Labor & Employment Update--April 1998
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In this issue:Court Gives Expansive Definition Of "Supervisors" For Purposes Of Strict Liability Under The FEHA
- Court Gives Expansive Definition Of "Supervisors" For Purposes Of Strict Liability Under The FEHA
- Scope Of Domestic Partners Benefit Ordinance Limited
- Mental Disorder Must Limit Major Life Activity To Constitute "Disability" Under FEHA
- Court Questions Use Of Statistical Evidence In Layoff
A California court of appeal has provided a broad definition of who is a "supervisor" in a case for sexual harassment brought under the Fair Employment and Housing Act. In Lai v. Prudential Insurance Co. of America, 62 Cal.App.4th 220, the court ruled that an individual in the "chain of command" over an employee, who has "sufficient actual or reasonably perceived control or direction in the work environment to significantly affect an employee's employment status," is a supervisor for purposes of holding an employer liable under the FEHA.
Justine Lai was an insurance sales agent for Prudential, who claimed that she was forced by her sales manager, Mr. Chiman Dialani, into having sexual intercourse with him, and was subjected to other sexual comments and contact. Within one week of learning of the complaints, Prudential investigated the charges, found them to have merit, and terminated Dialani. When Lai sued for harassment under the FEHA, the issue became whether Dialani was a "supervisor," thereby making Prudential liable for his harassing conduct, or merely a co-employee, making Prudential liable only if it "knew or should have known" of the behavior.
Prudential argued that Dialani was merely a co-employee, because he did not have authority to hire, promote, terminate, demote, or otherwise discipline the sales agents; he could not set compensation or transfer the agents; he did not set corporate policy at any level. Prudential conceded that Dialani trained sales agents, worked with them in their sales efforts, and reported their progress to his supervisors in management. Lai countered that Dialani oversaw sales agents' performance, assisted in general management and personnel administration, recommended new hires, promotions, terminations and transfers, approved sick leaves and vacations, scheduled mandatory sales meetings and met with agents to discuss their sales activities.
The Court rejected as overly "narrow" Prudential's argument that the definition of "supervisor" be limited to include only those who act as the employer "in decisions involving hiring, promotions, discipline and like substantial matters." Instead, the Court listed several "objective criteria" to be considered in determining whether an individual had been invested with the requisite actual or reasonably perceived power to be deemed a "supervisor" under the FEHA:
- Has a title, such as "supervisor" or "manager" been conferred, coupled with the power to direct the work of other employees?
- Do the duties include the right or responsibility to oversee, evaluate, or train other employees?
- Is there actual or perceived power to discipline or recommend discipline of other employees?
- Is there power to significantly influence working conditions, such as by increasing or decreasing work duties?
- Is the employee charged with day-to-day supervision of the work environment?
Scope Of Domestic Partners Benefit Ordinance Limited
In a significant victory for its clients, Brobeck, Phleger & Harrison LLP convinced Northern District Court Judge Claudia
Wilken to carve away much of the San Francisco domestic partners benefits ordinance, in a 95-page ruling issued on April 10.
The ordinance, which became effective in June 1997, requires employers contracting with the City of San Francisco to offer
the same benefits to domestic partners of employees which they offer to spouses of employees, all over the country. The ordinance
was challenged by two airline trade associations on behalf of their member airlines, many of whom contract with the city to
obtain leases and permits at San Francisco International Airport. The airlines, represented by Brobeck, claimed that the ordinance
was preempted by three federal laws: the Airline Deregulation Act, the Employee Retirement Income Security Act (ERISA), and
the Railway Labor Act. In addition, the airlines claimed that the ordinance violated Constitutional provisions limiting the
regulatory powers of state and local governments. The ruling was issued after six months of deliberation over cross-motions
for summary judgment filed by the parties. Despite conflicting reports in the media, the ruling serves, in Judge Wilken's
words, to "largely invalidate the ordinance."
The issue decided was whether San Francisco had reached beyond the limits of its power by both imposing requirements on employee
benefit plans governed by federal law and by attempting to regulate contractors' conduct throughout the United States. "On
both counts," the Court held, "the answer largely is yes."
The Court ruled that "the Ordinance is unconstitutional as applied to out-of-state conduct that is unrelated to the purpose
of a City contract." This ruling limits the reach of the ordinance to contractors' operations in San Francisco or on city-owned
property elsewhere. In addition, the city can apply the ordinance to contractors' locations outside of San Francisco only
where the contractor is actually performing work on its contract with the city.
The Court also ruled that "the City is preempted as applied to ERISA plans [which provide ERISA-covered benefits, such as
health and pension benefits] if the City is exercising more economic power than an ordinary consumer could exercise." Because
the city has extraordinary power as proprietor of the airport, "the Ordinance as applied to Airport contracts is entirely
preempted" as it applies to ERISA-covered benefits.
Because of the Court's finding of ERISA preemption, "the ruling covers virtually all of the benefits offered by the airlines
to their employees," according to Brendan Dolan, the Brobeck partner who filed the action.
For most employers, health and retirement plans are among the most costly benefits offered to employees and their dependents.
By finding ERISA preemption in all instances but those where the city acts as "an ordinary consumer," the Court has significantly
diminished the impact of the ordinance. In addition, the Court made very clear that the city cannot regulate employment practices
of city contractors which occur outside the state. Read the Court's decision.
© 1998 Brobeck Phleger & Harrison LLP