Nonprofit News: Summer 2023

Nonprofit News

Nonprofit Governance

Understanding The Role And Voting Rights Of Ex Officio Directors.

By: Chase Booth

Many misconceptions exist regarding ex officio directors on California nonprofit boards, particularly concerning their voting rights. This article clarifies some of the most common misconceptions and provides guidance on how your organization can effectively leverage ex officio directors while avoiding common pitfalls associated with ex officio positions.

Ex Officio Directors Serve By Virtue of Their Office

The term “ex officio” comes from Latin, meaning “from the office.” An ex officio director is an individual who holds a position on the board because of another position they hold. This means that ex officio directors are not elected. Instead, they assume their position automatically based on a particular role or office they hold. For example, some bylaws provide that the individuals holding a local office or a specific position at a governmental agency are ex officio directors. Two affiliated nonprofits may have bylaws that provide that the chair of each nonprofit sits on the board of the other nonprofit. As a final example, some nonprofits have their Executive Directors sit ex officio on the board.

It is important to understand that the ex officio seat on the board is tied to the other external or internal position rather than the individual. Accordingly, the term of office of an ex officio director coincides with the director’s respective term of office in the specified position entitling them to sit on the board. Therefore, when an individual retires or leaves the position tied to the ex officio seat on the board, that individual

relinquishes their board seat, and their successor in the external or internal position takes their place on the board.

Unless Stated Otherwise in Bylaws or Articles, Ex Officio Directors Can Vote

It is also very important to understand that ex officio directors are directors like any other directors on a board unless your articles of incorporation or bylaws provide otherwise. This is provided for in Section 5047 of the California Corporations Code, which states in pertinent part:

If the articles or bylaws designate that a natural person is a director or a member of the governing body of the corporation by reason of occupying a specified position within the corporation or outside the corporation, without limiting that person’s right to vote as a member of the governing body, that person shall be a director for all purposes and shall have the same rights and obligations, including voting rights, as the other directors.

Accordingly, unless your articles or bylaws clearly state that an ex officio director has no voting rights, any ex officio directors have the same fiduciary duties and rights as regularly elected directors, including the same voting rights.

Benefits and Alternatives to Ex Officio Directors

There are many reasons to have ex officio positions. Ex officio positions can strengthen ties and help facilitate collaboration between affiliated organizations, particularly in anticipation of a merger. People with the experience and expertise to serve in the position tied to an ex officio board seat will bring that experience and expertise to your board, adding valuable insight at board

meetings. Additionally, their connections and influence, especially when the ex officio seat is tied to an external position, may enhance fundraising efforts and contribute to realizing long-term strategic goals. Because ex officio board members typically serve longer terms, they can also be a good source of institutional knowledge.

However, a major concern with ex officio positions is potential conflicts of interest, particularly when the ex officio seat is tied to an internal position, like the Executive Director position. Because the Executive Director serves at the pleasure of the board, this arrangement can undermine the independence and oversight that the board should exercise over the Executive Director and is generally not considered a best practice. Where the ex officio seat is tied to an external position, the person may be presented with decisions where the interests of your nonprofit and the other organization they work for are not aligned or in conflict. To protect against those situations, it is important to have a robust conflict of interest policy that provides directors guidance on recusing themselves from decisions implicating conflicting loyalties.

To LCW!

We are pleased to announce that Nancy López has joined the management team as our Business Development Manager. Nancy has extensive marketing experience, actively working in the field for over 25 years. She comes to us after serving in management level positions with advertising agencies, the world’s largest food company (consumer product goods), the former largest retail wholesaler in the Western United States, and most recently, at a private TK-12 grade school.

“I am thrilled to join LCW’s management ranks and be part of such a prestigious organization,” said Nancy on assuming her new position, “I look forward to leveraging my skills and expertise in marketing and business development to contribute to the continued success of LCW and help drive its growth in the legal industry.”

Another thing to consider is alternatives to ex officio directors. Often ex officio positions are used when a nonprofit wants to honor a long-time director who is rolling off the board. If your organization wishes to honor its long-term members without giving them voting power, consider alternative designations such as “Honorary Advisor.” These nonvoting titles can acknowledge a valued person’s contributions to your organization while avoiding confusion about whether the person is a director with voting rights. Alternatively, you can still call them ex officio directors so long as your bylaws make clear that such individuals are not considered full members of the board with voting rights and are not counted as official directors for legal purposes.

Ex officio directors can play an integral role in many nonprofit organizations, but to use them most effectively, it is crucial to be mindful of their rights and potential challenges that may arise. By implementing some of the best practices discussed above, we hope your organization will be in a stronger position to leverage an ex officio director’s experience and expertise effectively.

Nancy López Business Development Manager

California Department Of Public Health Revises The Definition Of A COVID-19 Outbreak.

By: Brian R. Dierzé

On June 20, 2023, the California Department of Public Health (CDPH) revised the definition of the term “COVID-19 Outbreak,” reducing the time period during which the COVID-19 cases must occur in order to trigger an outbreak.

Previously, the CDPH defined “COVID-19 Outbreak” to mean at least three (3) COVID-19 cases within a 14-day period among people who are linked through COVID-19 exposures in the workplace.

Covid in the Workplace new to the Firm!

Now, the CDPH defines the term to mean at least three (3) COVID-19 cases within a seven (7)-day period who are linked through exposures in the workplace. The rest of the substantive requirements of the definition remain unchanged and operative.

As a reminder for employers concerning their obligations in the event of a “COVID-19 Outbreak”, should an employer determine that such an outbreak exists, the employer must take the following steps: (1) make no-cost COVID-19 testing available to the exposed group (i.e., all the employees at the work location, working area, or common area where any of the COVID-19 cases were present during their infectious period); (2) ensure that employees within the exposed group wear face coverings when indoors or when outdoors and less than six (6) feet from another person; and (3) ensure that any employee who had a “close contact” exposure to one of the COVID-19 cases be tested for COVID-19 three to five days after the close contact and test negative or be excluded from the workplace pursuant to the return to work requirements of the Permanent Standards (See 8 CCR 3205(f)(2)).1

The Permanent Standards for COVID-19 Prevention, which were promulgated on December 15, 2022, rely on the CDPH definition of the term “COVID-19 Outbreak” for setting regulatory requirements for employers in the event of an outbreak. (See 8 CCR 3205.1(a).) Consequently, employers should note the revised definition and update their COVID-19 Prevention Programs (CPP) as necessary to reflect the change.

