Employers are strictly liable for the actions of its supervisors, managers or agents under the doctrine street cafeof respondeat superior.  Here are five key concepts employers must understand about the liability that could be created by managerial employees.

1. Respondeat superior holds employers automatically liable for actions by managers

The respondeat superior doctrine provides that “an employer may be held vicariously liable for torts committed by an employee within the scope of employment.”  As explained by the California Supreme Court in Patterson v. Dominio’s Pizza, there are “three policy justifications for the respondeat superior doctrine…prevention, compensation and risk allocation.”

2. Employers liability for non-supervisory employees

Under California’s FEHA, the employer is strictly liable for harassing action of its supervisors.  However, an employer is only liable for harassment by a coworker if the employer knew or should have known of the conduct and failed to take immediate corrective action.

3. Managers/supervisors under the respondeat superior doctrine

Under California’s FEHA, an employer is strictly liable for all acts of a supervisor.  A supervisor is generally defined as someone who has the discretion and authority to hire, direct, transfer, promote, assign, reward, discipline, direct, or discharge other employees or to recommend these actions.  See Government Code section 12926(t).

4. Which entities may be considered the employer under the respondeat superior doctrine

 In terms of defining who is the employers, courts in FEHA cases have looked to “the control exercised by the employer over the employee’s performance of employment duties….This standard requires a ‘comprehensive and immediate level of `day-to-day’ authority’ over matters such as hiring, firing, direction, supervision, and discipline of the employee.”  FEHA also defines employer to mean “any person action as an agent of an employer, directly or indirectly….”  This means that people not directly employed by the company can still create agency liability for the employer.

5. Issue: Can a franchisor be held liable for a franchisee’s supervisor’s conduct?

How far does the doctrine of respondeat superior extend when there are levels of agency, such as in a franchisor-franchisee relationship?  This was the issue addressed by the California Supreme Court in Patterson v. Domino’s Pizza.  The Supreme Court held that given the facts in that case, Domino’s Pizza was not liable for the franchisee’s manager’s acts.  The Supreme Court explained:

A major incentive is the franchisee’s right to hire the people who work for him, and to oversee their performance each day. A franchisor enters this arena, and becomes potentially liable for actions of the franchisee’s employees, only if it has retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee’s employees.  Any other guiding principle would disrupt the franchise relationship.

The Supreme Court did not hold the franchisor liable in the case because it did not “control the workforce, and could not have prevented the misconduct and corrected its effects.”  However, the Court issued a warning to franchisors:

A franchisor will be liable if it has retained or assumed the right of general control over the relevant day-to-day operations at its franchised locations that we have described, and cannot escape liability in such a case merely because it failed or declined to establish a policy with regard to that particular conduct.

A lot was happening this week in California’s employment law.  This week’s Friday’s Five is a round-up on the highlights:

1.       Los Angeles City Council votes to require employers to provide 6 days of paid sick leave.

The LA City Council approved a measure to require employers to provide employees up to six paid sick days per year.  This is double the requirement under California state law that went into effect July 1, 2015.  It is likely that the law will go into effect July 2016.  The rules do not apply to small businesses with 25 employees or less until July 2017.  The law still must be drafted by the city attorneys.

2.       Uber settles class action cases for $100 million.

The settlement was reached this week by Uber to settle two class actions, one pending in California and the other in Massachusetts.  The class actions alleged that Uber improperly classified drivers as independent contractors rather than employees, and was seeking damages resulting from the misclassification.  The settlement provides $84 million to be distributed to the drivers “in California and Massachusetts who have used the Uber App at any time since August 16, 2009” until the court approves the settlement agreement.  The settlement resolves these cases, but Uber will likely have to continually fight this issue.  For more on the factors a court would look to in determining if an independent contractor has been misclassified, see my previous articles here.

 

 

3.       “Restrictive” Scheduling bill is working its way through California’s legislature.

Senate Bill 878 proposes to require retail establishments, grocery stores, and restaurants to set employees schedules 28 days in advance, and impose penalties on the employer if the schedule is modified by the employer.  In addition to the “modification pay” the employer would be required to pay to the employee, if the employer does not comply with the proposed law, the bill also adds a $4,000 penalty for failing to accurately provide “modification pay”, another $4,000 penalty for any harm that results to the employee or “another person” due to a violation of the law, and the ability for the employee to bring suit under the Private Attorney Generals Act (PAGA), among other penalties.

