Labor Employment Law Blog

By James R. Hays, Maranda W. Rosenthal, and Jonathan Stoler

As the risk of a double-dip recession looms and companies continue to adjust their workforces to adapt to the more challenging economic times, employers are being faced with making the tough decision regarding the possibility of layoffs. Workforce reductions are one of the most unpleasant events for employers to deal with and often involve both economic and emotional considerations. Layoffs can expose employers to unexpected pitfalls and disastrous legal consequences as the company tries to navigate the myriad complex laws involved. In recognition of the current economic climate and the enormous amount of work required to properly plan and execute a large-scale layoff, this article is intended to assist in identifying key issues and to suggest several best practices when implementing a reduction-in-force.

Before filing suit under the California Fair Employment and Housing Act ("FEHA"), an employee must exhaust her administrative remedies with the Department of Fair Employment and Housing ("DFEH"). In the recently decided case of Wills v. Superior Court, the court gave little leeway to an employee, finding that she failed to exhaust her administrative remedies because her DFEH complaint only alleged discrimination based on a denial of family/medical leave, while her lawsuit raised different allegations of disability discrimination, retaliation, harassment, and failure to accommodate.

Justice Melvin L. Schweitzer of the New York Commercial Division recently issued a decision in Greater Talent Network, Inc. v. Alec Melman, et. al., Index No. 650522/2010 (Sup. Ct., NY County, Dec. 22, 2010) that can have important ramifications for New York employers.
 

Last week, the California Supreme Court decided Reid v. Google, Inc. This case is yet another reminder to California employers that it is worth their while to train their employees and supervisors to be cautious about what they say and what they put into writing in emails, memos, and so on. The case also illustrates the critical importance of employers being able to articulate the precise reasons why an employee is being terminated, communicating those exact reasons to the employee, and having documentation to prove all this in the event of litigation.

A California Court of Appeal has recently held that a subsequent employer can be liable for wrongful termination in violation of public policy for firing a new employee when her prior employer attempted to enforce an unenforceable non-compete agreement.

This week, a California Court of Appeal found that the plaintiff employee was entitled to a full trial on his wrongful termination claim, concluding that California public policy in favor of the employer's duty to pay overtime wages protects an employee from termination for a mistaken but good faith claim to overtime wages.

On November 2, 2009, the California Supreme Court handed down its decision in Schachter v. Citigroup, Inc.  At issue was Citigroup's voluntary employee incentive compensation plan that provided employees with shares of restricted company stock at a reduced price in lieu of a portion of the employee's annual cash compensation. Under the Plan, the employees voluntarily agreed that, should they resign or be terminated for cause before their restricted shares of stock vest, they would forfeit the stock and the portion of cash compensation they directed be paid in the form of the restricted stock.

The California Supreme Court has ruled that an employer may terminate an employee for using marijuana for medical purposes.  In Ross v. RagingWire Telecommunications, Inc. the employee, Gary Ross, suffered from strain and muscle spasms in his back due to his service in the U.S. Air Force.  The employer, RagingWire, offered Mr. Ross a job, but required him to take a drug test.  Mr. Ross tested positive for marijuana use, and RagingWire terminated him as a result.  Mr. Ross filed a lawsuit claiming that RagingWire discriminated against him on the basis of his disability and wrongfully terminated him.

In Industrial Dielectric, 123 LA 822 (Arb 2006), a recent arbitration decision, an employer's immediate reaction to an employee's threatening actions towards the Vice President for Human Resources was closely scrutinized to determine whether the employer actually perceived the employee's actions as a threat.  Specifically, at issue was whether termination of the employee who made threatening remarks was merely an after thought in an attempt to terminate a problem employee or a legitimate action based on an actual fear of a perceived threat.  This became an issue because the Vice-President of Human Resources' actions at the time of the threat and through the time of the employee's termination contradicted the employer's contention that the actions were perceived as an actual threat.

Click here to view a PDF copy of the document.

In its opinion in Lujan v. Shala Minagar, filed on December 9, 2004 (Appeal No. B170438), the California Court of Appeal ruled that an employer is liable for retaliation in violation of California Labor Code section 6310 when it terminates an employee out of fear that the employee may, in the future, file a workplace safety complaint with a governmental agency, even though the employee never filed a complaint with the agency.

Smith v. Superior Court of Los Angeles County (L'Oreal USA, Inc.) is an important decision for employers because it provides some clarity on the meaning of "discharge" under Labor Code Sections 201 and 203.

by Greg S. Labate

Employers are at great risk of potential liability when making decisions concerning layoffs, downsizing, and reductions in force. This article provides employers with practical information and useful tools to protect themselves from liability when making these crucial choices.