LCW attorneys are familiar with the regulatory requirements related to COVID-19 Outbreaks and are available to assist employers in modifying their policies and practices to comply with these requirements in the event of an outbreak.

Will Abramovitz an associate attorney in LCW’s San Francisco office where he provides labor and employment law and litigation expertise to our clientele. Prior to joining LCW, Will was an associate at a major international law firm where he obtained experience litigating and advising on labor and employment matters and complex commercial disputes in both state and federal courts through all stages of litigation.

LCW thanks our 2023 Summer Associates and wishes them the best in the upcoming academic year!

Chase R. Booth

SanDiego

Monica J. Chinchilla

SanFrancisco

Sam M. Holmberg

LosAngeles

Jaqueline B. Hubbell

LosAngeles

Abigail E. Lee

Sacramento

Juliana B. Pech

LosAngeles

Cindy Rivas

LosAngeles

Allison E. Sipe

SanFrancisco

Legal Updates

The Pregnant Workers Fairness Act (PWFA).

The Pregnant Workers Fairness Act (PWFA) is a new federal law that requires covered employers – which includes private employers with 15 or more employees, including nonprofit organizations – to provide “reasonable accommodations” to an employee’s known limitations related to pregnancy, childbirth, or related medical conditions, unless the accommodation would cause the employer an “undue hardship.” The PWFA went into effect on June 27, 2023.

The PWFA makes it an unlawful employment practice for a covered employer to do any of the following:

1. Require a qualified employee affected by pregnancy, childbirth, or related medical conditions to accept an accommodation other than any reasonable accommodation arrived at through the interactive process;

2. Deny employment opportunities to a qualified employee if such denial is based on the need of the covered employer to make reasonable accommodations to the known limitations related to the pregnancy, childbirth, or

related medical conditions of the qualified employee;

3. Require a qualified employee to take leave, whether paid or unpaid, if another reasonable accommodation can be provided to the known limitations related to the pregnancy, childbirth, or related medical conditions of the qualified employee; or

4. Take adverse action in terms, conditions, or privileges of employment against a qualified employee on account of the employee requesting or using a reasonable accommodation to the known limitations related to the pregnancy, childbirth, or related medical conditions of the employee.

The Equal Employment Opportunity Commission (EEOC) enforces the PWFA. The EEOC will be releasing regulations to carry out the PWFA in the near future. In the meantime, the EEOC has issued guidance on the law through an FAQ webpage. The EEOC started accepting charges from aggrieved employees under the PWFA on June 27, 2023, for any violation occurring on or after June 27, 2023.

The PWFA does not preempt federal, state, or local laws that are more protective of workers affected by pregnancy, childbirth, or related

medical conditions. California law provides broad protections for employees affected by pregnancy, childbirth, or related medical conditions. California nonprofit organizations may be required, for example, to make reasonable accommodations for employees who have work-related limitations stemming from pregnancy, childbirth or a related condition. Those accommodations may include, but are not limited to, temporary transfer to a less strenuous or less hazardous position, upon the advice of her health care provider. California nonprofit employers should keep in mind that they must comply with both federal and California law, but that the laws impose very similar obligations.

PUMP For Nursing Mothers Act Expands Federal Protections For Lactating Employees.

On December 22, 2022, President Biden signed the Providing Urgent Maternal Protections for Nursing Mothers Act (PUMP Act) into law. The PUMP Act moderately expands the federal protections for lactating employees in the workplace. The PUMP Act went into effect on April 28, 2023.

What did Prior Federal Law Require?

Under prior federal law, employers were required to:

1. Provide a reasonable break time for an employee to express breast milk for the employee’s nursing child for one year after the child’s birth each time the employee has need to express milk; and

2. Provide a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which the employee may use to express breast milk.

What is New Under the PUMP Act?

The PUMP Act expressly sets forth three circumstances under which an employer must compensate an employee for break time spent expressing breast milk. Those are when:

• Required by a separate federal law, state law, or municipal ordinance;

• The employee is not completely relieved from duty during the entirety of the break time; or

• The employer provides other paid breaks to employees.

Employees need not complete any special procedure before bringing a private lawsuit to enforce the Act’s reasonable break time requirement, or to file a complaint with the Department of Labor’s Wage and Hour Division regarding any violation of the PUMP Act. However, before an employee may commence a private lawsuit for violation of the Act’s requirement to provide “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public,” the employee must both:

1. Notify the employer of the failure to provide the place; and

2. Provide the employer with 10 days after such notification to come into compliance.

An employee may commence a private lawsuit for violation of the Act’s “place” requirement without notification if any of the following apply:

1. The employee has been discharged because the employee made a request for break time or a place to express milk or because the employee opposed any employer conduct related to the Act; or

2. The employer has indicated that the employer does not intend to provide a place to express breast milk.

The PUMP Act also modifies the consequences for employers who violate an employee’s right to reasonable break time and space to pump breast milk and/or who retaliate against an employee in violation of the Act. Now, an employer who violates an employee’s right to reasonable break time and space to pump breast milk or who retaliates against an employee in violation of the Act, will be liable for legal or equitable remedies. Those remedies could be very broad, and may include reinstatement, promotion, the payment of wages, lost wages, and punitive damages.

As with the prior law, there are limited exceptions for employers with less than 50 employees.

How does the PUMP Act Compare to California Law?

California law provides broad protections for lactating employees in the workplace. Under California law, employers must, among other things:

• Provide employees reasonable amount of break time to express breast milk for the employee’s infant child each time the employee has need to express milk.

• Provide an employee with the use of a room or other location for the employee to express milk in private, that meets the following requirements:

ƒ Not be a bathroom;

ƒ Close proximity to the employee’s work area;

ƒ Shielded from view;

ƒ Free from intrusion while the employee is expressing milk;

ƒ Be safe, clean, and free of hazardous materials;

ƒ Contain a surface to place a breast pump and personal items;

ƒ Contain a place to sit; and

ƒ Have access to electricity or alternative devices, including, but not limited to, extension cords or charging stations, needed to operate an electric or battery-powered breast pump.

