Court Of Appeal Upholds Decision of Fair Employment & Housing Commission: Employer Is Liable for Terminating Employee Because of Pregnancy


August 31, 2009
INTRODUCTION

California’s Fair Employment and Housing Commission ("Commission") is an administrative agency of the State charged with adjudicating claims of harassment, discrimination, and retaliation in employment or housing arising under the Fair Employment and Housing Act ("FEHA"; Government Code §12940 et. seq.). An employee who believes he or she has been discriminated, harassed or retaliated against must file a complaint with the Department of Fair Employment and Housing ("DFEH") before seeking relief in state or federal court. The DFEH may investigate the employee’s complaint. Thereafter, the DFEH may dismiss the employee’s claim and/or give the employee a "Right to Sue" letter. If the DFEH believes a violation of FEHA has occurred, the DFEH will issue an "accusation" against the employer and a quasi-judicial proceeding will commence before the Commission. An administrative proceeding before the Commission is similar in many ways to a court proceeding. The Commission has jurisdiction to decide if the employer is liable and may impose damages against the employer of up to $150,000. The employer must comply with the Commission’s decision. If the employer disagrees with the Commission’s decision, the employer may appeal the decision by filing a petition for writ of mandate in California Superior Court, which may either uphold the Commission’s decision or overturn it.

In SASCO Electric v. California Fair Employment and Housing Commission (Scherl) (2009) 97 Cal.Rptr.3d 482, an employer appealed a decision by the Commission finding the employer liable for unlawful discrimination when it terminated an employee because she was pregnant. A California Court of Appeal upheld the decision of the Commission and a damage award in excess of $110,000.00.

FACTUAL BACKGROUND

SASCO Electric hired Zibute Scherl in January, 2003 to work as a deckhand on a yacht often used for excursions for SASCO’s clients in Mexico. Scherl had extensive experience, including a license as a U.S. Merchant Marine Officer. In September, 2003, Scherl became second captain in training and was to learn how to dock the yacht. The training never occurred, but both SASCO and Scherl agreed she could have successfully completed the training.

In December, 2003, SASCO management learned of Scherl’s recent marriage, allegedly commenting, "Whatever you do, don’t get pregnant." In January, 2004, Scherl became second captain, and SASCO hired a deckhand to assist on the yacht. In February, 2004, Scherl informed her supervisor and supervisor’s wife that she was pregnant. The supervisor expressed concerns both to Scherl and others about Scherl’s abilities to continue her job duties due to her pregnancy. At one point, SASCO requested Scherl obtain a release from her physician, which Scherl obtained indicating she was not incapacitated and did not have work restrictions. However, the doctor recommended that after May 10, 2004, Scherl should not work where she could be knocked over or be out to sea for several days at a time. Scherl did not provide the release to SASCO, allegedly because her supervisor told her to "hold off" on providing the release.

On February 24, 2004, a finance manager sent an e-mail to Scherl’s supervisor stating that due to budget reasons, the supervisor’s wife and "the third person" will have to come out of the budget. Scherl was provided with the e-mail and informed she was laid-off. Sometime later, Scherl asked her supervisor why she had been terminated, and he responded that she would not have been terminated had she not been pregnant. The supervisor informed the deckhand that Scherl was laid off because he was concerned about her being "cavalier" about working on the boat for too long when she was pregnant. At hearing, the supervisor admitted he told two or three people he laid Scherl off because she was pregnant, but alleges he was being "sarcastic."

The supervisor’s wife was re-hired by SASCO one week after the "lay-off." In addition, SASCO hired another male to work as a second deckhand in April, 2004. When the first deckhand resigned, SASCO hired another individual as a deckhand on an independent contractor basis. Neither of these two new deckhands had prior experience.

Scherl alleged she suffered substantial emotional distress from the experience, including embarrassment and humiliation for having been fired because of her pregnancy. She also alleged substantial financial hardship from the loss of income. Scherl filed a complaint with the DFEH. The DFEH issued an accusation against SASCO, and the case proceeded to hearing before the Commission.

