Janken v. GM Hughes Electronics

Opinion

In Caldwell v. Montoya (1995) 10 Cal.4th 972 [ 42 Cal.Rptr.2d 842 , 897 P.2d 1320 ], the Supreme Court considered whether individual members of a public school board placed themselves at risk of personal liability on claims of the FEHA^[1] discrimination when they voted to terminate the school district’s superintendent. The Caldwell court found that statutory immunities protect public sector employees from personal liability on claims such as FEHA discrimination. Since Caldwell was decided on the immunity issue, the Caldwell court found it unnecessary to decide the “broad and difficult” preliminary question of whether the FEHA exposes individual supervisory employees to the risk of personal liability for discrimination whenever they make a personnel decision. We now confront that question.^[2]

The question is one of legislative intent. (See, e.g., California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692 , 698 [ 170

The primary determinant of legislative intent is the words used by the Legislature. (See, e.g., California Teachers Assn. v. San Diego Community College Dist., supra, 28 Cal.3d 692 , 698.) However, legislative intent is the dominant consideration; a literal reading resulting in unintended consequences does not control over intent. (See, e.g., Whitman v. Superior Court (1991) 54 Cal.3d 1063 , 1072 [ 2 Cal.Rptr.2d 160 , 820 P.2d 262 ] [settled principle that “ ‘ “statute should not be given a literal meaning if doing so would result in absurd consequences the Legislature did not intend”’”].) Hence both the wording of the statute and the consequences of differing possible constructions must be evaluated in order to determine and effectuate legislative intent.

In the present case, these rules of statutory construction can reasonably lead to differing conclusions, and the “broad and difficult question” presented here has consequently generated considerable debate. Below we will expound our decision that the statutory language here in question was not intended to place individual supervisory employees at risk of personal liability for performing the job of making personnel decisions. This decision places us in accord with the growing consensus of courts from around the country which have considered similar language in similar statutes. Our conclusion is based on the wording of the statute, the fundamental distinction between discrimination and harassment, the avoidability of the type of

The

FEHA prohibits both harassment^[5] and discrimination.^[6] Case law has generally found little reason to distinguish clearly between the type of allegations that support a claim of harassment versus the type of allegations that support a claim of discrimination. The Legislature, although clearly indicating an intended distinction between the two different types of conduct by treating them differently in the wording of the FEHA7 has not provided any express definitions.^[7] Based upon the language used by the Legislature, we conclude in part III below that it was the intent of the Legislature to place individual supervisory employees at risk of personal liability for personal conduct constituting harassment, but that it was not the intent of the Legislature to place individual supervisory employees at risk of personal liability for personnel management decisions later considered to be discriminatory. We conclude that the Legislature’s differential treatment of

Both parties present as an example of harassment California Code of Regulations, title 2, section 7287.6, subdivision (b)(1). This regulation provides that harassment includes, but is not limited to, verbal epithets or derogatory comments, physical interference with freedom of movement, derogatory posters or cartoons, and unwanted sexual advances.^[8] As the regulation implies, harassment consists of a type of conduct not necessary for performance of a supervisory job. Instead, harassment consists of conduct outside the scope of necessary job perfonnance, conduct, presumably engaged in for personal gratification, because of meanness or bigotry, or for other personal motives. Harassment is not conduct of type neeessary for management of the employer’s business or performance.of the supervisory employee’s job. (Cf. Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291 , 301 [ 48 Cal.Rptr.2d 510 , 907 P.2d 358 ] [sexual assault not motivated by desire to serve employer’s interest]; Farmers Ins. Group v. County of Santa Clara (1995) 11 Cal.4th 992 [ 47 Cal.Rptr.2d 478 , 906 P.2d 440 ] [sexual harassment by deputy sheriff not within scope of employment].)^[9]

Discrimination claims, by contrast, arise out of the performance of necessary personnel management duties. While harassment is not a type of