• Provide employees desiring to express breast milk access to a sink with running water, and either a refrigerator or another cooling device (e.g., employer-provided cooler) suitable for storing milk in close proximity to the employee’s workspace.

• Develop and implement a lactation accommodation policy that includes certain elements.

California law provides that the break time will, if

possible, run concurrently with any break time already provided to the employee, and any break time for an employee that does not run concurrently with the break time already provided to the employee will be unpaid.

California law also provides limited exceptions for employers who employ fewer than 50 employees. Such employers may be exempt from a specific requirement of the lactation laws if the employer can demonstrate that the requirement would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer’s business.

Similar to federal law, California law provides remedies for employees who believe employers denied reasonable break time or adequate space to express milk or retaliated against them.

There are two provisions of California lactation accommodation law that differ from federal law. First, California law provides that an employer is not required to provide lactation break time if to do so would seriously disrupt the operations of the employer. Since federal law may be more favorable to the employee, California nonprofit organizations should comply with the federal requirement. Second, California law provides that if an employer cannot meet the break time or location requirements as requested by the employee, then the employer must provide a written response to the employee. Since California law is more favorable to the employee in imposing this written notice requirement on employers, organizations should comply with California law. California organizations should note, however, that any denial of an employee’s request for a lactation accommodation must be consistent with applicable law, which provides very limited, narrow bases for denial.

Severance

Nonprofit Breached Mutual Non-Disparagement Provision Of Severance Agreement.

Dr. Terri Wright was the Vice President of Program and Community at the Eugene and Agnes E. Meyer Foundation, a nonprofit that promotes social and racial equity in the Washington D.C. area.

During Wright’s first year at the Foundation, she received a favorable performance evaluation and a raise. At the same time, the CEO criticized Wright for her “interpersonal skills and communication issues,” feedback she had not received from anyone else at the organization. Wright alleges this criticism was pretext to mask the CEO’s discriminatory animus. Wright also described a general culture of racial inequity at the Foundation. During a round of internal company discussions about racial equity in the workplace, several employees of color shared their own concerns and experiences regarding race issues within the Foundation.

In October 2019, without any notice or opportunity for discussion, the CEO terminated Wright. Wright and the Foundation signed a severance agreement, which included a release of employment-related claims against the Foundation and employees, and a mutual nondisparagement clause. The mutual non-disparagement clause included language that the Foundation would direct its officers, directors, and employees with direct knowledge of the severance agreement not to make any false, disparaging or derogatory statements about Wright.

About a month after Wright was fired, the CEO told another nonprofit leader that Wright was let go because she was “toxic” and created a “negative environment,” and that two-thirds of the Foundation staff would have quit if Wright stayed. Wright sued the Foundation and the CEO for breaching the severance agreement, for doing so in a racially discriminatory manner in violation of 42 U.S.C. Section 1981, and for defamation.

The trial court dismissed all three claims, finding the

non-disparagement clause obligated the Foundation only to direct its employees not to disparage Wright, but the Foundation and its officers and employees were free to disparage her. The trial court found that the Section 1981 claim failed because it was based on a breach of the severance agreement. The trial court found there was no defamation because the CEO’s statements were protected by the common interest privilege because they were made by the CEO in her capacity as the Chair of the Board of a separate non-profit organization to the CEO of that organization.

In regard to the breach of contract claim, Wright argued that the non-disparagement clause’s promise to direct officers, directors, and employees to not disparage her was a promise that the Foundation itself would also not disparage her. The CEO herself signed the severance agreement. The Foundation and CEO argue that their duty began and ended with the promise to direct its employees not to disparage Wright.

The Court of Appeals found that the severance agreement was ambiguous, and reasonably capable of Wright’s interpretation. The clause was titled as a mutual nondisparagement agreement and the clause contained words such as “mutual” and “likewise,” indicating a corresponding duty to not disparage Wright. The Court of Appeals found it would be unreasonable to follow the Foundation’s interpretation, which would provide that the Foundation could send an email to all employees and Board members directing them not to make false, disparaging, or derogatory comments about Wright, and then only minutes later, release a public statement disparaging Wright.

The Court of Appeal then turned to the Section 1981 claim. Section 1981 protects the right to make and enforce contracts free from discrimination. To prevail, Wright must establish a prima facie case of discrimination: (1) that she is a member of a protected class; (2) she suffered an adverse employment action; and (3) the unfavorable action gives rise to an inference of discrimination.

The Court of Appeals concluded that Wright alleged a

Agreements

prima facie case of discrimination. Wright clearly met the first two prongs because she is African American, and therefore a member of a protected class, and she was terminated, meaning she suffered an adverse employment action. Wright successfully alleged that the action gave rise to an inference of discrimination because the Foundation did not defame her predecessor, a white man who was also separated from the company, nor any other non-African American employee. Additionally, the CEO praised Wright’s performance during her first year, indicated that Wright’s communication and relationship with her team was improving, and gave Wright a raise. The praise was specific and detailed. The CEO’s criticism, on the other hand, was vague and subjective, stating that Wright was “too busy in the weeds,” and terminating Wright without notice or warning, inconsistent with her performance record.

The Court of Appeals then considered the defamation claim. The Foundation and CEO argued that Wright’s defamation claim failed because the CEO’s statements were protected by the common interest privilege because the CEO and other non-profit leader were leaders of the same non-profit organization at the time the statements were made. The Foundation and CEO also argued that the statements were opinions and therefore not capable of defamation.

For the common interest privilege to apply, the statements must be made in good faith, on a subject in which the party communicating has an interest, to a person who has a corresponding interest. The Court of Appeals found that the common interest privilege did not apply because the statements were made in malice. Wright had a favorable performance evaluation and a raise, and the CEO acknowledged that Wright had been working on her communication. The CEO had raised Wright’s performance to the other nonprofit leader unprompted because the CEO was feeling backlash over the firing. The CEO used unprofessional language to describe Wright, calling her toxic and claiming that two-thirds of the staff would quit if Wright remained. The Court of Appeals also found the statements were not opinions because they had an implicit factual basis.

The Court of Appeals reversed the trial court’s decision

to dismiss the three claims.

Wright v. Eugene & Agnes E. Meyer Foundation (D.C. Cir. 2023) __ F.4th __ [2023 WL 3589084.

Note:

This case is an important reminder that mutual nondisparagement clauses can create risk for an organization because a court may hold the organization accountable for anything employees say, even those who are unaware of a settlement agreement.

