Tuesday, February 11, 2014

A CALIFORNIA COURT OF APPEAL INTERPRETS THE SELDOM-USED “CONSTRUCTIVE VOLUNTARY QUIT” DOCTRINE



            On February 10, 2014, the Court of Appeal of the State of California, Second Appellate District, issued its opinion in Kelley v. California Unemployment Insurance Appeals Board (2014) ___ Cal.App.4th ___, 2014 Cal. App. LEXIS 128 (Feb. 10, 2014), holding that the plaintiff-employee, Stephanie Kelley, had not “constructively voluntarily quit” as contended by her employer, real party in interest-appellant Merle Norman Cosmetics, Inc., and therefore was eligible for unemployment benefits.

I.          FACTS

            In 2010, Stephanie Kelley went on a stress leave from her job as marketing director for Merle Norman Cosmetics, her employer, one month after filing a claim with the California Department of Fair Employment and Housing, which alleged that she was retaliated against for reporting ongoing sexual harassment.  Kelley was cleared by her physician to return to work in November 2010.  Prior to returning to work, Kelley’s attorney emailed the employer concerning certain “assurances” Kelley wanted before she returned to work. [[1]]   The employer would not agree to the requested assurances. [[2]]   Merle Norman noted it had already offered a severance package but invited Kelley to submit a further settlement proposal.  Kelley responded with a $300,000 settlement demand.  Finally, asserting that Merle Norman did not agree to the conditions Kelley had set for return to work, the employer terminated her.

II.        FACTS/PROCEDURE

            Kelley applied for unemployment benefits.  The employer contended she was ineligible under the seldom-used “constructive voluntary quit” doctrine, because Kelley insisted on conditions the employer was not obligated to satisfy.  The California Employment Development Department (“EDD”) agreed and denied Kelley’s claim for benefits.  The decision was reversed on appeal to an administrative law judge.  The California Unemployment Insurance Department disagreed and reinstated the EDD’s denial of Kelley’s claim. 

III.       THE CALIFORNIA SUPERIOR COURT FOUND THAT KELLEY DID NOT “CONSTRUCTIVELY VOLUNTARILY QUIT”

            Kelley brought an administrative mandate action to the California Superior Court.  The trial court found that Kelley had not constructively voluntarily quit.  The court characterized the emails from Kelley’s counsel as “requests” and not “ultimatums” or “conditions.”  The employer, the court stated, was not placed in a position where its only reasonable alternative was to fire Kelley.  It should have waited until the date Kelley was due to return to see whether she showed up for work.  Employer Merle Norman appealed the adverse ruling.

IV.       THE COURT OF APPEAL AFFIRMED THE SUPERIOR COURT RULING

            The Court of Appeal affirmed the superior court’s ruling.  In so doing, the court analyzed the eligibility standards for unemployment benefits.  There exists a presumption that an employee has been discharged for reasons other than misconduct and not to have voluntarily left employment without good cause unless the employer provides written notice to the contrary, with facts sufficient to overcome the presumption.  Both misconduct and voluntary resignation, the court noted, render an employee ineligible for benefits.  An otherwise involuntary discharge, in contrast, renders an employee eligible for unemployment benefits.

            In affirming the trial court, the appellate court interpreted EDD’s regulation that defines when a voluntary leaving of work occurs. [[3]]  Under Regulation 1256-1(b), an employee leaves work voluntarily “when the employee is the moving party causing his or her unemployment.”  In contrast, an employee involuntarily leaves work “when the employer is the moving party in causing the unemployment of an employee at a time when the employee is able and willing to continue working.”  (Regulation 1256-1(c).)  Regulation 1256-1(f) provides that even when an employee is discharged by the employer, the employee may be deemed to have left work voluntarily under the doctrine of “constructive voluntary leaving.”  This occurs when the employee is the moving party and engages in a voluntary act or course of conduct which leaves the employer no reasonable alternative but to discharge the employee and the employee knows or reasonably should know would result in his or her unemployment.[4]  (Ibid.) 