An administrative law judge issued a proposed decision to the Commission finding SASCO liable and awarding Scherl backpay and $85,000 in emotional distress damages. The proposed decision also found there was clear and convincing evidence of oppression and malice by SASCO and imposed an administrative fine of $25,000. The Commission adopted the decision. SASCO petitioned a California superior court for a writ of administrative mandamus, but the court denied the petition. SASCO appealed to the California Court of Appeal. The Court of Appeal upheld the lower court and the Commission’s decision.

There was substantial evidence that SASCO terminated Scherl because of her pregnancy based on the statements of her supervisor, as well as the timing of the termination shortly after disclosing the pregnancy. SASCO alleged Scherl was laid off because she could not dock the yacht. However, substantial evidence showed Scherl could have docked the yacht because she previously docked two of SASCO’s other ships. In addition, the fact that her supervisor made no attempt to recall her after the "lay-off," but instead, hired two inexperienced deckhands, defeated this argument.

SASCO also alleged the Commission should not have awarded Scherl back pay covering the period after May 10, 2004 in which Scherl’s doctor indicated she should not be working where she could be knocked over or out to sea for several days. However, the Court upheld the back pay award because even if Scherl would have been incapacitated from her duties as a second captain after May 10, 2004, SASCO still would have been required to reasonably accommodate her disability, including temporarily transferring her to a less strenuous or hazardous position. SASCO presented no evidence it would not have been able to accommodate her.

Finally, as to the administrative fine, the Court held there was substantial evidence of oppression and malice in SASCO’s actions. The evidence established that SASCO intentionally discriminated against Scherl and contrived a reduction in force to hide its determination. Until management learned of her pregnancy, there was no indication SASCO contemplated a reduction in force. Indeed, a month before Scherl was informed of her impending layoff, SASCO changed the deckhand’s status from independent contractor to a full-time employee. Scherl was also the only employee affected by the alleged lay-off, and SASCO made no attempt to recall her before hiring two other, much less experienced persons, shortly after her termination.

CONCLUSION

The employer’s intentions in this case may have been two-fold: (1) concern for Scherl’s safety and the safety of her unborn child; and (2) concern that she would not be able to do her job due to the pregnancy. The intention may not have been one of pure animosity at the thought of a pregnant woman. The problem arises, though, when an employer "assumes" that an employee’s pregnancy will make them a bad employee, an absent employee, or cause harm to the employee or the fetus. Pregnancy does not equate to a reason to take an adverse employment action against the employee.

Instead, if there are legitimate business concerns why a pregnant employee may be impeded in performing her job duties (e.g. job duties involve physical labor, exposure to chemicals, etc.), the best approach is to request a release from the employee’s doctor and to follow the recommendations of the physician. If the employee is limited in the ability to perform the essential functions of the job, even if for a short period of time, the employer must engage in the interactive process and seek out a reasonable accommodation until the pregnant employee is no longer disabled by the pregnancy.

UPDATE: CALIFORNIA SUPREME COURT REVIEWS "KIN CARE" CASE

In our June 17, 2008 edition of The Personnel File, we addressed a California Court of Appeal decision, McCarther v. Pacific Telesis Group et. al. (May 23, 2008) 77 Cal.Rpt.3d 401. In that decision, the Court of Appeal held that California’s "Kin Care" law, Labor Code section 233, applied to sick leave policies having an indefinite number of sick leave days, not just traditional, accrual based policies. On August 20, 2008, the California Supreme Court granted review of the decision. This means that McCarther may not be relied upon as binding precedent at this time. However, a decision from the California Supreme Court is expected within the next few months.

This article was written by Frances Rogers, an attorney with the labor and employment law firm of Liebert Cassidy Whitmore (LCW). Ms. Rogers (mrogers@lcwlegal.com) is an Associate in the Fresno office and can be reached at (559) 256-7800. For more information regarding the discussion above or on our firm please visit our website at www.lcwlegal.com, or contact one of our offices below.

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