Issue 2 - 2007

Train Your Workforce To Help Prevent Discrimination Claims
Be Careful In Drafting Legal Releases
Bonus Plans And Workers' Compensation Costs
Social Security No Match Regulations Derailed

Casual remarks that could relate to an employee's age can be devastating in a lawsuit. The recent case of Reid v. Google, Inc., highlights the need for employers to be proactive in educating employees that age-related remarks are unacceptable.

An ex-employee, Reid, sued Google, claiming in part that Google terminated him because of his age. Reid alleged that he was 54 years old at the time of his termination, that he was performing competently in the position he held, and that circumstances suggested age discrimination as the motive in Google's termination decision. As part of his evidence, Reid asserted that certain age-related comments were made by key decision makers and co-workers. Alleged statements included telling Reid he was "slow," "fuzzy," "sluggish" and "lethargic." A decision maker also allegedly told Reid his ideas were "obsolete" and "too old to matter." Reid further referenced statements allegedly made by co-workers that he was an "old man" and an "old fuddy duddy," and that his office placard should be an "LP" instead of a "CD."

The trial court dismissed Reid's case on summary judgment before he ever reached a jury. However, the appeals court decided that he should have his day in front of a jury --citing in part the age-related comments made by decision makers and co-workers.

So much attention has been devoted to training to prevent sexual harassment, this case reminds us that employees should be trained about other types of unlawful discrimination too.

Many companies frequently use release agreements in order to have employees waive legal rights. However, agreements must be carefully crafted to address numerous legal issues and should not be merely "boilerplate." This lesson was recently reiterated in the case of Nielsen v. City of Mesa, a federal court of appeal case.

In the City of Mesa case, Nielsen signed a release that covered possible legal claims related to the investigation into her background, employment history and suitability for employment. Nielsen sued, in part, for discrimination under Title VII. Nielsen alleged that she was not hired due to her filing an EEOC complaint against a previous employer, after the City of Mesa improperly discovered her EEOC complaint during the course of its background investigation.

The Court held that the waiver did not include the Title VII case; the waiver had to do with the background investigation, not the hiring itself. Accordingly, Nielsen was able to proceed with the Title VII case in this situation. Be sure to consult with legal counsel prior to using a release - even if the release was originally drafted by counsel.

The California Supreme Court has decided that a profit-based incentive compensation plan may take into account workers' compensation costs. (Prachasaisoradej v. Ralph's Grocery Company.) In the Ralph's Grocery case, each of the employees of a store were eligible to receive, in addition to their regular wages, supplementary monies based upon store profits. Profits were determined by subtracting store expenses from store revenues. Included among those store expenses, was the workers' compensation insurance premium costs. One challenge to the plan was under Section 3751(a) of the Labor Code -- which makes it a misdemeanor for an employer to "exact or receive from any employee any contribution, or make or take any deduction from the earnings of any employee, either directly or indirectly, to cover the whole or part of the cost of workers' compensation."

The Supreme Court decided that Ralph's plan was not in violation of the Labor Code. The plan did not involve a deduction or recapture of expected wages, only discretionary bonus potential. In other words, the profit-based supplementary plan designed to reward employees beyond their normal wages for their contributions to profits did not violate the wage protection sections of the Labor Code including protections for workers' compensation costs.

Bonus plans are legally complicated. The terms of such plans should be communicated in writing and require careful drafting. The attorneys at Simpson, Garrity & Innes can assist you in devising lawful bonus plan terms and in drafting a written plan to meet your business goals.

A federal judge in San Francisco barred the administration on October 10 from threatening to prosecute businesses for knowingly employing illegal immigrants if they fail to terminate workers whose Social Security numbers do not match government records.

U.S. District Judge Charles Breyer issued a nationwide preliminary injunction barring the government from enforcing the so-called "no-match" rule, which was scheduled to take effect last month but was blocked by temporary restraining orders from Breyer and another judge. The order remains in effect until a suit by labor unions challenging the rule goes to trial sometime next year or until a higher court intervenes.

In the meantime, it remains unlawful to knowingly hire or continue to employ a worker not legally authorized to work in the United States. Further, the I-9 form requirements also remain unchanged.