4.       California HR consulting company cited for $1 million for misclassification of exempt employees.

TriNet Human Resources Corp. provides outsource human resources solutions for small and medium sized business, was cited by the U.S. Department of Labor for failing to pay time and a half to 267 employees who worked more than 40 hours per week.  The case shows how often times the test to determine if an employee is exempt or nonexempt is not black or white.  If an HR company can get into legal trouble over the issue, it shows that employers must approach the exempt classification of employees very carefully.

5.       Reminder that California regulations may require an update to sexual harassment policies.

As I’ve written about previously, new regulations issued by California’s Fair Employment and Housing Counsel set for additional steps employers should consider in regards to their discrimination, harassment, and retaliation policies.   These regulations are effective April 1, 2016.

1. Automatic liability for a company when harassing or discriminatory conduct is taken by supervisors.
A company is automatically liable for any harassment or discriminatory actions taken by its supervisors. Under California’s Fair Employment and Housing Act (FEHA), a supervisor is defined as anyone who has the authority to hire, transfer, suspend, layoff, recall, promote, discharge, assign, reward, or discipline other employees, or the responsibility to direct them, or to adjust their grievances, or effectively to recommend these actions to the employer.

2. When is a company liable for harassment by non-supervisory employees?
Employers are only liable for harassment in the workplace that it knew about or should have known about, and failed to take corrective action to stop the harassment.

3. Is there personal liability for harassment or discrimination?
There is a difference regarding personal liability for alleged harassment and discrimination.  Employees can be held personally liable for harassment, but there is no personal liability for discrimination.

Any employee working for a company covered by FEHA can be held personally liable for harassment that employee engages in. However, a supervisor who did not engage in harassment and who is aware of harassment taking place but fails stop the harassment, cannot be held personally liable for aiding and abetting the harassment.  However, obviously, this will create liability for the company. 

On the other hand, supervisors are not held personally liable for discrimination or retaliation. This is because the basic job duties of a supervisor could be viewed as discriminatory, acts such as hiring, firing, and setting schedules. Therefore, the courts did not want to impose personal liability on to supervisors for their day-to-day duties. However, it is important to remember that even though the supervisor does not have personal liability for discrimination or retaliation, the employer will always be liable for any proven misconduct.

4. The avoidable consequences doctrine could reduce liability in certain cases.
Under the avoidable consequences doctrine, an employee’s damages can be limited if the employer can show that: (1) it took reasonable step to prevent harassment, (2) the employee unreasonably failed to utilize the procedures put in place by the employer to prevent harassment, and (3) had the employee used the procedure to prevent the harassment some of the damages would have been prevented. Under this defense the employer’s complaint system put in place will be challenged and viewed under high scrutiny.  Therefore it is important for employers to show that employee’s who complained in the past had their complaints properly addressed and there was never any retaliation for making the complaint.  

5. Revise sexual harassment training in 2015 to include discussion about abusive conduct.
Even though workplace bullying is not illegal under California law, a new law going into effect in 2015 amends the law requiring employers with 50 or more employees to provide sexual harassment prevention training to include a discussion about workplace bullying and abusive conduct.

Q:  Is it "Illegal" to work with a relative as your co-worker or supervisor, or is it left up to the facility/business to make rules regarding how/who they hire as their employees?

There is nothing in California law that prohibits family members from working together. However, many companies institute non-fraternization or anti-nepotism policies as a safety measure to prevent work-place disputes that boil over from non-work relationships as well as to avoid claims of sexual harassment or discrimination. In fact, it is advisable for companies to have such policies.

One of the most problematic areas that arises is when two employees are dating, but the relationship goes sour. As you can imagine, this creates an awkward working environment that will take away from the employees’ productivity, in addition to exposing the company to a sexual harassment claim if one of the employees continues to pursue the other while at work. Also, if the relationship was between a supervisor and a subordinate, the company faces liability if the supervisor favors the person he/she is having the relationship with over other employees when making decisions about bonuses or promotions.

To avoid this problem, many companies have policies in place the either prohibit relationships at work, or some companies require the employees to disclose the relationship. Then the company can work with the employees to see if moving one or both employees to different divisions and/or locations within the company could prevent any potential problems should the relationship not workout in the future. Employers have to walk a fine-line however, because employees have an expectation of privacy about their personal lives while away from work, so employers cannot have too evasive policies. It is best to have a knowledge CA employment lawyer review the policy in advance.