and Intentional Interference with Prospective Business Advantage, and Intentional Infliction of Emotional Distress against Jane. The causes of action are all based on Jane’s formal sexual harassment complaint to your Human Resource Director.

This hypothetical raises a number of critical questions for an employer. When faced with a situation analogous to the above, an employer must consider the following questions:

1) Is the employer responsible for providing the employee with a defense?

2) If an employee discusses, generally, with your Director of Human Resource, should the employee be warned that while the company will not retaliate against an employee for filing a complaint, the employee could be subject to a civil suit for defamation, among other causes of action?

3) If the company pays for the employee’s defense, is the company responsible for any money judgment rendered against the employee? Does this answer change when the evidence reveals an inconsistency between the jury findings, and the employer’s findings (i.e., the company’s independent investigation failed to expose that the employee’s claim was false, and/or fabricated)?

4) Does the anti-SLAPP statute allow for an expeditious end to a frivolous lawsuit filed by a vindictive employee?

The answers to some of the questions are unequivocal. For example, it is clear that the employer has an obligation to afford the employee a defense, as the case arose during the course and scope of employment. See Cal. Lab. Code §2802. Additionally, when asked generally about filing an internal sexual harassment complaint, the company should not advise the employee that he/she could be the subject of a lawsuit for filing a complaint, as the Fair Employment and Housing Agency could view such comments as an inappropriate attempt to chill the exercise of an employee’s rights. The remaining questions raise issues of first impression. A trial court in Orange County recently decided that an internal complaint of sexual harassment was merely a dispute between two employees and did not raise an important public policy issue. Based on this determination, the trial court denied the defendant’s Motion to Strike (or dismissal of the case) pursuant to the anti-SLAPP statute. This decision has been appealed to California’s Fourth District Court of Appeal for a final determination. We will be keeping you abreast of this issue, but in the meantime, employers should be acquainted with this issue as they receive complaints and conduct the required investigation.

Nose rings, tattoos, purple hair and pants that are so large they have to be constantly pulled up. What can you do as an employer? What can you do when your employee shows up at the preschool you operate with a swastika tattooed to her forehead or a chain running from the ring in her nose to the one piercing her eyebrow? Don’t we all have a fundamental right guaranteed by the Constitution to express ourselves? The answer is yes and no. We all have the freedom to make choices and to express ourselves in a way that we see fit and within the law. However, we also have a choice to work or not to work for a particular employer. Accordingly, an individual’s freedom to dress or look a particular way generally ends at the workplace where the employer has the freedom and discretion on how he or she will operate their business. Generally employers have a significant amount of discretion in regulating grooming standards or an employee’s appearance on the job.

Courts have ruled in favor of employers who have fired employees for not covering tattoos, wearing earrings, failing to wear a tie or having hair that was too long. Employers have even been permitted to set up different appearance standards for men and women. For example, it has been found permissible to prohibit male employees from wearing earrings while at the same time allowing female employees to do so. Similarly, an employer can require its male employees to have short hair and permit female employees to have long hair. In sum, the law gives employers significant discretion in regulating the modes of dress, appearance and grooming standards that are “mutable” or within the control of the employee to change. However, the law generally forbids employers from attempting to regulate specific “immutable” characteristics such as race, national origin, color, sexual orientation, disability, medical conditions or gender. Furthermore, an employer is required to reasonably accommodate an employee’s religious beliefs or disability to the extent that the accommodation does not create an undue burden on the employer. Finally, although an employer can regulate an employee’s appearance at work, an employer generally cannot regulate an employee’s lawful off duty behavior or appearance.

In an effort to avoid any legal issues concerning the regulation of employee appearance, employers should first make sure that any such regulations are applied and enforced in an evenhanded and non-subjective manner. Employees should know what is and is not acceptable in the workplace. One of the most effective ways to educate employees is to have clear and concise appearance standards enumerated in an employee handbook.

