California Oddities, Quirky Question # 75

Quirky Question # 75:

We are a California employer and were just hit with a lawsuit by a former employee for acts that supposedly took place almost three years ago.  Our former employee alleges that in January 2006, his supervisor asked him to fire three Asian-Americans who work in an otherwise all Caucasian department.  The former employee alleges that he refused to follow his supervisor’s directive and did not fire anyone.  (Incidentally, this was the same supervisor who hired the employee who now is suing us.)

Our former employee also contends that from January 2006 through January 2008, he received very poor performance evaluations from his supervisor, which he attributes to his unwillingness to fire the three Asian-American employees.  Despite his “belief” about the supposed link between his performance reviews and his refusal to fire anyone, he never complained to our Human Resources Department or anyone on our management team.  He claims he had conversations about his supervisor’s behavior with one of his subordinates, an Assistant Manager who reported to him.

In February 2008, he quit without notice.  He immediately filed an administrative complaint with the Department of Fair Employment and Housing (DFEH), alleging race and age discrimination.  The DFEH conducted an investigation which ended in December 2008, and issued a right to sue letter soon thereafter.  We just were served with the Complaint, some three years after the primary incident on which his lawsuit is based.

First, can he file a race discrimination claim even though he is not Asian?  Second isn’t his lawsuit time-barred?  (I thought these types of lawsuits were limited to a one year statute of limitations.)  Finally, given that the employee did not take advantage of our very extensive internal complaint procedures (designed to address precisely these kinds of issues), doesn’t his failure to utilize this internal complaint process bar his claims?

Dorsey’s Analysis:

This is a complex scenario, so I think it would make the most sense if we treated each of your three questions separately:

Question 1

First, the broad question is asked: can a Caucasian can file a race discrimination claim even though he is not Asian, or part of any other ethnic minority for that matter?  The answer is yes.  Both federal law (Title VII) and California law (the Fair Employment and Housing Act (“FEHA”)) prohibit discrimination on the basis of race, color or national origin (among other bases).  Simply put, Caucasians are part of a specific race and their color happens to be white.  Therefore, an employer taking any adverse action against a person because of the employee’s status as a Caucasian, or any other race, does so in violation of the law.  Additionally, an employer may not take adverse action against any employee based on the color of the employee’s skin be it white, black or tan.  However, it is unlikely that your former employee will succeed in bringing such a claim because he supervised and works in an otherwise all Caucasian department.  He will have a difficult time proving that his Caucasian supervisor discriminated against him because he was Caucasian.

Question 2

Second, the next question presented is whether this lawsuit is time-barred?  The answer is no, for two separate reasons.  The first reason is the continuing violations doctrine and the second is the rule of equitable tolling that applies to the FEHA.

The continuing violations doctrine permits an employee to bring a lawsuit for an employer’s unlawful conduct that begins before the limitations period and “continues” into the limitations period.  The California case on point is Richards v. CH2M Hill, Inc., 26 Cal. 4th 798 (2001).  In Richards the court explained that discrimination may occur as either an isolated one-time occurrence or as a continuous course of conduct taking place over a period of time.  In either case, the statute of limitations begins to run when the unlawful course of conduct ceases or when the employee is on notice that further efforts to end the unlawful conduct will be in vain.

In 2005, the California Supreme Court affirmed and applied Richards in Yanowitz v. L’Oreal USA Inc., 36 Cal. 4th 1038 (2005), to a set of facts similar to the question submitted.  In Yanowitz, plaintiff sued her employer for failing to fire a female sales associate and replace her with someone more attractive.  Plaintiff refused to do so and thereafter alleged that plaintiff’s supervisor began criticizing her performance in written performance evaluations.  Notably, plaintiff never suffered a decrease in salary or benefits, nor was she ever fired or demoted.  More than one year after her supervisor began criticizing plaintiff’s work performance, she filed a complaint with the DFEH claiming that she was retaliated against for refusing to terminate an employee for an impermissible reason.  Applying Richards, the Court held that the supervisor’s criticisms and negative performance evaluations amounted to a continuing violation because the supervisor’s actions took place over time and amounted to a pattern of conduct.  Therefore, plaintiff’s lawsuit was not time-barred.

As applied to the question submitted, the actions taking place from January 2006 through January 2008 may amount to a continuing violation, effectively tolling the statue of limitations during that time.  Specifically, if your former employer can show that the poor performance evaluations he received over time were the result of his refusal to terminate the Asian-Americans because he thought that doing so was unlawful, then the continuing violations doctrine may apply.  In other words, every time your former employee received a poor performance evaluation based on his refusal to terminate in 2006, a new violation occurred connected to the 2006 event (i.e., the alleged refusal to terminate the three Asian-Americans).  This effectively makes the discriminatory conduct a pattern rather than one swift blow occurring from January 2006 to January 2008.

