Watch Your Step to Avoid Tripping up Your HR Strategies


In two recent cases, courts in California have ruled in support of protections for employers against claims by employees where the employers have followed the appropriate process for employee discipline, investigation of workplace misconduct and reductions in force.  But in a third case, the court prevented an employer from what it viewed as gaming the judicial process to seek an advantage against class claims for wage and hour violations, including contractor/employee misclassification and consequent denial of minimum wages, meal periods, and reimbursement of expenses.

Two of the cases show that employers can minimize or eliminate liability exposure if they comply with the not always clear process required by law when seeking to make appropriate human resources decisions.  Because these processes are often riddled with pitfalls, engaging experienced employment counsel to help navigate the process can save an employer the expense, time commitment and liability exposure that defending a later lawsuit will involve.  The third case is a cautionary tale for employers not to use strategies that may not pass the smell test.

I.   Okorie: Follow Appropriate Internal Investigation Procedures and
Limit Communications about Them to What Is Necessary

The California appellate case, Okorie v. Los Angeles Unified School District, 14 Cal.App.5th 574 (2017), shows that, where an employer follows the appropriate process to investigate employee misconduct and engages in appropriate communications in connection with that investigation, it can defeat claims by the employee related to that investigation conduct.  In Okorie, the Court of Appeal in Los Angeles affirmed a trial court order granting the defendant employer’s special motion to strike a former employee’s complaint as a Strategic Lawsuit Against Public Participation (“SLAPP”).

California’s anti-SLAPP statute allows a defendant to seek early dismissal of claims that “aris[e] from any act of [the defendant] in furtherance of the [defendant’s] right of petition or free speech” under either the U.S. or California Constitution, in connection with a public issue.  Under the statute, an “act in furtherance of a person’s right of petition or free speech” includes written or oral statements made before, or in connection with an issue under consideration or review by, “any . . . official proceeding authorized by law.”  An “official proceeding authorized by law” includes internal investigations into alleged employee misconduct.

The plaintiff in Okorie sued the school district and two of his supervisors for discrimination, harassment and retaliation, based upon the following communications:  comments they made to him about disciplinary practices in Africa (where he was from), comments to his co-workers about complaints expressed by parents about him, write-ups, a directive that he be reassigned to his home pending an investigation of an allegation against him, and notification of parents that he had been escorted off campus for misconduct and reassigned to an office where teachers under investigation were often placed, where he remained until the school district charged him with misconduct.

The appellate court held that the comments of which the employee complained were protected by the anti-SLAPP statute because they were part of an internal investigation, which “constitute[s] an ‘official proceeding authorized by law,’” one of the categories of activities protected by the anti-SLAPP statute; that the comments were integral (not incidental) to plaintiff’s claims; and that plaintiff failed to show the probable success of his claims, because he had presented no evidence, other than a self-serving declaration, to show any discriminatory animus on the part of the defendants.

II.   Merrick: Follow Your RIF Procedures and Common Sense

A recent Ninth Circuit case, Merrick v. Hilton Worldwide, Inc., 867 F.3d 1139 (9th Cir. 2017), shows the importance, when planning and executing a reduction in force (RIF), of (1) following the guidelines established by the company for RIFs, (2) meticulously documenting the steps taken in executing the RIF, and (3) making reasoned decisions for particular layoffs that can be justified by common-sense business rationales.  In Merrick, the Ninth Circuit U.S. Court of Appeals affirmed the dismissal of a lawsuit brought by an employee who claimed that his termination as part of a RIF constituted age discrimination.  The employee alleged that his termination was motivated by age discrimination.

The Court held that Merrick had shown a prima facie case of age discrimination, even though he had not shown that he was replaced by a younger employee.  Courts have consistently recognized that employers often do not replace employees terminated in a RIF; therefore, instead of showing they were replaced, employees may show, through statistical, direct or circumstantial evidence, circumstances from which an inference of age discrimination arises.  The inference may be established by demonstrating that the employer continued to need an employee’s skills or services.  Hilton did not contend that it no longer needed Merrick’s skills, and acknowledged that his duties were outsourced or assumed by other employees.

Nevertheless, the Court ruled in Hilton’s favor, because it had non-discriminatory reasons for choosing him for the RIF, including that his high salary permitted it to comply with the RIF criteria by laying off only one employee, his duties in property operations were not considered a high guest contact or revenue generating function, and other departments that were considered high guest contact and had greater revenue generating capabilities were already understaffed because of prior terminations and unfilled positions.