            Analyzing the facts, the Court of Appeal determined that Kelley had made no demands or conditions, merely requests.  It characterized the exchange of emails as “pre-litigation poker” (that is, an unbinding type of preliminary negotiations), which did not rise to the level of demands or conditions that would invoke the constructive voluntary quit doctrine.  Merle Norman was the moving party in the termination, not Kelley, the court held, and she was therefore entitled to unemployment benefits.

V.        KELLEY’S APPLICATION TO WRONGFUL EMPLOYMENT DISCHARGE LAW

           Employers and Employees:  Kelley is instructive concerning whether an employee has voluntarily resigned and is thus ineligible for unemployment benefits or has been involuntarily discharged and, therefore, is eligible for benefits. 

            However, the case has application to the broader area of civil lawsuits involving alleged “constructive discharge” from employment.  Generally speaking, a constructive discharge occurs when the conditions of employment become so intolerable that a reasonable person would resign rather than continue to work under the conditions.  Traditional examples of constructive discharge include an employee who resigns after the employer has moved the employee’s office from the company facility to a storage facility or when an employee has resigned when threatened with being blacklisted if the employee doesn’t quit. 

            Kelley does not address constructive discharge in civil lawsuits.  However, companies should be aware of the lesson from Kelley:  Honestly judge who the “moving party” is -- employer or employee.  If the driving force is the conduct of the employer, and such conduct is egregious or unlawful, a resignation may be found by a court in a civil lawsuit to be not voluntary and a “constructive discharge.“  Such a finding transforms a seemingly voluntary resignation into a firing. 

            The damages that flow from a constructive discharge lawsuit include lost income for present and future income for the contract period or in the case of an “at will” employee for a period the jury determines to be the reasonable length of employment. The employee’s attorney will always look for other egregious conduct that will permit the employee to sue for tort damages; that is; damages for severe physical and emotional distress and an award of punitive damages.  As in Kelley, a constructive discharge case may have underlying claims for employment discrimination or harassment under state and federal anti-discrimination statutes, which would entitle an employee to an award of attorney’s fees and costs if the case is successful.  Finally, the employee may also include a claim for unpaid wages – for example, failure to timely pay last paycheck or vacation, sick and/or personal time off (PTO) -- for which attorney’s fees and costs and statutory penalties are awardable to the employee.  Waiting time penalties provide for payment of the employee’s daily wage by the employer for up to 30 days.   

           Employer Defendants:   An employer defendant in a wrongful discharge case may plead the constructive voluntary quit doctrine as an affirmative defense to overcome "good cause" where a good or substantial reason is necessary to terminate an employee.  Under the authority of Kelley, a moving party employee who forces the termination may be barred from recovery, because he or she has made an unreasonable demand that has caused the employer to terminate the individual.

NOTE:  This Alert is designed to provide a summary of the case entitled Kelley v. California Unemployment Insurance Appeals Board.  It is not intended to, nor does it, offer solutions to individual problems.  Employees and employers with specific questions should consult legal counsel.

Kenneth J. Sargoy, Esq. provides assistance and representation in connection with employment matters.  Questions involving this case as well as other employment issues may be directed to Mr. Sargoy, telephone toll free (855) 235-1488 or (310) 472-7113, to his email at ken@sargoylaw.com, or via his website at www.sargoylaw.com.   THIS EMPLOYMENT ALERT IS CLASSIFIED AS A NEWSLETTER AND CONSTITUTES ADVERTISING MATERIAL UNDER APPLICABLE RULES OF PROFESSIONAL CONDUCT.