Courts have employed the concept of delegable authority as a test to distinguish conduct actionable as discrimination from conduct actionable as harassment. We adopt this approach to find that the exercise of personnel management authority properly delegated by an employer to a supervisory employee might result in discrimination, but not in harassment. (See Birkbeck v. Marvel Lighting Corp. (4th Cir. 1994) 30 F.3d 507 , 510 and fn. 1 [distinguishing “personnel decisions of a plainly delegable character” from harassment]; and Stephens v. Kay Management Co., Inc. (E.D.Va. 1995) 907 F.Supp. 169 , 171, 173 [no personal liability of individual supervisors for “employment-related decisions” or “ ‘personnel decisions of a plainly delegable character’”].) Making a personnel decision is conduct of,a type fundamentally different from the type of conduct that constitutes harassment. Harassment claims are based on a type of conduct that is avoidable and unnecessary to job performance. No supervisory employee needs to use slurs or derogatory drawings, to physically interfere with freedom of movement, to engage in unwanted sexual advances, etc. in order to carry out the legitimate objectives of personnel management. Every supervisory employee can insulate himself or herself from claims of harassment by refraining from such conduct.^[11] An individual supervisory employee cannot, however, refrain from engaging in the type of conduct which could later give rise , to a discrimination claim. Making personnel decisions is an inherent and unavoidable part of the supervisory function. Without making personnel decisions, a supervisory employee simply cannot perform his or her job duties.

We conclude, therefore, that the Legislature intended that commonly necessary personnel management actions such as hiring and firing, job or

III. Individual Supervisory Employees Are Not at Risk of Personal Liability on Claims of Age Discrimination.

1. The statutory provisions and plaintiffs’ argument:

Section 12941, subdivision (a) declares it unlawful for “an employer” to discriminate on the basis of age.^[12] By contrast, section 12940, subdivision (h)(1) declares it unlawful for “an employer ... or any other person” to harass. (Italics added.) “Person” is defined in section 12925, subdivision (d) to include “one or more individuals.” The wording of these three sections suggests that liability for harassment is broader than liability for discrimination. It appears from this language that liability for harassment, which extends to “any person” and hence extends to “individuals,” encompasses individual supervisory employees. Liability for discrimination, by contrast, is limited to the “employer” only.

Plaintiffs argue against this interpretation by reference to section 12926, subdivision (d), which defines “employer” to include “any person regularly employing five or more persons, or any person acting as an agent of an employer.” Plaintiffs argue that an individual supervisory employee is “acting as an agent of an employer,” and hence that an individual supervisory employee is himself or herself an “employer” for purposes of statutory liability. A proper construction of section 12926, subdivision (d) and the purpose of its reference to “any person acting as an agent of an employer” is therefore a key to proper resolution of this case.

Two alternative constructions are available. One construction is that argued for by plaintiffs here: that by this language the Legislature intended

For the reasons which follow, we reject the contention that individual supervisory employees are at risk of personal liability for age discrimination on the theory that the “agent” language in the statute defines them as an “employer” for purposes of liability.

2. The growing consensus that individual supervisors are not personally liable as “agents”:

Because the antidiscrimination objectives and relevant wording of title VII of the Civil Rights Act of 1964 (Title VII),^[13] the Age Discrimination in Employment Act (ADEA)^[14] and the Americans with Disabilities Act (ADA)^[15] are similar to those of the FEHA, California courts often look to federal decisions interpreting these statutes for assistance in interpreting the FEHA. (See, e.g., Los Angeles County Dept. of Parks & Recreation v. Civil Service Com. (1992) 8 Cal.App.4th 273 , 280 [ 10 Cal.Rptr.2d 150 ]; Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590 , 606 [ 262 Cal.Rptr. 842 ]; 8 Witkin, Summary of Cal. Law (9th ed. 1988) Constitutional Law, § 759, pp. 255-259.)

Title VII defines employer as “a person . . . who has fifteen or more employees . . . and any agent of such a person.”^[16] The ADEA defines employer as “a person . . . who has twenty or more employees” including “any agent of such a person.”^[17] The ADA defines employer as “a person . . . who has 15 or more employees . . . and any agent of such person.”^[18] These three federal statutes thus contain definitions of employer identical in all relevant respects to the definition of employer contained in the FEHA: specifically, all the definitions of employer in these statutes are worded to cover the “agent” of the employer.