Severance Agreement Was Valid Because It Did Not Actually Release Employer From Unknown, Future Claims.

Elizabeth Castelo worked for Xceed Financial Credit Union as its Controller and Vice President of Accounting. In November 2018, Xceed informed Castelo she would be terminated effective December 31, 2018. On November 19, 2018, the parties entered into an agreement entitled “Separation and General Release Agreement,” in which Xceed agreed to pay Castelo a severance in exchange for a full release of all claims, including “a release of age discrimination claims that she has or may have under federal and state law, as applicable.”

The release extended to all claims known and unknown “arising directly or indirectly from Employee’s employment … [and] the termination of that employment” including claims for wrongful discharge, violations of public policy, and violation of FEHA.

Castelo and Xceed signed the Separation Agreement on November 19, 2018. Castelo continued to work through the date of her separation, which was December 31, 2018. The parties intended that Castelo would sign another release covering this extra period of employment on the date of her separation. However, Castelo mistakenly signed the extension release the same day she signed the Separation Agreement.

The following year, Castelo filed a complaint against Xceed alleging age discrimination and wrongful termination in violation of FEHA. The parties stipulated the action would be submitted to binding arbitration.

The arbitrator decided that, despite Castelo signing the extended release prior to her last day of employment, the release was valid throughout Castelo’s employment. The arbitrator also examined California Civil Code Section 1668, which prohibits a person from releasing future violations of law. The arbitrator decided that the release did not violate California Civil Code Section 1668. The Arbitrator declined to permit Castelo— who accepted the benefits under the Separation Agreement—to use her mistakenly-premature signing of the second release to leverage Section 1668 as a weapon against Xceed.

Castelo asked the trial court to vacate the arbitration award. The trial court denied to do so. Castelo asked the Court of Appeal to further examine whether the release for the final month of Castelo’s employment violated California Civil Code Section 1668. The Court of Appeal noted that “… courts have interpreted Section 1668 as precluding releases of liability only for future violations of law, … [when] the facts giving rise to the offense have not yet occurred.” The Court

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of Appeal added that the future violations of law that are not allowed to be released are generally unknown future violations of law.

At the time Castelo signed the Separation Agreement and the extension, Xceed had already made the decision to terminate her. Castelo already knew the facts that would later form the basis for her wrongful termination and age discrimination claims. Castelo testified that by the time she signed the releases, she believed she was being wrongfully terminated and the wrongful termination was based on age discrimination. Castelo also did not allege any new, independent acts of discrimination after the date she signed the second release.

The only violations of law that cannot be released by an agreement between two parties are unknown future violations of law. The Court of Appeal sided with Xceed and upheld the judgment of the arbitrator and trial court.

Castelo v. Xceed Financial Credit Union (2023) 91 Cal.App.5th 777.

Note:

The employer was fortunate that the employee did not allege any new discrimination after the date she signed the releases. Severance agreements that release an employer from future, unknown violations of the law are not valid.

Olga Bryan, an associate in the San Diego office where she provides labor, employment, and wage and hour expertise. She has defended employers in litigation claims for a variety of issues including discrimination, retaliation, harassment, wrongful termination, and wage and hour class violations.

Brian Hawkinson, an Associate in the San Francisco office where he provides legal expertise concerning labor and employment matters. Prior to joining LCW, Brian worked for an Oakland based civil rights law firm where he actively participated in all stages of litigation: from screening clients, investigating claims, and filing complaints to engaging in discovery, resolving disputes with opposing counsel, and responding to dispositive motions.

Jordan M. Carman, an associate in the Los Angeles office where she provides labor, employment, and education law expertise to our public and private education clientele. Prior to joining LCW, Jordan worked at The Child Care Law Center in Berkeley, CA where she secured childcare subsidies for low-income clients and provided technical assistance to the Department of Social Services on the drafting of regulations and sub-regulatory guidance affecting families and childcare providers.

FMLA

Employee Notified Of Imminent Termination Prior To FMLA Leave Did Not Have Right To Reinstatement.

On November 3, 2020, Jeff Lyde was elected Sheriff of Clay County, Texas. Following his election, Lyde made personnel decisions for his upcoming administration, including replacing many incumbent supervisors within the Clay County Sheriff’s Office. On November 16, 2020, Lyde sent employees individual emails letting them know they would be terminated in two weeks’ time, on November 30, 2020, when Lyde assumed office.

Linda Byrd was one of these employees. Byrd denied ever seeing the email on November 16, 2020. On the same day, Byrd reached out to the County about the possibility of receiving leave pursuant to the Family and Medical Leave Act (FMLA). Byrd received the paperwork from the County on November 18 and completed her leave application on November 25, 2020. A County employee, unaware of the plans to terminate Byrd, approved the leave. Byrd’s leave concluded in January 2021 and the County declined to reinstate her.

Byrd sued Clay County under the FMLA for interfering with, restraining, or denying the exercise of her FMLA rights. Subject to certain limitations, one right under the FMLA is the right to reinstatement after return from leave. Byrd argued that the County should have offered her employment at the conclusion of her leave in January 2021. The trial court disagreed and granted summary judgment in favor of the County.

The Court of Appeals agreed with the trial court and reasoned that employees do not have a right of employment that they would not have been entitled to had the employee not taken leave. The Court of Appeals said that denying reinstatement to an employee who had already been terminated had she not taken the leave does not violate the FMLA. The Court of Appeals expressed concern that if they ruled differently, employees would immunize themselves from legitimate termination by taking FMLA leave.

The Court of Appeals said that Byrd was not able to dispute that her termination was imminent, and therefore

nothing could change the outcome of the case. Byrd did not need to know that her job was ending when she applied for the leave, it mattered only that it was in fact ending.

Byrd v. Clay County, Texas (5th Cir. 2023) __F.4th__ [2023 WL 3122462].

Note:

Terminating an employee while they are on protected leave, such as FMLA or CFRA leave, can be risky. Nonetheless, this case confirms that the FMLA does not protect employees on leave from termination unrelated to their leave.

new to the Firm!

Peter

Nguyen

, a

Sr. Labor Relations Consultant in

the Los

Angeles office

of Liebert Cassidy Whitmore. Peter has extensive experience, having negotiated over forty master agreements and doing labor relations work across many jurisdictions, including municipalities, special districts, K-12, higher education, entertainment, and healthcare. He has also engaged in complex policy analysis, drafted legislation, and taught public policy at the university level.

