Storm's California Employment Law

Second District Decision Allows Mandatory Employment Arbitration Class-Action Waivers

    This week, in Konig v. U-Haul Co. of Cal., the Second District issued a ruling that held that an employment contract requiring employees to waive their rights to class or representative actions in arbitrations with the employer was enforceable. U-Haul, the employer, required employees to sign an arbitration agreement and a waiver of “any right to join or consolidate claims in arbitration with others or to make claims in arbitration as a representative or as a member of a class or in a private attorney general capacity” unless U-Haul agreed to the procedure. An employee bringing a wage and hour claim against U-Haul sought to have the waiver declared unconscionable. 

    Applying Discover Bank, the Second District noted that, while contractual class-action waivers are unconscionable when they apply to claims that have “predictably . . . small amounts of damages,” wage and hour claims against an employer, such as the one disputed in Konig, are not predictably small. Therefore, the Court reasoned, a class-action waiver was not substantially unconscionable under the standard outlined in Discover Bank. 

    This case is sure to generate a lot of comment, including some recommendations to employers that they begin adding representative claim and class-action waivers to their employment contracts. However, this opinion will not be the last word on the issue, and I expect more changes to the law in this area soon. Because the California Supreme Court granted a petition to review an opt-in employment arbitration agreement with a similar class-action waiver in April, there will likely be changes to the standard announced in Konig.

Delfino v. Agilent Technologies, Inc.

    Yesterday, the Sixth District filed an opinion that found an employer immune from state law tort claims under the Communications Decency Act of 1996 (CDA). The plaintiffs alleged that an Agilent employee had used Agilent’s computers to send threatening email messages to the plaintiffs, and sought damages from Agilent for intentional and negligent infliction of emotional distress. Agilent successfully brought a motion for summary judgment, claiming immunity under the CDA, which plaintiffs appealed.

     Under the CDA, a defendant has immunity when: 1) the defendant is a provider or user of an interactive computer service; 2) the cause of action treats the defendant as a publisher or speaker of information; and 3) the information at issue is provided by another information content provider. 47 U.S.C. 230(c)(1). Because plaintiffs did not dispute that the Agilent employee was the “information content provider,” the court in Delfino focused on the following two questions in its application of the CDA. First, the court asked whether Agilent was a “provider of an interactive computer service.” Second, the court asked whether plaintiffs’ state law claims for negligent and intentional infliction of emotional distress treated Agilent as a publisher or speaker of the information at issue.

    Addressing the first question, the court stated that it was unaware of another opinion that addressed the issue of whether a corporate computer network qualifies an “interactive computer service” under the CDA. The court first compared the approaches used by various federal circuits and California state courts, and noted that courts have broadly defined the term to encompass entities other than ISPs. The court also surveyed academic sources, and noted that several journal articles concluded that employers, like ISPs, should be covered by the CDA’s immunity provisions. Ultimately, the court found that employers who provide employees access to the internet meet the CDA’s definition of a “provider of an interactive computer service.”

    Addressing the second question, the court first noted that most cases addressing the scope of CDA immunity under section 230 involve defamation. However, the court noted that some cases had applied CDA immunity to claims of intentional infliction emotional distress. In addition, the court cited a California opinion from the First District had applied CDA immunity to claims of nuisance, premises liability, and a taxpayer suit under CCP section 526a. The court found further support for the proposition that CDA immunity applies to civil claims generally. Without further elaboration, or a statement of the exact claims CDA immunity applies to, the court held that plaintiffs’ claims of negligent and intentional infliction of emotional distress treated Agilent as “a publisher or speaker of the information at issue” under the CDA.

    The court’s opinion in Delfino seems part of a trend, where courts will broadly interpret the CDA’s immunity provisions in section 230 to limit plaintiffs’ ability to bring state law tort claims against any entity that provides a means for transmission of tortuous electronic communications. However, the opinion in Delfino resulted, at least in part, from the plaintiffs’ inability to provide a sufficient rebuttal to the evidence offered by Agilent in its summary judgment motion. It remains to be seen if the CDA’s immunity provisions will be applied as broadly in a case where the facts are more favorable to plaintiffs seeking to overcome an assertion of immunity under the CDA.

   

Taylor v. City of Los Angeles Department of Water and Power

In November, the Second District issued an opinion in this case that outlines both California Law under the FEHA and Federal Law under Title VII. The case involved claims under the FEHA against an employer for retaliation and a supervisor for failing to prevent discrimination. The case is worth reviewing, because court applied both the state and federal standards in its analysis of the plaintiff’s claims.

The Second District first applied the materiality test for FEHA retaliation claims under the California Supreme Court decision in Yanowitz. The court then applied the deterrence test for retaliation claims under the United States Supreme Court decision in

Burlington

. The court held that the retaliation claims against both the employer and the supervisor stated a cause of action sufficient to overcome a demurrer under either standard.

However, in its analyses of the different standards, the court did not state the practical differences between the two standards. While the court noted that it saw no difference between the legislative intent of the FEHA and Title VII, it failed to discuss what practical differences, if any, exist between the materiality and deterrence tests. It thus seems that the differences in application of the two standards are currently an open question.

In addition to its analysis of the FEHA and Title VII, the court also held that employer notice of protected activity, when considered with the timing of adverse employment actions in relation to the protected activity, could be considered constructive knowledge by the employer of the plaintiff’s protected activity.

Finally, the court interpreted section 12940(k) of the FEHA in regards to supervisor liability, and held that supervisors are “persons” under the statute, and may thus be found liable for failing to prevent acts of discrimination and harassment. While the court noted that a supervisor may not be held liable for employment discrimination under the FEHA, a supervisor may be liable for failing to prevent discrimination. As part of its ruling on this issue, the court also held that a failure to prevent retaliation against protected activity, in this case opposition to discrimination, is the same as a failure to prevent discrimination.