Of course, the fact that the former employee never complained to Human Resources or anyone in the management team about his belief that he was receiving unfair and discriminatory performance evaluations cuts against such an argument.  Moreover, the company can argue that because these alleged discriminatory performance evaluations occurred over a two-year period, the unlawful conduct had reached a degree of permanency which put this former employee on notice that the unlawful conduct would not end.  If successful, this argument would stop the tolling of the statute of limitations on the date that the discriminatory conduct reached a level of permanency.  If the actions reached a level of permanency more than a year before your former employee filed his DFEH complaint (i.e., before February 2007), then the lawsuit would be time-barred.  Nonetheless, the Yanowitz case is a difficult hurdle to overcome.

As for the time period the DFEH was investigating your former employee’s complaint (February 2008 to December 2008), that time period is subject to equitable tolling.  Broadly speaking, equitable tolling is a judicially created principle designed to prevent a case from being disposed of on statute of limitations grounds when the defendant was provided timely notice of plaintiff’s claims.  As applied here, plaintiff is required to file a complaint with the DFEH prior to bringing suit in a civil action as provided by statute in the FEHA.  Therefore, California Courts have long held that the one year period for an employee to file a civil lawsuit is tolled until the DFEH completes its investigation.

Question 3

The final question presented is whether the former employee must avail himself of the company’s internal complaint procedure prior to bringing suit?  Two recent California cases instruct that: (1) an employee is not required to utilize an employer’s internal complaint procedure before obtaining a right to sue letter from the DFEH if that process does not protect the employee’s due process rights to present evidence, and (2) the statute of limitations will be tolled while an employee utilizes an employer’s internal complaint procedure.

In Ahmadi-Kashani v. Regents, 149 Cal. App. 4th 449 (2008), the defendant employer argued that plaintiff’s lawsuit was barred because she initiated, but did not complete, a mandatory internal grievance process set forth in a collective bargaining agreement applicable to her.  The Court of Appeal found for plaintiff because the informal grievance procedure did not provide for a “quasi-judicial” hearing with sufficient due process and therefore the plaintiff was not required to see that process to completion before pursuing a claim with the DFEH.

Next, in McDonald v. Antelope Valley Community College Dist., 45 Cal. 4th 88 (2005), defendant employer argued that plaintiff’s case was time-barred because she failed to file a DFEH complaint during the time period that she was participating in a voluntary internal complaint process.  The employer made the specific point that plaintiff was advised she could file her DFEH complaint while the internal complaint process was moving forward and that the internal complaint procedure was entirely voluntary.  The California Supreme Court disagreed with the employer and held that the statute of limitations was tolled during the time period that the voluntary internal complaint procedure transpired because the employer had adequate notice of the claim and refusing to toll the statute of limitations in such a situation would be fundamentally unfair.

Thus, these two cases taken together instruct that an employer must likely pursue an internal complaint procedure through completion before filing a DFEH complaint when required by a collective bargaining agreement, so long as the internal procedure provides a “quasi-judicial” process for presenting evidence.  However, if the internal complaint process is voluntary, an employee need not see the process through to completion before filing a DFEH complaint.  In either case, the statute of limitations will be tolled because the employer is on notice of the former employees claims.

In sum, the questions posed illustrate that it is entirely possible for events that occurred more than one year ago to give rise to a legal claim that is within the statute of limitations because of both the continuing violation and equitable tolling doctrines.  This situation should serve as a reminder to employers to keep good records beyond the one year statute of limitations when it comes to matters the employer believes may be subject of a lawsuit – even if it that lawsuit is filed several years down the line.

Of course, the fact that the former employee never complained to Human Resources or anyone in the management team about his belief that he was receiving unfair and discriminatory performance evaluations cuts against such an argument.  Moreover, the company can argue that because these alleged discriminatory performance evaluations occurred over a two-year period, the unlawful conduct had reached a degree of permanency which put this former employee on notice that the unlawful conduct would not end.  If successful, this argument would stop the tolling of the statute of limitations on the date that the discriminatory conduct reached a level of permanency.  If the actions reached a level of permanency more than a year before your former employee filed his DFEH complaint (i.e., before February 2007), then the lawsuit would be time-barred.  Nonetheless, the Yanowitz case is a difficult hurdle to overcome.

As for the time period the DFEH was investigating your former employee’s complaint (February 2008 to December 2008), that time period is subject to equitable tolling.  Broadly speaking, equitable tolling is a judicially created principle designed to prevent a case from being disposed of on statute of limitations grounds when the defendant was provided timely notice of plaintiff’s claims.  As applied here, plaintiff is required to file a complaint with the DFEH prior to bringing suit in a civil action as provided by statute in the FEHA.  Therefore, California Courts have long held that the one year period for an employee to file a civil lawsuit is tolled until the DFEH completes its investigation.

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