Employee Lacked Any Medical Condition That Exempted Her From Employer-Mandated Vaccination Policy.

Deanna Hodges began working for Cedars-Sinai Medical Center in 2000 as an administrator with no patient care responsibilities. In 2017, Cedars announced a new policy requiring all employees, regardless of their role, to be vaccinated by the beginning of flu season. This was the latest expansion to Cedars’ longstanding efforts to limit employee transmission of flu, which had become more urgent following multiple patient deaths relating to flu.

As required by law, Cedar’s policy made exemptions for “valid medical or religious” reasons. Cedars established a very thorough exemption evaluation process through which a panel would grant an exemption only for a “recognized medical contraindication”. Hodges did not want to get the flu vaccine, despite not having any contraindication to the flu vaccine. Hodges and her doctor merely stated on the exemption form that Hodges has a “History of multiple allergies post treatment for colorectal cancer with chemoradiation. Extreme unwell state results from injections and immunizations. No direct patient contact.” Hodges’ doctor stated in his deposition that he was not communicating that Hodges had a recognized contraindication to the flu vaccine.

Hodges submitted her form. She was informed that her form was illegible and she would be suspended and terminated if she did not agree to get the flu vaccine. Hodges attempted to convince a variety of personnel that her exemption request was valid and should be granted. The panel denied her exemption request. Hodges’ doctor then attempted to persuade her to receive the vaccine. Hodges steadfastly refused and was terminated effective November 9, 2017.

Hodges filed a lawsuit against Cedars alleging: (1) disability discrimination; (2) failure to engage in the interactive process; (3) failure to accommodate a disability; (4) retaliation; (5) failure to take reasonable steps to prevent discrimination, harassment, and retaliation; and (6) wrongful termination. Cedars received summary judgement and Hodges appealed to the California Court of Appeal.

After a thorough review of the evidence, including depositions, declarations, and exhibits, the Court of Appeal decided that Hodges did not have a medically valid contraindication that constituted a disability. Even if she did, the Court of Appeal stated, Cedars terminated Hodges for a legitimate nondiscriminatory reason—noncompliance with a bona fide employer policy aimed at protecting and saving lives.

Hodgesv.Cedars-SinaiMedicalCenter (Cal. Ct. App. 2023) 2023 WL 3558767.

Note:

In this case, the court ruled for the employer because the hospital was able to show that their reason for terminating the employee was based on a legitimate nondiscriminatory reason, and was not based on the employee’s medical condition.

Misconduct

Court Upholds Decision To Terminate Tenured Professor For Alleged Sexual Harassment.

Professor John Heineke became a tenured professor of economics at Santa Clara University, a private institution, in 1972. His employment was subject to the faculty handbook, a part of his employment contract with the University. In 2015, Jane Doe, a Chinese national and MBA student, enrolled in one of Heineke’s classes. She repeatedly met with Heineke in his office outside of office hours, at her own request, for help with the course material. Doe received an “A” in the class and accepted an offer to serve as Heineke’s teaching assistant (TA) for the same course in fall 2015. Heineke and Doe had a friendly relationship and Doe sent complimentary emails to Heineke.

Heineke admits that he tried to “mentor” Doe in European/American culture, including once demonstrating the French style of greeting by pressing cheeks and kissing the air and hugging her several times. Heineke described the contact as brief, nonsexual, and at her request. Doe described the contact as extreme, extensive, and nonconsensual.

During the summer of 2015, Doe canceled a lunch and when Heineke asked to reschedule for later in the summer, Doe responded that she was unavailable during summer break. Despite Doe’s and Heineke’s agreement to defer a meeting until September, Heineke emailed Doe

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multiple times over the summer to see if she was available to discuss the materials.

In September 2015, Doe responded to the emails, again stating her unavailability and alleging that Heineke had put his hands in her clothes, touched her body and skin, squeezed her bottom, kissed her mouth, pressed his penis against her, and sexually harassed her. Heineke emailed back denying the allegations and expressing shock and disbelief. Doe reported the sexual harassment to the University’s equal employment opportunity office. The University’s Director of Equal Opportunity and Title IX Coordinator Belinda Guthrie met with Doe about her claim, but Doe did not respond to Guthrie’s requests for more information and Guthrie did not pursue Doe’s claim. Guthrie did not initiate an investigation or advise Heineke of the complaint. Heineke did not tell anyone at the University about the emails and deleted them from his account because they “bothered him immensely.”

In January 2017, another female student from China (Student A) complained to Guthrie’s office that Heineke had sexually harassed her. Guthrie hired Michael Henry, an investigator with the National Center for Higher Education Risk Management Group (NCHERM) to investigate. When Henry interviewed Heineke, Heineke did not disclose Doe’s accusations and said “no” when asked if anything like this has ever come up before. Henry also interviewed Doe at length, and her account was consistent with her September 2015 emails. After the interview, Guthrie authorized a separate investigation of Doe’s claim.

In May 2017, Henry interviewed Heineke and seven other witnesses about Doe’s accusations. Heineke again denied that anything like this had happened before. In May 2017, Henry issued a report concluding that Heineke had not sexually harassed Student A. In June 2017, Henry issued a report on the Doe investigation, finding it more likely than not that Heineke had harassed Doe. Based on the investigation findings, the University determined that Heineke engaged in gross misconduct and terminated his employment. Heineke appealed the decision internally, when the appeal was denied and his dismissal was affirmed, he brought multiple actions in court to overturn the termination. None of these succeeded.

For example, for Heineke’s wrongful termination claim alleging age discrimination, the trial court concluded the University made a primafacie showing of a legitimate basis for termination under the faculty handbook for sexual harassment. Heineke admitted he had no objective evidence that he was discriminated against or terminated due to his age. The trial court also found that the veracity of Doe’s allegations was immaterial to the question of whether the University genuinely believed, after conducting an investigation, that Heineke had harassed Doe. The Court of Appeals agreed. The Court of Appeals noted that Heineke did not provide any evidence of age discrimination. Heineke’s “evidence” of pretext was all speculation, hearsay, and conclusory arguments.

