PACIFIC COUNSELOR TM (Fall 2005)

A Law Bulletin from

TERAOKA & PARTNERS LLP

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HARASSMENT LAW EXPANDS
In the last several months, two cases have significantly expanded the scope of sexual harassment law as it is applied in California.

In July 2005, the California Supreme Court unanimously held that consensual sexual affairs may constitute sexual harassment if “sexual favoritism” is sufficiently widespread to create a hostile work environment. “Sexual favoritism” would involve giving preferential treatment to one’s lover over other employees.
In September 2005, the Ninth Circuit decided Christopher v. National Education Association, Alaska, ruling that sexual harassment can occur even where the behavior is not sex based.

California

In Miller v. Department of Corrections, the warden of Valley State Prison for Women was having sexual affairs with three subordinates over a span of five years. These affairs were common knowledge in the workplace, and the employees involved did not attempt to keep the affairs private. In addition to demonstrating their affection in the workplace, the women involved would also frequently squabble over the warden while at work. The plaintiffs were female coworkers who were not having affairs with the warden. They brought their complaint on the basis that they were denied benefits given to less qualified women who had sexual affairs with the warden and that they suffered from retaliation after complaining about the unfair treatment. According to the plaintiffs, they were repeatedly denied promotions that were given to the warden’s lovers, although the plaintiffs had superior education, more experience, and higher ranks, and the lovers were not qualified for the promotions they received.

The trial court dismissed the plaintiffs’ claims, holding that a supervisor who grants favorable employment opportunities to a person with whom the supervisor is having a sexual affair is not guilty of sexual harassment toward other non-favored employees. That court indicated that sexual favoritism could not constitute harassment when both men and women were denied the favorable treatment that was bestowed upon the supervisor’s various sexual partners. The lower court also noted that neither plaintiff claimed that she herself had been subjected to unwanted sexual advances or requests for sexual favors.

The California Supreme Court reversed the lower court’s decision, holding that a hostile work environment can be created even if the plaintiffs are never subjected to sexual advances, so long as the work atmosphere created by these affairs is demeaning to women and conveys the message that the way to get ahead is to sleep with your boss. The Court acknowledged that isolated instances of favoritism by a supervisor toward an employee with whom the supervisor is conducting a consensual sexual affair ordinarily would not constitute sexual harassment. When, however, “sexual favoritism in the workplace is sufficiently widespread it may create an actionable hostile work environment in which the demeaning message is conveyed to female employees that they are viewed by management as ‘sexual playthings’ or that the way required for women to get ahead in the workplace is by engaging in sexual conduct with their supervisors or the management.”
 

Needless to say, the Miller holding will affect all workplaces. Although consensual office romances have become increasingly a cause for concern to employers as laws prohibiting sexual harassment have evolved, those relationships have not before now themselves created liability for the employer. The Supreme Court has pointed out that it is not the relationship but its effect on the workplace that is relevant. As a result of this ruling, any office romance between a supervisor and subordinate is subject to scrutiny and potential liability.

Liability in the case of office romances will depend on the fine distinction between “isolated” sexual favoritism, which is not actionable, and “widespread” sexual favoritism, which creates a hostile work environment. This standard virtually guarantees that any action taken by a supervisor and his or her paramour in the workplace could be subject to scrutiny and that employers will spend an increasing amount of time, energy and money defending against claims of sexual favoritism. This decision opens the way to numerous lawsuits from employees who may challenge any decision of a supervisor who is involved in, or allegedly involved in, an affair or workplace romance with another employee. Although the office affair or romance may be completely consensual, other employees who feel that the paramour received special treatment may sue. Furthermore, as the Supreme Court recognized, both men and women can be injured by sexual favoritism. This raises the specter of an entire department suing because the supervisor repeatedly favored the one employee involved in a romantic relationship.
 

Ninth Circuit

In the federal case decided in September 2005, the Ninth Circuit addressed the conduct of a manager who tended to berate all of his employees, but, because the scope and depth of his bullying behavior was greater toward women, the court found that his conduct could violate Title VII of the Civil Rights Act, and therefore constitute unlawful sexual harassment.

In Christopher v. National Education Association, Alaska, three female employees contended that they were harassed by the Assistant Executive Director, Thomas Harvey. According to their allegations, Harvey frequently shouted at them in a loud and hostile manner, used profanity, invaded their personal space, and shook his fist or fingers at them. The male employees confirmed the conduct by Harvey, and also confirmed that the women were afraid of him.
The defense in this case alleged that there could be no sexual harassment because Harvey did not make sexual overtures or lewd comments to the female employees. In fact, his behavior was not sexual at all. He was not alleged to have made any references to their bodies or body parts, to make sexual epithets, or even refer to gender during his bursts of temper.

In this case, the Ninth Circuit Court ruled that harassing conduct need not be motivated by sexual desire, nor must it be overtly sex or gender specific. Rather, the main question to consider in a sexual harassment case should be the extent to which members of one sex are exposed to disadvantageous terms or conditions of employment to which members of the other sex are not exposed.
This decision is significant because it reminds employers how broad the concept of “sexual harassment” has become. The decision confirms the advisability of an employer developing a strong policy against harassment, and implementing it forcefully.

Recommendations for Employers

With regard to the Christopher case, harassment and management training programs should emphasize a zero tolerance policy for harassment and companies should be aware that bullying supervisors may need remedial counseling.
In considering the Miller case, employers should be mindful that on the one hand, the workplace has become a major center of social life for both men and women. It is not uncommon for employees to first meet their significant others in the workplace. Alliances, affairs and romances between employees are a fact of life. At the same time, California Labor Code section 96(k) prohibits employers from taking any adverse actions against employees for engaging in lawful off-duty conduct by employees, such as sexual relationships. This statute severely limits an employer’s ability to stop office affairs or romances. It should be kept in mind that it is not the relationship but its potential impact on other employees that may create liability for employers. Thus, all employers can do is prevent the romantic relationship from affecting others in the workplace.