Second, it is always better to have a legitimate and specific reason for the particular regulation. For example, if your employees deal face to face with customers, your organization may need to present a certain type of image depending on your type of business. A nose ring may be appropriate in a tattoo parlor but not in a law office. If your employees work around heavy equipment, it may be necessary, for safety reasons, to prohibit excessively baggy cloths or loose body piercings that may become entangled in machinery, “ouch!”

Third, avoid regulations that may disparately impact a particular group of employees. For instance, requiring short hair of all employees may disparately impact females. A “no beard” policy may disparately impact African American men, a high percentage of whom suffer from a skin condition that is worsened by shaving. A “no turban” policy may disproportionately affect employees of a specific national origin.

Fourth, be sensitive to an employee's religious beliefs and reasonably accommodate the employee in that regard. Certain faiths may require certain types of clothing or grooming standards. In one case, currently pending before a Massachusetts District Court, a former employee has sued Costco for failing to permit her to wear an eyebrow ring at work. At the time, Costco, like many businesses, had a dress code that barred facial and tongue jewelry, visible tattoos, sweatpants, jeans with holes and open toed shoes. In that case, the employee is claiming that the eyebrow ring is part of her religious belief as a member of the Oregon based Church of Body Modification. Although such a case may appear to be ridiculous at first glance, the U.S. Equal Employment Opportunity Commission has nevertheless sided with the former employee.

Many times our practice is about remedying a problem that has already occurred. Our abilities to remedy those problems often depend on the policies and procedures implemented. Unfortunately, we find that our client’s policies and procedures are inadequate to afford a viable defense, do not comply with current law or do not exist at all.

The following Top Ten List of Policies and Procedures should be reviewed to confirm whether your policies and procedures comply with current law and are sufficient to avoid, or minimize, civil liability:

1. At-will Employment. Employers should ensure that all of their employees sign an acknowledgment form reflecting that the employee’s employment is at-will. This acknowledgment must affirm that this is the only agreement between the employee and employer regarding their employment status and supercede all prior agreements or understandings. This policy should be reaffirmed in the employer’s written policies. This affirmation should also be included in the “prohibited conduct” section, which lists specific conduct that the employer will not tolerate and at the same time confirms that the employer can take disciplinary action consistent with the at-will relationship.

2. Equal Opportunity Employer. Employers should have a policy that clearly prohibits unlawful discrimination by any employee, including managers, supervisors and/or co-workers. This policy should provide that the employer would make reasonable accommodations for employees with known physical and mental disabilities. Further, employers should develop job descriptions that accurately reflect essential functions of each position for purposes of assisting the employer in making a reasonable accommodation determination for employees with disabilities. The policy should also prohibit any form of retaliation against employees who make complaints of discrimination or harassment.

3. Prohibiting Harassment. Under state and federal law all employers must have a harassment policy that prohibits all forms of harassment. This policy must be posted in a conspicuous location at the employer’s place of business and be reaffirmed in the employer’s written policies. In conjunction with the employer’s anti-discrimination and harassment policies all employers should take immediate steps to investigate and remedy any claims of harassment or discrimination at the work place.

4. Employment Status. Employers should confirm whether their employees’ employment status is properly designated as full or part-time, temporary or regular. Failure to properly understand and designate employment status may expose employers to liability involving employee benefits issues and create unintended joint employment relationships.

5. Working Hours/Overtime Compensation. Employers sometimes improperly designate employees as exempt from overtime laws. This is often times a result of a misunderstanding of how to properly classify an employee’s duties or for the convenience of the employer’s payroll accounting system. Regardless of whether a non-exempt employee has agreed to be paid a salary in lieu of hourly wages, employers are strictly required to pay employees as required by law. Failure to follow current law regarding working hours and overtime compensation may result in a significant award of back wages, interest and penalties against the employer.

6. Vacation Pay. Although employers are not required to provide vacation pay, if you do, vacation policies must properly compute vacation accrual and must not have an illegal forfeiture provision. Vacation pay is considered wages under California law. Therefore, all accrued vacation must be paid at the time of termination. For current employees vacation pay cannot be forfeited at the end of each year.