For Heineke’s breach of contract claim, the trial court held that the University complied with their faculty handbook terms permitting termination for misconduct, which includes sexual harassment. The handbook authorizes termination when “in the judgment of the Provost, reasons exist to dismiss and terminate the tenure of a tenured faculty member for misconduct.” Heineke argued that this interpretation renders the tenure clause illusory because the University could have its Provost falsely (and/or in bad faith) claim subjectively that a faculty member committed misconduct. The Court of Appeals upheld the trial court’s ruling and noted that the University afforded Heineke all of the processes he was entitled to in the faculty handbook, including a lengthy evidentiary hearing and a thorough decision where the Faculty Judiciary Board made credibility findings and explained its reasoning. The Court of Appeals upheld the University’s decision to terminate Heineke.

Heinekev.SantaClaraUniversity (2023) __ Cal. Ct. App. __ [2023 WL 3116225].

Note:

This case is instructive because it shows the importance of following the process outlined in the employee handbook when terminating an employee for violation of an organization’s policy. In addition, it shows the importance of conducting a thorough investigation into allegations of harassment to support terminating an employee accused of harassment.

DidYou Know?

• The Department of Labor recently issued an opinion letter about how to calculate the amount of leave used when an employee takes leave under the Family and Medical Leave Act (FMLA) during a week with a holiday. The opinion letter confirms that when a holiday falls during a week when an employee is taking a full workweek of FMLA leave and is not expected to work on the holiday, the entire week is counted as FMLA leave. For example, an employee who works Monday through Friday and takes leave for a week that includes a holiday would use one week of leave and not 4/5 of a week, even though the employee used only four days of FMLA leave that week. On the other hand, when an employee takes FMLA leave in increments of less than one week during a week that includes a holiday, the holiday generally does not count against the employee’s FMLA leave entitlement, unless the employee was required to report for work on the holiday.

• The Equal Employment Opportunity Commission (EEOC) has issued updated guidance on COVID-19 and the Americans with Disabilities Act, the Rehabilitation Act, and Other Equal Employment Opportunity Laws. With the end of the COVID-19 Public Health Emergency, the EEOC updated 30 questions including questions on disabilityrelated inquiries; confidentiality of medical information; hiring and onboarding; disability and reasonable accommodation; pandemic-related harassment due to national origin, race, or other protected characteristics; return to work; vaccinations; and the definition of “disability” under the ADA/Rehabilitation Act as it relates to COVID-19 and Long COVID.

Retaliation

California Supreme Court Says Whistleblower Statute Protects All Employees Who Report Wrongdoing And Not Just The First Employee To Report.

From May 2010 to April 2014, a woman with the initials ACR worked as a bartender at Kolla’s, a nightclub in Orange County. On April 5, 2014, ACR complained to the owner, Gonzalo Estrada, that she had not been paid wages owed for her previous three shifts of work. Estrada responded by threatening to report ACR to immigration authorities (hence the initials instead of her full name), terminating her employment, and telling her never to return.

In June 2014, ACR filed a complaint against Estrada and Kolla’s with the California Division of Labor Standards Enforcement (DLSE), which opened an investigation. After determining that Estrada’s immigration-based threats and termination of ACR violated California law, DLSE notified Estrada and Kolla’s of proposed remedies, including payment of lost wages to ACR, reinstatement of ACR’s previous position, and payment of civil penalties to ACR and DLSE. After Estrada and Kolla’s declined to accept DLSE’s proposed remedies, the Labor Commissioner sued them for violations of the Labor Code, including retaliation in violation of Section 1102.5(b).

The trial court granted judgment for DLSE, but ruled against DLSE on the Section 1102.5(b) claim. The Court of Appeal upheld this ruling and the DLSE thereafter appealed to the California Supreme Court.

Labor Code Section 1102.5 prohibits employers from retaliating against employees for “disclosing information” concerning suspected violations of the law, either internally or to government or law enforcement agencies. The crux of this case revolved around what it means to disclose information. Some California courts have held that the report of information that was already known

does not constitute a protected disclosure because the ordinary meaning of the verb “to disclose” is to reveal something that was hidden and not known.

It is for this reason that the trial court and Court of Appeal held against DLSE; they both opined that because Estrada was the owner of Kolla’s, he already knew that he had not paid ACR and thus her telling him this was not a disclosure under Labor Code Section 1102.5(b).

On the other hand, other California courts have held that using this definition of “disclose” would defeat the legislative purpose of the law, which is to encourage and protect whistleblowing employees. If only the first employee to blow the whistle was protected, employees would be unwilling to report unlawful conduct for fear that another employee had already done so.

The California Supreme Court found that the Court of Appeal’s definition of “disclose” would defeat the law’s purpose. The Court first noted that dictionary definitions of disclose include “to make openly known” and “to open up to general knowledge.” The Court surmised that these definitions do not require that the topic of disclosure be unknown to the recipient.

The Court also made clear Labor Code Section 1102.5 was intended to protect every employee, not just the first employee to report. The protection should also not be dependent on whether the information was already known to the wrongdoer.

Peopleexrel.Garcia-Browerv.Kolla’s,Inc. (Cal. 2023) 308 Cal.Rptr.3d 388.

Note:

This case makes it clear that the protections of Labor Code Section 1102.5(b) extend to all reports of wrongdoing regardless of previous knowledge and whether another employee had reported the misconduct. Nonprofit organizations should openly receive and consider any information of potential misconduct or unlawful acts.

Labor Relations

NLRB Returns To Previous Test For Determining Independent Contractor Status.

Section 2(3) of the National Labor Relations Act (NLRA) excludes independent contractors from coverage. To determine whether a worker is an employee or independent contractor, the National Labor Relations Board (NLRB) considers 10 different factors, including, among other factors: the extent of control the employer exercises over the details of the work; whether the work is done under the direction of the employer or without supervision; whether the employer is engaged in a distinct occupation or business; how much skill is required; whether the employer supplies the tools and place of work; and the method of payment, whether by the hour or by the job.

In 2019, the NLRB ruled in SuperShuttle DFW, Inc., that the 10 different factors should be evaluated through the “prism of entrepreneurial opportunity.” In other words, entrepreneurial opportunity should be the animating principal of the test, and afforded special weight relative to the other factors. The more opportunity workers possess, the more likely they are independent contractors.