If faced with a claim of sexual favoritism, employers should treat that claim as seriously as a claim of unwanted sexual advances and perform prompt and thorough investigations as they would for any claim of sexual harassment.

Companies may want to consider adopting appropriate non-fraternization or anti-nepotism policies which discourage office relationships, particularly between managers and subordinates. However, care must be taken as these policies may create more litigation. Requiring employees to disclose any relationship as part of the policy, and taking disciplinary action for violation of the policy, may run afoul of Labor Code section 96(k) and other privacy laws.

In addition, where management is aware of a relationship between a supervisor and one of his or her subordinates, it may be advisable to arrange for another manager to audit and oversee performance reviews, promotions, salary adjustments and other employment decisions of that supervisor to ensure that such decisions do not involve sexual favoritism, and that such decisions were made for good business reasons.
Employers should address issues of sexual favoritism in their anti harassment training programs for managers and supervisors.

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DOCUMENT RETENTION REQUIREMENTS
What legal obligations does a company have to retain its files? When can old files be purged? These days, with new scrutiny on corporate governance, even the simple housecleaning act of cleaning out one’s file cabinets can be fraught with legal risk.

One recent example is the criminal charge of evidence tampering that Arthur Andersen faced, and upon which the U.S. Supreme Court ruled, in part, on May 31, 2005 (Arthur Andersen LLP v. United States, 125 S. Ct. 2129).
In that case, the U.S. Supreme Court reversed the criminal conviction of Arthur Andersen for violating a federal witness tampering statute (the “Tampering Statute”). That statute makes it a crime to “knowingly use[s] intimidation, threaten[s] or corruptly persuade[s] another person or attempt[s] to do so, or engage[s] in misleading conduct toward another person, with intent to … cause or induce any person to … alter, destroy, mutilate, or conceal an object with intent to impair the object’s integrity or availability for use in an official proceeding” (18 U.S.C. 1512(b)(2)). In a unanimous opinion written by Chief Justice William Rehnquist, the Court held that, contrary to the position of the Justice Department, the jury instructions failed to require a finding that Andersen had criminal intent to violate the law and remanded the case to the trial court for further proceedings.

The Supreme Court’s decision clearly relates to intent, and is not an endorsement of Arthur Andersen’s conduct. In its opinion, the Supreme Court avoided direct evaluation of the conduct that led to the accounting firm’s conviction. Instead, the Supreme Court reversed the case simply because the jury instruction failed to convey properly that a conviction requires knowledge of the wrongdoing.

Since the case was remanded for further proceedings, it is completely possible that Arthur Andersen would be convicted again should it be retried with the appropriate jury instructions under the Supreme Court’s guidance. It should also be noted that the Supreme Court’s decision was limited to the analysis of the Tampering Statute, and did not address other statutes and rules that require companies to maintain documents in relation to a possible government investigation or legal action.

There are many statutes, regulations and court rulings that mandate document retention practices. For example, the Sarbanes-Oxley Act criminalizes the knowing alteration, destruction, mutilation, concealment or falsification of documents with the intent to impede, obstruct or influence any federal investigation or bankruptcy proceedings. A violation of this provision can result in imprisonment up to 20 years (18 U.S.C. 1519). Similarly, the Private Securities Litigation Reform Act requires any party with actual notice of securities allegations in the complaint to maintain all tangible objects, including electronically recorded data, relevant to the allegations (15 U.S.C. 78u-4(b)(3)(C)). In the context of tax reporting, the IRS requires that taxpayers maintain records to support income and deductions claimed on their tax returns as long as the records may become material (Internal Revenue Code §6001; Treas Reg. §1.6001-1(e)). In the civil context, many courts have imposed harsh penalties for failure to preserve documents or items such as emails. Failure to preserve back-up documents could be deemed negligent.

Documents are not limited to hard copies; emails, audio tapes, computer files, electronic data on hard drives, disks and backup tapes also are included in the definition.

A higher degree of culpability has often been found where individuals within a company fail to take steps to preserve all relevant evidence in the face of circumstances that should have made it clear that the company needed to locate and preserve evidence of the type that was lost.

Costs of maintaining documents can be significant, yet the risk of noncompliance can be much more costly. An appropriate document retention plan, adopted in good faith, can be a legitimate justification for a company’s inability to later produce documents that were destroyed in the ordinary course of business under the adopted plan.

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USCIS REACHES H-1B CAP
U.S. Citizenship and Immigration Services (USCIS) announced that it has received enough H 1B petitions to meet the congressionally mandated cap of 65,000 for fiscal year 2006. USCIS has determined that the “final receipt date” is August 10, 2005. USCIS will reject and return any petitions that are subject to the fiscal year 2006 annual cap, and received after the “final receipt date.” Petitioners may re submit their petitions when H 1B visas become available for fiscal year 2007. The earliest date for which a petitioner may file a petition requesting fiscal year 2007 H 1B employment with an employment start date of October 1, 2006 is April 1, 2006.

THE INFORMATION DESCRIBED ABOVE IS FOR GENERAL INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS LEGAL ADVICE OR LEGAL OPINION ON SPECIFIC FACTS OR CIRCUMSTANCES. EACH COMPANY HAS PARTICULAR SITUATIONS, CIRCUMSTANCES AND ISSUES. YOU SHOULD CONSULT WITH YOUR LEGAL AND/OR TAX EXPERTS IN ORDER TO DETERMINE WHAT IS SUITABLE FOR YOUR BUSINESS.