Within the past three years, six federal circuits have concluded either (1) that the “agent” language does not create individual liability for either discrimination or harassment, or (2) that the “agent” language does not create individual liability for discrimination (while possibly allowing individual liability for harassment). A seventh circuit has found that while individuals can be sued in their official or representative capacity, they cannot be sued in their individual capacity and have no personal liability. An eighth circuit has construed similar language in the Missouri Human Rights Law, finding that it does not create individual liability. These cases are discussed next below. Since, as we will set forth in part IV below, the claims raised in the instant case are all discrimination (not harassment) claims, the divergence among the federal courts of appeals as to individual liability for harassment is immaterial for present purposes.^[19]

Tomka v. Seiler Corp. (2d Cir. 1995) 66 F.3d 1295 ,1313-1314 was a Title VII case. In Tomka, the Second Circuit rejected “a narrow, literal reading of the agent clause” which implied “that an employer’s agent is a statutory employer for purposes of liability.” Instead, on “a broader consideration” of the purposes of Title VII, Tomka found that the “agent” language was intended as a simple expression of respondeat superior liability. ( 66 F.3d 1295 , 1314.)

Birkbeck v. Marvel Lighting Corp., supra, [(4th Cir. 1994)] 30 F.3d 507 was an ADEA case. In Birkbeck, the Fourth Circuit noted that “[t]he few courts that have found individual liability under the ADEA tend to seize on the use of the word ‘agent’ ” in the definition of employer. Birkbeck found

Grant v. Lone Star Co. (5th Cir. 1994) 21 F.3d 649 , 651-653 was a Title VII case. In Grant, the Fifth Circuit stated that neither public nor private sector employees are subject to individual liability on the basis of the “agent” language, instead agreeing that the purpose of the “agent” provision was to incorporate respondeat superior liability into Title VII. (See also Harvey v. Blake (5th Cir. 1990) 913 F.2d 226 , 227-228 [public officials may be liable in their official capacities, but not in their individual capacities].)

U.S. E.E.O.C. v. AIC Security Investigations, Ltd. (7th Cir. 1995) 55 F.3d 1276 was an ADA case. In U.S. E.E.O.C., the Seventh Circuit joined “analogous decisions of our sister Circuits in holding that individuals who do not independently meet the ADA’s definition of ‘employer’ cannot be held liable under the ADA.” ( 55 F.3d 1276 , 1279.) The Seventh Circuit stated that the EEOC was “fighting against the weight of authority” in urging individual liability on the basis of the “agent” wording in the employer definition. While finding the EEOC’s “ ‘plain language’ ” argument to have “surface appeal,” the Seventh Circuit found “upon closer examination that appeal is really an illusion.” ( 55 F.3d 1276 , 1281.) The court ruled that the reason for the inclusion of the “agent” language in the definition of employer “was to ensure that the courts would impose respondeat superior liability upon employers for the acts of their agents. [Citations.]” ( 55 F.3d 1276 , 1281, original italics.)

Miller v. Maxwell’s Intern. Inc. (9th Cir. 1993) 991 F.2d 583 was a Title VII and ADEA case. In Miller, the Ninth Circuit noted that, because of the use of the word “agent” in the definition of employer, “some courts have reasoned that supervisory personnel ... are themselves employers for purposes of liability.” (Miller, supra, 991 F.2d 583 , 587.) Although the Ninth Circuit found that this statutory construction argument was “not without merit,” the court found the “better rule” to be that the purpose of the agent provision was to incorporate respondeat superior liability into the statute. ( 991 F.2d 583 , 587.)^[20]

Sauers v. Salt Lake County (10th Cir. 1993) 1 F.3d 1122 was a Title VII case. In Sauers the Tenth Circuit found that a supervisor with significant

In Jones v. Los Angeles Community College Dist. (1988) 198 Cal.App.3d 794 , 813 [ 244 Cal.Rptr. 37 ], the court reversed a summary judgment in favor of individual supervisory employees on a discrimination claim on the grounds of lack of a showing that individuals could not be held liable, and in Matthews v. Superior Court, supra, 34 Cal.App.4th 598 , 604, the court noted the opinion of the Fair Employment and Housing Commission that individual employees could be held liable for discrimination. Caldwell v. Montoya, supra, 10 Cal.4th 972 , decided several months after Matthews and several years after Jones, noted that “no prior published California decision has directly considered whether FEHA imposes personal liability on an individual employee or manager” for discrimination. ( 10 Cal.4th 972 , 978, fn. 3.) The Supreme Court hence did not consider either Jones or Matthews as deciding the issue that now concerns us, and for obvious reasons. Jones involved simply a finding that a summary judgment had not been adequately supported. Matthews was a harassment case, hence Matthews made no rulings concerning discrimination and any observations in Matthews about discrimination were dicta.