On June 13, 2023, the NLRB ruled in Atlanta Opera, Inc. that it would return to the prior, more employee-friendly standard for determining whether workers are employees or independent contractors by applying a holistic analysis of the 10 factors. Under the holistic method, “entrepreneurial opportunity” is one of several non-dispositive factors, and the analysis should be fact-intensive.

In this case, the issue before the NLRB was whether makeup artists, wig artists, and hairstylists (collectively known as stylists) are employees of The Atlanta Opera or independent contractors. The Make-up Artists and Hair Stylists Union, Local 798, IASTE filed a petition to represent the stylists. The Opera asserted that the stylists are independent contractors and therefore not covered by the act.

For each production at the Opera, the director

chooses a wig and makeup designer, who is part of the director’s design team and who works closely with lighting and costume designers to effectuate the director’s vision. The wig and makeup designer works with a wig and makeup department head, who seeks out other qualified hair, wig, and makeup artists to execute the styles for each character.

These stylists do not work pursuant to written contracts; they agree to an hourly pay rate and fill out timesheets accordingly. Stylists are not on the Opera’s payroll, receive different rates of pay, and are designated as vendors. Each stylist must fill out a W-9 tax form and a direct-deposit form. The Opera keeps financial records regarding the work of the stylists, but not any other records or personnel files for them. The Opera does not provide any training or orientation and the stylists generally do not wear uniforms, except that they are expected to wear black for the productions to minimize their visibility to the audience. Stylists are not subject to the Opera’s rules and regulations except for the Opera’s infectious disease policies. The stylists’ schedules are dictated by the Opera’s rehearsal and performance schedule and selected based on their availability for the entirety of a production.

Typical job responsibilities include applying makeup; preparing, fitting, and fastening wigs; styling performers’ natural hair; creating special makeup effects (e.g., wounds, aging, or facial hair); working with the audio department to attach microphones; working with the wardrobe department to integrate wig styles with costumes; and removing performers’ makeup, wigs, and microphones after the performances.

Applying the 10 factors in a holistic manner, the NLRB determined that the stylists are employees and not independent contractors. Specifically, the NLRB said that the following factors point toward employee status: the Opera controls the details of the stylists; the Opera directs stylists’ work via continuous feedback from the director; the Opera supplies the tools, instruments, and places of work; the Opera pays the stylists an hourly rate with a fixed number of working hours; the stylists’ work is part of the regular business of the employer; and the Opera is in the same

business as the stylists. The factors weighing in favor of the stylists being independent contractors were their distinct occupation, their skill, and their length of employment. However, considering the various factors holistically, the NLRB concluded that the evidence showing an employment relationship outweighed the evidence supporting independent contractor status.

AtlantaOperaHouse,Inc., 371 NLRB No. 45 (June 13, 2023).

Note:

This test for determining independent contractor status is important for nonprofit organizations to consider when determining whether the NLRA applies to certain workers. California has a separate independent contractor test for determining whether certain California laws, including importantly wage and hour laws, apply to workers. California’s test has more stringent requirements for a worker to be considered an independent contractor.

Non-Compete Clauses Deemed Violation Of NLRA.

On May 30, 2023, the General Counsel of the National Labor Relations Board (NLRB) issued a memorandum clarifying that requiring employees to sign noncompete agreements to obtain or keep their jobs, or as part of severance agreements, interfere with employees’ exercise of their rights under Section 7 of the National Labor Relations Act (NLRA).

Section 7, in particular, protects employees’ right to self-organization, to form, join, or assist labor organizations, and to bargain collectively. The General Counsel said that non-compete provisions are overbroad and reasonably tend to chill employees in exercising their rights under Section 7 when the provisions

deny employees the ability to quit or change jobs. For example, the provisions interfere with Section 7 if they cut off employees’ access to other employment opportunities that they are qualified for based on experience, aptitude, and preferences as to type and location of work.

Generally speaking, this denial of access to employment opportunities is a violation of Section 7 activity because employees know they will have greater difficulty replacing their lost income if they are discharged for organizing and acting together to improve working conditions. In addition, an employer’s former employees are unlikely to reunite at a local competitor’s workplace, and therefore be unable to leverage their prior relations to encourage each other to exercise their rights to improve working conditions in their new workplace.

The General Counsel also noted that non-compete provisions can be construed as denying employees the ability to quit or change jobs by cutting access to other employment opportunities.

The full opinion letter can be found here

Lion Elastomers LLC: Setting-Specific Standards For Evaluating Employee Misconduct.

On May 1, 2023, the National Labor Relations Board issued a decision in Lion Elastomers LLC II, overruling General Motors LLC and returning to the long-established precedent of three different settingspecific standards for employees who are disciplined or discharged for misconduct that occurs during activity otherwise protected by

the National Labor Relations Act (e.g., employee activities related to employee’s hours, wages, and working conditions). The Board had previously made it easier for employers to sanction misconduct that takes place as part of protected activity. In overruling General Motors, the Board noted that labor disputes are often heated and the Board reaffirmed that employees must be given some leeway for their behavior while engaging in protected activity.

The three setting-specific standards are: (1) the Atlantic Steel test, which governs employee conduct towards management in the workplace; (2) the totality-of-the-circumstances test, which governs social media posts and most cases involving conversations among employees in the workplace; and (3) the Clear Pine Mouldings standard, which governs picket-line conduct. Under the Atlantic Steel test, the Board will look to: (1) the place of the discussion; (2) the subject matter of the discussion; (3) the nature of the employee’s outburst; and (4) whether the outburst was, in any way, provoked by an employer’s unfair labor practice. Under the Clear Pine Mouldings test, the Board will consider whether the misconduct was such that, under the circumstances existing, it may reasonably tend to coerce or intimidate employees in the exercise of rights protected under the Act.

LionElastomersLLC&UnitedSteel, Paper&Forestry,Rubber,Mfg., Energy,AlliedIndus.&Serv.Workers Int’lUnion,Local228, 372 NLRB No. 83 (May 1, 2023).

Note:

Going forward, nonprofit organizations should be aware of these setting-specific standards when disciplining employees.