Merrick could not then show that Hilton’s grounds for terminating him were pretextual.  He failed to show that Hilton neglected to follow policy by not transferring him, because there was no policy requiring that Hilton transfer him; the managers who decided on his termination in the RIF used reasonable judgment in determining that another employee could assume some of Merrick’s functions and in assessing his performance; and any showing by Merrick that Hilton failed to follow its RIF policy was insufficient to raise a triable issue of fact, because it did not support a rational inference that intentional discrimination on the basis of age motivated Hilton’s decision.

In the context of this RIF, a context that included Hilton’s lost profits during the recession, prior layoffs over the years, which Merrick had survived while also a member of a protected class (because of his age), and the business reasons for selecting his position for elimination, the evidence he offered did not support a rational inference of age discrimination.

III.   Sprunk: Do Not Overplay Your Hand

By contrast to Okorie and Merrick, the ruling in Sprunk v. Prisma LLC, 14 Cal.App.5th 785 (2017), shows that an employer that games the applicable process to resolve employment claims and asserts unconvincing justifications for its litigation strategies can lose the right to assert applicable defenses.  In Sprunk, the California Court of Appeal affirmed the trial court’s order denying the defendant employer’s motion to compel arbitration in a class-action wage and hour lawsuit, where the employer had filed and then withdrawn a prior motion against the named plaintiff and then renewed its motion against class members only after a class had been certified.

The employer argued that, although unreasonable delay in moving to compel arbitration can result in waiver, it had not delayed because it could not have moved for arbitration against unnamed class members until the trial court had certified a class.  The Court held that the trial court could properly consider whether the employer had unreasonably delayed moving to compel arbitration against the putative class representative in determining whether the employer had waived the right to compel arbitration against the class members.  Even though unnamed class members would not have been bound by the trial court’s ruling before class certification, the employer could have settled the question whether the claims were subject to arbitration with regard to the form of agreement plaintiff had signed.

While the employer also argued it needed to wait to file its motion because the law regarding class arbitration was too uncertain and risky until settled by the California Supreme Court, the employer delayed for a year after the California Supreme Court had settled any uncertainty over whether an employer might be compelled to engage in class arbitration.  Although the Court in Iskanian v. CLS Transportation, 59 Cal.4th 348, had decided on June 23, 2014, that class arbitration waivers were not categorically unenforceable, the employer did not file its motions to compel for more than 15 months thereafter.

Moreover, even before Iskanian, the state of the law held little risk to the employer that class arbitration would be imposed, or that class action waivers would be held unenforceable.  “[W]ell prior to our Supreme Court’s decision in Iskanian, the state of the law on class arbitration in California was that (1) the continued viability of [California case law restricting consumer class action waivers in arbitration agreements] was in serious question following [AT&T Mobility LLC v.] Concepcion, [563 U.S. ___], (2) even under [California case law], a class plaintiff resisting individual arbitration had to make a specific factual showing that only a class action could adequately protect unwaivable statutory rights (a showing that Sprunk did not make), (3) the Fifth Circuit had reversed Horton I, [an NLRB ruling prohibiting class action waivers as a violation of the NLRA], and (4) several California Courts of Appeal had rejected Horton I. While the outcome was not free from doubt, given this authority one could not reasonably describe [employer’s] prospects of compelling individual arbitration prior to Iskanian as ‘futile.’”

In light of the state of the law pre-Iskanian, “a prudent litigant who was intent on avoiding an implication of waiver would not have taken [the] risk” by delaying filing a motion to compel arbitration.  The Court concluded that the delay was part of a strategy to gain an advantage in the litigation, and noted:  “An attempt to gain a strategic advantage through litigation in court before seeking to compel arbitration is a paradigm of conduct that is inconsistent with the right to arbitration.”

Waiting to compel arbitration “until after a ruling on class certification was a strategic decision to attempt to win the case by defeating the class before seeking to arbitrate.  Such strategic use of the judicial forum is inconsistent with an arbitration right and supports a waiver finding.”

During the four-year delay in seeking to compel arbitration, plaintiff had conducted class-related discovery and filed an “extensive” class certification motion, which would have been unnecessary had the employer earlier sought arbitration and the court had granted it.  Therefore, the trial court properly found that the delay had caused plaintiff prejudice.

Employers need to think through their defense strategies carefully.  In addition to considering what may be considered an effective strategy under the applicable law, employment counsel need to assess the impact of the strategy on the Court, both in terms of burden and optics.

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