The argument has been suggested that the “agent” language in the employer definition must have been intended to accomplish more than the imposition of respondeat superior liability for discrimination on the theory that the employer’s liability for the supervisory employee’s discrimination is an obvious and foregone conclusion. Not necessarily so. Without the “agent” language, it is by no means a foregone conclusion that employers would uniformly be held liable for all prohibited discriminatory acts by their supervisory employees. See, e.g., the analysis of the scope of respondeat superior liability in Farmers Ins. Group v. County of Santa Clara, supra, 11 Cal.4th 992 , and the discussion of the purpose of the “agent” language in Meritor Savings Bank v. Vinson (1986) 477 U.S. 57 [ 91 L.Ed.2d 49 , 106 S.Ct. 2399 ], and especially the concurring opinion of Justice Marshall. With

3. The incongruity between exempting small employers and yet holding individual nonemployers liable:

Section 12926, subdivision (d) defines “employer” as including “any person regularly employing five or more persons.” A person who regularly employs less than five other persons is not an “employer” for purposes of FEHA prohibitions on discrimination, and hence cannot be sued for discrimination. (Jennings v. Marralle (1994) 8 Cal.4th 121 [ 32 Cal.Rptr.2d 275 , 876 P.2d 1074 ].) For purposes of harassment, however, “employer” is specially defined in section 12940, subdivision (h)(3)(A) to include any person regularly employing one or more persons. Section 12940, subdivision (h)(4) and (5) make clear that this special definition of “employer” as someone employing only one other person applies only to harassment claims, and that discrimination claims continue to be covered by the “five or more” definition in section 12926, subdivision (d). The Legislature thus made a clear distinction in California in the treatment of harassment claims versus the treatment of discrimination claims: small employers can be sued for harassment, but they cannot be sued for discrimination.

In Title VII and the ADA, employer is defined as a person employing 15 or more.^[22] In the ADEA, employer is defined as a person employing 20 or more.^[23] These definitions exempt small employers from federal employment discrimination litigation because “Congress did not want to burden small entities with the costs associated with litigating discrimination claims.” (Miller v. Maxwell’s Intern. Inc., supra, 991 F.2d 583 , 587; see also, e.g., Birkbeck v. Marvel Lighting Corp., supra, 30 F.3d 507 , 510 [purpose of exempting small employers is to reduce burden on small businesses].) Many of the federal cases which found no personal liability against individual supervisory employees based their decisions in part on the incongruity that would exist if small employers were exempt from liability while individual nonemployer supervisors were at risk of personal liability. (Tomka v. Seiler Corp., supra, 66 F.3d 1295 , 1314 [inconceivable that a Congress concerned with protecting small employers would simultaneously impose liability on individual employees]; Birkbeck v. Marvel Lighting Corp., supra, 30 F.3d 507 , 510 [incongruous to impose personal liability on individual nonemployer when small employers are exempted]; Grant v. Lone Star Co., supra,

Plaintiffs’ theory would place a supervisory employee in a direct conflict of interest with his or her employer every time that supervisory employee was faced with a personnel decision. Every employee owes his or her employer duties of undivided care and loyalty. (See, e.g., 2 Witkin, Summary of Cal. Law (9th ed. 1987) Agency and Employment, §§ 5, 41-43, pp. 24, 53-55.) Plaintiffs’ theory, however, would coerce the supervisory employee not to make the optimum lawful decision for the employer. Instead, the supervisory employee would be pressed to make whatever decision was least likely to lead to a claim of discrimination against the supervisory employee personally, or likely to lead only to that discrimination claim which could most easily be defended. The employee would thus be placed in the position of choosing between loyalty to the employer’s lawful interests at severe risk to his or her own interests and family, versus abandoning the employer’s lawful interests and protecting his or her own personal interests. The insidious pressures of such a conflict present sobering implications for the effective management of our industrial enterprises and other organizations of public concern. We believe that if the Legislature intended to place all supervisory employees in California in such a conflict of interest, the Legislature would have done so by language much clearer than that used here.^[24]

Moreover, imposing personal liability against individual supervisory employees adds little to an alleged victim’s legitimate prospects for monetary