Construction Corner

LCWrepresentsandadvisesnonprofitorganizationsinvariousbusiness,construction,andfacilitiesmatters,including allaspectsofconstructionprojectsfromcontractdraftingandnegotiationstocourseofconstructionissues. Through thisConstructionCorner,LCWwillbegivingnonprofitorganizationshelpfultipsonavarietyoftopicsapplicable toconstructionprojects. LCWattorneysareavailableshouldyouhaveanyquestionsorneedassistancewithany constructionprojectsnomatterwhatphaseyoumaybeincurrently.

California Construction Payments - Timing Of Progress Payments

By: Brian R. Dierzé

Progress payments in the construction world are rooted in an incremental approach to a construction project. Instead of a lump sum payment upon completion of the project, progress payments are partial payments made to a contractor after the completion of a predefined stage of the work. These types of payments are provided for in the contract between the project owner and contractor, and help contractors recover and pay for a portion of their costs during the construction project. They also give project owners a chance to assess whether the billed portion of work has been completed satisfactorily before the project proceeds.

Various methods can be used in a contract to designate when and how progress payments are due. The payments may be based on a percentage of the overall scope completed as the work progresses based on a schedule of values (lump sum contract) or payments may be made based on a cost of the work (typically a cost of the work plus a fee with a guaranteed maximum price). Progress payments can also be keyed to the completion of a specific stages of the project, such as when roofing and electrical systems have been put in place, although this is much less common.

The precise format and method of progress payments must be articulated clearly in the contract between the project owner and contractor. Project owners should determine the timing of these payments before a project starts, keeping in mind that too long of a payment period could stall the project, while too short of a payment period could create administrative difficulty with timely review and processing. Per Section 8800 of the California Civil Code, unless otherwise agreed in writing, the project owner must pay the contractor “any progress payment due as to which there is no good faith dispute between them … within 30 days after notice demanding payment pursuant to the contract is given.” This 30 day time period is a good balance.

From the above statute, unless the parties agree otherwise in the contract, progress payments must be made by the project owner within 30 days of notice from the contractor. Typically, notice comes in the form of a Request for Payment Application. The contract should provide detailed information that the contractor must provide in connection with its applications for payment so that the project owner can assess the progress of the project, project expenditures, and payments to subcontractors.

It should be noted that if a project owner violates the terms of Civil Code Section 8800 they can be penalized at two percent per month, in lieu of interest, on the amount wrongfully withheld. Further, in any action to collect amounts wrongfully withheld, the prevailing party may collect reasonable attorney’s fees.

A project owner and contractor should draft a clear contract detailing how progress payments will be invoiced, requirements for submission of pay applications, timing of payment, and reasons that payment may be withheld in order to minimize payment disputes and keep the project moving.

Change Orders – Over Budget – How Did This Happen!

By: Abigail Clark

A change order is a modification to an existing construction contract that changes the original project scope by either adding or deducting scope, which potentially impacts project time and contract costs.

Change orders are the most frequent cause of cost overruns for construction projects, and frustrating for many owners who strive to keep projects on time, and on budget. However, a clear understanding of why change orders occur, and careful planning, can help reduce the need for change orders and keep your project on track.

Change orders occur for a variety of reasons, including unforeseen conditions such as underground differing site conditions, weather delays, inaccurate architectural plans, unanticipated increases in the costs of labor or materials, lack of experienced construction personnel, and design changes.

Although sometimes a change order is unavoidable, understanding potential causes of change orders and advance planning during preconstruction can help minimize issues during the project. A project team who anticipates problems can address them upfront in the project design, timeline, budget, environmental assessment, and contract drafting. Some best practices include the following:

• Assess the nature of your project: Certain construction projects are more likely to generate change orders because some conditions cannot be anticipated until you put shovel to dirt. For example, laying a parking lot without significant grading is not a project that is likely to generate change orders. However, creating a building with an underground parking lot has the potential to encounter significant unforeseen underground differing site conditions. It is important for the latter project to conduct a thorough site investigation, utility survey and geotechnical assessment to help identify potential issues or surprises.

• Understand what you want to accomplish with your project: Sometimes change orders occur because the organization has not spoken to key constituencies to confirm everyone agrees about project goals and objectives. It is important to seek out input from the organization’s board and senior leadership, such as a real estate development or facilities director, before the project begins to confirm everyone is on the same page.

• Hire experienced and skilled personnel: It is important to hire an experienced contractor and architect who understand how to properly plan and budget for a construction project. Experienced project personnel can also help anticipate and plan for any delays, including scheduling long lead times for certain materials.

• Integrate Project Delivery: Frequently, contractors attempt to blame the architect when change orders arise citing errors and omissions in the architectural plans and specs. One way to avoid this is to hire a contractor who will perform pre-construction work to ensure that your architect and contractor work together from the beginning of the project, and coordinate project delivery.

• Allow for Contingencies in Your Construction Plan: A well-planned construction project should anticipate weather delays, allow for unforeseen conditions, and may offer alternatives, which the parties can agree upon as the project progresses. For example, weather frequently impacts a construction project. It is smart to include a certain number of rain or snow days in the contract to account for weather related delays.

• Establish a Change Order Procedure: The contract documents should establish a formal change order application and approval process, which can streamline the handling of potential changes, thereby reducing their overall project impact.

Consortium Call Of The Month

MembersofLiebertCassidyWhitmore’sconsortiumsareabletospeakdirectlyto anLCWattorneyfreeofchargetoanswerdirectquestionsnotrequiringin-depth research, document review, written opinions or ongoing legal matters. Consortium callsrunthefullgamutoftopics,fromleavesofabsencetoemploymentapplications, disabilityaccommodations,constructionandfacilitiesissuesandmore.Each newsletter,wefeatureaConsortiumCalldescribinganinterestingcallandhowthe issuewasresolved.Allidentifiabledetailswillbechangedoromitted.

Question: Answer:

When a letter of recommendation is written for a former employee, should a copy be placed in their personnel file?

The attorney advised the nonprofit organization that we do not recommend that reference letters be kept in the employee’s personnel file. Instead, the organization can keep reference letters in a separate, confidential correspondence file or in a file that the person writing the reference letters (e.g., Executive Director) maintains with all of the reference letters they have written.

The attorney also advised that before providing any references to another employer, we recommend requiring the former employee to sign a waiver and consent form, in which the former employee should specifically waive their right to access the letter of reference.

Finally, the attorney advised if an employee or former employee requests to view their personnel file, they do not have a right to view letters of reference under Labor Code Section 1198.5.

Liebert Cassidy Whitmore