7. Labor Relations. Employers with a workforce that may seek union representation should have in place Open Door and No Distribution/Solicitation policies. An Open Door policy provides awareness to the employer of employee problems and concerns. It also provides a venue for employees to make complaints and allows the employer to remedy those complaints without litigation or union organizing drive. A No Distribution/Solicitation policy sets the boundaries of how employees may solicit support for their personal causes, such as labor relations or other private concerns.

8. Family and Medical Leaves. If employers have Family Medical Leave Act (“FMLA”) leave obligations, the employer is required by law to have a FMLA policy included in its written policies. Employers without FMLA obligations, but that provide medical leaves of absence, should have a written policy that sets the parameters regarding medical leaves of absence to avoid confusion as to how such leave will be administered. Please note there may be workers’ compensation and disability leave considerations that must be accommodated.

9. Arbitration Agreement. Arbitration agreements are a valuable tool for employers to resolve employment disputes quickly and in a cost effective manner. Changes in current law have placed certain requirements on arbitration agreements. See “Arbitration Agreements Reconsidered” in this Edition. Failure to comply with these requirements will render the arbitration agreement void.

10. Workplace Violence. Due to the reality of the workplace today, a no tolerance policy regarding workplace violence is helpful to avoid potential civil liability for violent conduct of employees at the workplace.

COBRA requires group health plans in certain circumstances to provide the opportunity for participants and beneficiaries, who otherwise would lose coverage, to elect to continue coverage under the plan at group rates for a limited period of time.

The Employee Benefit Security Administration (EBSA) recently proposed regulations on the various notice requirements imposed by COBRA. The proposed rules set minimum standards for the timing and content of the notices required and establish standards for administering the notice process. The proposed rules also include model forms to satisfy the notice requirements.

The rules are proposed to become effective for plan years beginning on or after January 1, 2004. However, the rules have an immediate effect, because they indicate that plan sponsors may no longer rely in good faith on previously issued guidance on the COBRA notice requirements, including prior model notices.

Insights:

The new model notices are designed for use by single-employer plans and may not be appropriate (i) for union plans (ii) for multiemployer plans, or (iii) when bankruptcy is the qualifying event in a single-employer plan. The EBSA advises in the proposed rule that Summary Plan Descriptions (SPDs) for all group health plans be amended to provide notice of the provisions of the Trade Act of 2002. The Trade Act of 2002 amended COBRA to provide additional rights, including a second COBRA election period and a 65 percent tax credit, for individuals whose employment is adversely affected by international trade.

The Rule in a Nutshell:

Four types of notices are covered by the proposed rule:

1. The general notice of COBRA rights. This notice must be provided within 90 days of the first day of coverage or on the date an election notice is required, if earlier. The general notice requirement may be satisfied through distribution of an SPD that includes the necessary content for the notice. The proposed rule provides significant additional detail on the content of the notice.

2. Employer-provided notices of the occurrence of a qualifying event. This notice relates to termination of employment or reduction in hours, an employee’s death or enrollment in Medicare, or the employer’s bankruptcy. The notice must be given to the plan administrator within 30 days after the qualifying event.

3. Notice by a qualified beneficiary of certain qualifying events or of a disability. The new guidance provided for this notice is significant in both quantity and effect. This notice requires covered employees and qualified beneficiaries to provide notice of qualifying events such as divorce or legal separation or a dependent becoming ineligible for coverage as a dependent. The proposed rule requires reasonable procedures for the furnishing and receipt of such notices, and sets standards for what will be considered reasonable (including restrictions on rejecting incomplete notices and other provisions designed for the benefit of plan participants).

4. The election notice and other notices required after the election of COBRA coverage. The election notice must be provided within 14 days after the plan administrator learns of a qualifying event. The proposed rule sets forth the information required in this notice, including the independent right of each qualified beneficiary to elect COBRA coverage. Several additional details and warnings relating to COBRA coverage must be provided in this notice.

© Copyright 2003 Palmer Kazanjian Wohl Perkins LLP