The only marginally legitimate purpose for adding individual supervisory employees as defendants is the possibility that the employer will file for bankruptcy protection and be unable to respond fully in damages. This prospect cuts both ways, however. Employment with an employer about to go bankrupt is in jeopardy in the first instance, and hence is of inherently lesser value than employment with a healthy and solvent employer. Loss or impairment of employment with an employer on the brink of bankruptcy would thus cause correspondingly less compensable damage. At the same time, it is often when companies are struggling for their financial survival that the most difficult personnel decisions must be made. A legal regime in which individual supervisory employees were personally liable after bankruptcy of the employer (a bankruptcy which would potentially result in unemployment for the supervisory employees as well) would mean that salvage of a troubled business would be all that less likely, as managers declined to make decisions necessary to save the enterprise. The public policy implications of these factors are significant, yet we have not been cited to any mention or consideration of them in the history of the legislative enactment here under examination. The fact that these considerations were apparently not considered by the Legislature reinforces our conclusion that the concept of providing a source of recovery in the event of bankruptcy is too attenuated to be considered a factor motivating the Legislature, especially in view of the ambiguous language used.

Little would be added to the protection of employees by the addition of individual supervisory employees as defendants, and what little would be added would be at potentially great cost. We do not think the Legislature intended such a result; if it did we would expect it stated in less ambiguous language and reflected in the legislative history. The construction we choose avoids conflicts of interest by harmonizing the FEHA statutory provisions

5. The “chamber of horrors" argument:

In many of the federal cases which construed the “agent” language not to create personal liability for individual supervisors, it was argued that such a construction would open the floodgates of discrimination, would give supervisors a “free pass” to discriminate, would “liberate” supervisors to discriminate “with impunity,” and the like.^[26] All the recent cases have rejected such arguments. One case rejected this “parade of horribles” as “Chicken Littleesque.” (U.S. E.E.O.C. v. AIC Security Investigations, Ltd., supra, 55 F.3d 1276 , 1282.) Another considered this “chamber of horrors” argument and was “not persuaded.” (Lenhardt v. Basic Institute of Technology, Inc., supra, 55 F.3d 377 , 381.) Another found the argument “unsound.” (Miller v. Maxwell’s Intern. Inc., supra, 991 F.2d 583 , 588.)

The cases have rejected such arguments because the employer remains liable. “An employer that has incurred civil damages because one of its employees believes he can violate Title VII with impunity will quickly correct that employee’s erroneous belief.” (Miller v. Maxwell’s Intern. Inc., supra, 991 F.2d 583 , 588.) “The employing entity is still liable, and that entity and its managers have the proper incentives to adequately discipline wayward employees, as well as to instruct and train employees to avoid actions that might impose liability.” (U.S. E.E.O.C. v. AIC Security Investigations, Ltd., supra, 55 F.3d 1276 , 1282.) “As a practical matter employees who unlawfully discriminate against their fellow employees, and who thereby expose their employer to liability, do not get anything like a ‘free pass’ to continue their wrongdoing with impunity. By incorporating the principles of respondeat superior into Title VII, Congress has required employers to answer for prohibited acts of discrimination perpetrated by their employees. An employer subjected to well-founded claims of employment discrimination as a result of an employee’s intentional acts of discrimination is not likely to look favorably upon the offending employee. To the contrary, the employer, to protect its own interests and to avoid further liability, almost certainly will impose some form of discipline upon the offending employee. That discipline may include a ‘free pass’ to the unemployment line, a result that would seem particularly likely if the employee

The

factual allegations in the present case plead claims of discrimination, but not claims of harassment. Broadly construing the factual allegations of the complaint, which are liberally interspersed with characterizations and conclusions, the complaint variously alleges that the defendants collectively or individually downgraded or altered plaintiffs’ performance appraisals; demoted, terminated or laid off plaintiffs; failed to promote or failed to transfer plaintiffs; failed to provide plaintiffs with salaries commensurate with their qualifications, experience and responsibilities; placed a “cap” on salaries of long-term employees such as plaintiffs; sent plaintiffs “at risk” notifications warning of possibly impending layoffs, or at other times failed to send “at risk” notifications warning of possibly impending layoffs; failed to provide plaintiffs with work assignments; failed to provide plaintiffs with sufficient clerical or secretarial support; failed to respond to correspondence sent by plaintiffs to “senior Hughes management”; “accused” one plaintiff of not properly maintaining a time card; and similar claims.

The allegations in the complaint here fail to plead facts which, if true, could legally constitute harassment. All the actions alleged here are within the realm of properly delegated personnel management authority. The personnel management actions alleged here would be unlawful only if motivated by prohibited discriminatory considerations. This alleged conduct, if first proven true and if then proven motivated by prohibited considerations,