By Brian Long

The California Supreme Court rarely puts employers in the holiday spirit. But this year, amidst all the lumps of coal that employers could find in the Christmas stocking, there was one treat: Harris v. City of Santa Monica (2013) 56 Cal.4th 203.

In Harris, a unanimous high court held that a “same decision” defense applies to employment discrimination claims under the California Fair Employment and Housing Act (“FEHA”). This defense can apply where the employer’s decision was motivated by both discriminatory and non-discriminatory reasons. The employer can limit its liability by showing that the non-discriminatory reason, standing alone, would have caused the employer to make the same decision. The employer’s burden of proof is simply “preponderance of the evidence” and not “clear and convincing evidence.”

Even this solitary treat can leave a sour taste, however. Although the same-decision defense precludes any award of damages, back pay, or reinstatement, any discriminatory reason that was a “substantial factor” in the employment decision will entitle the trial court to order declaratory or injunctive relief, to “prevent and deter” discrimination, and to award reasonable attorney’s fees and costs.

Certain legislative Grinches then passed a bill that would have nullified most of the pro-employer aspects of the Harris ruling. Only the intervention of Governor Brown, wielding his veto pen, preserved Harris’s limited victory for employers.

On the arbitration front, 2013 saw the California Supreme Court hand down its long-awaited decision in Sonic-Calabasas, Inc. v. Moreno (2013) 57 Cal. 4th 1109. The high court had earlier ruled that an employer cannot require employees to arbitrate disputes while waiving their right to a “Berman hearing” (an administrative proceeding to settle wage disputes). In Moreno, the high court acknowledged that the FAA preempts its earlier ruling. But now a majority of the high court holds that courts can continue to invalidate arbitration agreements under unconscionability rules that do not interfere with “fundamental attributes of arbitration.”  Thus, even if state public policy does not invalidate an arbitration agreement, a court may void it under an aggressive application of the doctrine of unconscionability.

Arbitration agreements will continue to keep us on ice in 2014. We expect the high court to resolve a disagreement between lower courts as to whether employers, through arbitration agreements, can secure waivers of the right to bring representative claims under the Labor Code Private Attorneys General Act (“PAGA”). In Brown v. Ralphs Grocery Co., (2011) 197 Cal. App. 4th 489, the Court of Appeal held that a PAGA waiver contained in an employment arbitration agreement was not enforceable, because a PAGA plaintiff acts as a proxy for the State, which was not a party to the arbitration agreement. But then in Iskanian v. CLS Transportation Los Angeles, (2012) 206 Cal. App. 4th 949, another division of the Court of Appeal held that the FAA and the U.S. Supreme Court’s decision in Concepcion apply to PAGA claims, and preempt any state law rule that would invalidate an otherwise valid arbitration agreement. The California Supreme Court granted review of Iskanian, giving itself the chance to provide some clarity regarding the enforceability of representative action waivers in employment arbitration agreements.

Other cases that might have us reaching for the champagne in 2014 include important questions regarding employment class actions. In Ayala v. Antelope Valley Newspapers, (2012) 210 Cal. App. 4th 77, the high court will review a decision whether to grant class certification in an action by newspaper carriers claiming that they were employees misclassified as independent contractors. And in Duran v. U.S. Bank, N.A., (2012) 203 Cal. App. 4th 212, the high court will address the important issue of whether a class-wide trial by formula in exempt/non-exempt misclassification case would deny employers due process. That decision likely will have have wide-ranging implications on whether proposed misclassification class actions are manageable, and thus suitable for class treatment.

Finally, next year the California Supreme Court will review the decision in Patterson v. Domino’s Pizza, (2012) 207 Cal. App. 4th 385.  In Patterson, the Court of Appeal issued a potentially far-reaching decision that could hold a franchisor vicariously liable for workplace harassment by an employee of one of its franchisees. The Court of Appeal reasoned that the terms of the franchise agreement and the franchisor’s instructions to the franchisee created a triable issue that the franchisor was liable for the harassment that a franchisee employee suffered at the hands of her supervisor, another franchisee employee. The California Supreme Court’s review of this decision may have important implications not only for franchise liability, but also for other corporate relationships and independent contractors.

If 2013 thus unwrapped high-court decisions that were both naughty and nice for employers, one can expect much the same in 2014.

Workplace Solutions:  If you are interested in learning more, please contact us and ask about our “California Peculiarities” full-length publication and if you would like to discuss strategies relating to these pending cases in California, please contact a Seyfarth Shaw attorney.