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California Supreme Court Issues Two Decisions
Helpful to Employers
By
Judith
Droz Keyes and Kathleen
Poole
[August 2007]
On Aug. 23, 2007, the California Supreme Court
issued decisions resolving two highly-contested issues for employers:
the permissible structure of profit-sharing plans, and the burden
of proof in disability discrimination cases.
Employers Can Account for Expenses in Profit-Sharing Plans
In Prachasaisoradej v. Ralphs Grocery Co., Inc, Case
No. S128576, Ralphs Grocery had implemented an incentive compensation
plan (ICP) that provided for employees in stores that attained
specific net profit goals to receive a bonus in addition to
their regular wages. Business expenses such as worker’s
compensation costs, breakage, and cash and merchandise losses,
were deducted in calculating the net profit. The plaintiff alleged
that this calculation constituted an unlawful “charge
back” to employees, and thus was an impermissible wage
deduction under the Labor Code. The Court of Appeal had agreed.
The Supreme Court reversed. Over a vehement dissent by Justice
Kathryn M. Werdegar, the majority found that “the ICP
did not create an expectation or entitlement in a specified
wage, then take deductions or contributions from that wage.”
The employees received their promised regular wages, and the
ICP simply entitled employees to additional monies if certain
conditions were met. The Court observed that as the deductions
were ordinary business expenses that would not normally be included
in net profits, requiring them to be added into net profits
for purposes of the ICP would “artificially inflate”
the employer’s earnings figures. The Court noted that
the employer bore all of the costs relating to the purported
deductions, so the costs themselves were not passed on to the
employees.
Burden of Proof on Disabled Employees to Show They Can Do the
Job
In Green v. State of California, Case No. S137770,
the Court addressed whether it is a plaintiff’s burden
to prove he or she is a “qualified individual with a disability”
under the California Fair Employment and Housing Act (FEHA),
or whether it is the employer’s burden to prove that the
disabled employee is not qualified to perform the essential
functions of the position. The Court of Appeal had ruled that
it was the employer’s burden.
The Supreme Court, again over a dissent by Justice Werdegar,
reversed. The Court reasoned that the relevant provisions in
FEHA parallel the federal Americans with Disabilities Act, which
places the burden on the plaintiff. The Court also pointed to
the fact that it is generally a plaintiff’s burden to
prove the elements of his or her claims, and that there was
no evidence that the Legislature intended to deviate from the
general rule here.
For more information, please
contact:
Davis Wright Tremaine has employment
and labor lawyers in Alaska, California, Oregon, Washington
state and Washington, D.C. We represent many clients
nationally. For a specific referral for a DWT employment and
labor attorney in your state, please contact an above attorney.
Thank you.
This
advisory
is a publication of the Employer Services Department of Davis
Wright Tremaine LLP. Our purpose in publishing this advisory
is to inform our clients and friends of recent developments
in employment law. It is not intended, nor should it be used,
as a substitute for specific legal advice as legal counsel may
be given only in response to inquiries regarding particular
situations.
Copyright
© 2007, Davis Wright Tremaine LLP.
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