[1]              The assurances requested in a first email were:  (1) a written job description; (2) a written statement of goals and objectives; (3) written confirmation of Kelley’s job title, duties, pay, and benefits; and (4) the status of her earlier request for vacation during the Christmas holiday period.  A second email from Kelley’s counsel sought written confirmation that Kelley would not be retaliated against for her previous complaints and reporting of sexual harassment.  The second email further stated that a Merle Norman executive had found a replacement for Kelley, would take her back to work, but would dismiss Kelley after she returned.  The email cautioned that if this were true, it was constitute further evidence of retaliation.            
[2]              The employer replied to the requested assurances that Kelley should meet with her supervisors on her return to work to discuss job duties and responsibilities, assured counsel that Merle Norman would not retaliate and would not tolerate such behavior, and that the allegation of dismissal purportedly made by an executive was false and slanderous. 
[3]              The EDD regulation is set forth at California Code of Regulations, title 22, section 1256-1.  It defines “voluntary leaving of work” under California Unemployment Insurance Code section 1256.  The Unemployment Insurance Code governs unemployment benefits.  It was enacted to provide “benefits for persons unemployed through no fault of their own [in order to] reduce involuntary unemployment and the suffering caused thereby to a minimum.”  (Unemp. Ins. Code, § 100.)
[4]              Regulation 1256-1 provides three examples which would invoke the constructive voluntary quit doctrine despite the fact that the employee was actually discharged by the employer:  (1) a truck driver who lose his driver’s license; (2) an employee who refuses to join a union or pay his union dues; and (3) a cannery worker on a Monday through Saturday schedule who suddenly refuses to work on Saturdays.


Sunday, January 5, 2014

TEN NEW CALIFORNIA WAGE AND HOUR LAWS FOR 2014 THAT AFFECT EMPLOYERS DOING BUSINESS IN CALIFORNIA



1.         MINIMUM WAGE IN CALIFORNIA TO INCREASE TO $9.00 AND $10.00 OVER TWO-YEAR PERIOD  
Effective July 1, 2014, the minimum wage for all industries will be nine dollars ($9) per hour, and on and after January 1, 2016, the minimum wage for all industries increases to $10 per hour.  (Cal. Lab. Code, § 1182.12)

2.         “DOMESTIC EMPLOYEES” ENTITLED TO OVERTIME

Effective January 1, 2014, “domestic employees” are entitled to payment of overtime at the rate of one and one-half (1 ½) times the employee’s hourly wage for work over nine (9) hours per workday or over 45 hours per workweek.  (Cal. Lab. Code, § 1450, et seq.) 

“Domestic work” means services related to the care of persons in private households.  Domestic work occupations include childcare providers, caregivers of people with disabilities, sick, convalescing, or elderly persons, house cleaners, housekeepers, maids, and other household occupations.  Domestic work does not include care of persons in facilities providing board or lodging in addition to medical, nursing, convalescent, aged, or child care, including, but not limited to, residential care facilities for the elderly.

“Domestic work employee” means an individual who performs domestic work and includes live-in domestic work employees and personal attendants. Domestic work employee does not include any person who is the parent, grandparent, spouse, sibling, child, or legally adopted child of the domestic work employer or any person under the age of 18 who is employed as a babysitter for a minor child in the domestic employee’s home or as a casual baby sitter for a minor child in the domestic employer’s home.

“Domestic work employer” means a person, including corporate officers or executives, who directly or indirectly, or through an agent or any other person, including through the services of a third-party employer, temporary service, or staffing agency or similar entity, employs or exercises control over the wages, hours, or working conditions of a domestic work employee.  Domestic work employer does not include certain employment agencies, persons identified as exempt by statute, and licensed health care facilities.

3.         “LIQUIDATED DAMAGES ” AGAINST EMPLOYERS FOR FAILURE TO PAY MINIMUM WAGES    

Former law subjected an employer who paid less than the minimum wage to pay a civil penalty and restitution of wages to the employee.  California Labor Code section 1194.2, effective January 1, 2014, expands the payment and restitution provision to also subject the employer to payment of liquidated damages in an amount equal to the wages unlawfully unpaid for actions brought under Labor Code §§ 98, 1193.6, 1194, or 1197.1.  The new law expressly provides that liquidated damages are not authorized for failure to pay overtime compensation. 

4.         WAGE EXEMPTION FOR EMPLOYERS OF MINORS UNDER ARTISTIC EMPLOYMENT CONTRACTS 

Former law required employers of minors employed under artistic employment contracts (including actors, dancers, musicians, comedians, singers, stunt-persons, voice-over artists, or sports players) to set aside 15% of the minor’s gross earnings in trust for the benefit of the minor. 
  
Effective, January 1, 2014, employers of minors are exempted from setting aside 15% of the minor’s gross earnings in trust for minors providing services as extras, background performers, or in similar capacities.  (Cal. Fam. Code, §§ 6750(b)(3), 6752.)  

5.         GARMENT MANUFACTURERS SUBJECT TO CIVIL PENALTIES

California Labor Code section 2676.55, effective January 1, 2014, subjects garment manufacturers who fail to display their name, address, and garment manufacturing registration number on the front entrance of the business to a civil penalty of $100 for each calendar day the business violates this law and $200 for each calendar day for any subsequent violation.

6.         CREATION OF LIEN ON EMPLOYER’S PROPERTY FOR LABOR COMMISSIONER FINAL ORDERS

California Labor Code section 98.2,subdivision (g), amended and effective January 1, 2014, provides for creation of lien upon an order of the Labor Commissioner becoming final.  The lien may be recorded in any California county in which an employer’s property may be located. The lien continues on the employer’s real property until satisfied or released, or for 10 years if not satisfied or released. 

7.         CAR WASH EMPLOYERS BOND INCREASED TO $150,000

California Labor Code section 2055, effective January 1, 2014, requires employers of car washers to obtain a surety bond issued by a surety company admitted to do business in California for not less than $150,000.  The employer is required to file a copy of the bond with the commissioner. 

The previous amount of the surety bond had been $15,000.

8.         ONE-HOUR ADDITIONAL PAY IF EMPLOYER REQUIRES EMPLOYEE TO WORK DURING “COOLDOWN” RECOVERY PERIOD

Former law prohibited an employer from requiring an employee to work during any meal or rest period mandated California Wage Orders and established a penalty of one hour of the employee’s regular rate of pay for each violation.

Cal. Labor Code section 226.7, effective January 1, 2014, expands the no-work- during-meal-or-rest-period rule to include “recovery periods.”  Recovery period is defined as a “cooldown” period afforded an employee to prevent heat illness.    

The law now prohibits an employer from requiring an employee to work during any meal or rest or recovery period.  Violation of the law subjects the employer to a penalty of one hour additional pay at the employee’s regular rate.

9.         ATTORNEY’S FEES AND COSTS AWARDABLE TO EMPLOYER ONLY IF EMPLOYEE WAGE CLAIM IS FILED IN “BAD FAITH”

Former law required a court in any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, to award reasonable attorney’s fees and costs to the prevailing party if any party to the action requested attorney’s fees and costs upon the initiation of the action.

California Labor Code section 218.5, amended and effective January 1, 2014, now provides that if the prevailing party is not the employee, an award of attorney’s fees and costs shall be awarded only upon a finding by the court that the employee brought the court action in bad faith.

10.       EMPLOYER’S FAILURE TO REMIT PAYROLL TAXES OR OTHER WITHHOLDINGS PUNISHABLE AS FELONY OR MISDEMEANOR 

The former law made it a crime for an employer to fail to make agreed-upon payments to health and welfare funds, pension funds, or various benefit plans, with violations punishable as a felony if the amount unpaid exceeded $500 and as a misdemeanor if the amount was less than $500.

California Labor Code section 227, amended and effective January 1, 2014, has been expanded to include failure to remit withheld payroll taxes:  If an employer withholds wages pursuant to any state, local, or federal law, and willfully or with fraudulent intent fails to remit the withholdings to the proper agency, the violation is punishable as a felony if the amount is more than $500 and misdemeanor if less than $500.  

NOTE:  This Alert is designed to provide a summary of new laws for 2014 regulating wages and hours for employees, employers, and businesses doing business in California.  It does not include all new laws or set forth new laws in their entirety; nor does it provide potential defenses to enforcement or offer solutions to individual problems.  Employees and employers with specific questions should consult legal counsel.

Kenneth J. Sargoy, Esq. provides assistance and representation in connection with employment matters.  Questions involving these new wage and hour laws as well as other employment issues may be directed to Mr. Sargoy, telephone toll free (855) 235-1488 or (310) 472-7113, or to his email at ken@sargoylaw.com.  THIS EMPLOYMENT ALERT IS CLASSIFIED AS A NEWSLETTER AND CONSTITUTES ADVERTISING MATERIAL UNDER APPLICABLE RULES OF PROFESSIONAL CONDUCT.