EducationPrivateMatters 2022August
2 • Los Angeles • San Francisco • Fresno • San Diego • Sacramento • Table Of Contents Copyright © 2022 Requests for permission to reproduce all or part of this publication should be addressed to Cynthia Weldon, Director of Marketing and Training at 310.981.2000. Cover Photo: Attributed to pexels.com Private Education Matters is published monthly for the benefit of the clients of Liebert Cassidy Whitmore. The information in Education Matters should not be acted on without professional advice. To contact us, please call 310.981.2000, 415.512.3000, 559.256.7800, 916.584.7000 or 619.481.5900 or e-mail info@lcwlegal.com. 13 Did You Know...? 14 BenefitsCorner 16 LCW Best TimelinePractices 19 Consortium Call Of The Month Connect With Us!Contributors:@lcwlegalGraceChan Partner | San Francisco Millicent O. Usoro Associate | Los Angeles 03 Corporations Code 05 EMPLOYEESGifts 07 Wage & Hour 08 STUDENTSArbitration 11 Contracts
In September 2018, two months after Bancorp filed the malpractice suit, Fowler sent Bancorp a written demand to inspect and copy various books and records pursuant to Corporations Code Section 1600, including a breakdown of expenses, payment of legal fees, loan files, and accounting books and records. Fowler asserted that as a director, he had an “absolute right” to inspect the records. Bancorp refused to permit the inspection, citing a conflict of interest and concerns that Fowler was seeking the records to undermine Bancorp’s claims in the malpractice Bancorplawsuit. refused to produce the requested documents and Fowler filed a motion to compel.
The Court of Appeal also agreed with the trial court that exceptions to the general rule allowing unfettered access should only be applied in “extreme” cases where enforcing the absolute right of inspection would produce an “absurd” result. The Court reasoned that the mere possibility that requested information could be used to harm a corporation is not enough to curtail a director’s inspection rights. Moreover, a director’s right to inspection cannot be denied solely because the director has a conflict of interest or is in litigation with the Thecorporation.Courtof Appeal then considered the trial court’s finding that Bancorp failed to produce sufficient evidence to curtail Fowler’s absolute right to inspection, and that Fowler’s inspection was motivated by an improper purpose or that Fowler intended to breach his fiduciary duty or commit a tort against the corporation.
Between Director And Corporation. Bancorp was a bank holding company conducting business through its wholly owned subsidiary, Golden Pacific Bank, N.A. Rick Fowler was a member of Bancorp’s board of directors and its largest individual shareholder. Fowler was also the CEO of a law firm called Kronick, Moskovitz, Tiedemann & Girard In(KMTG).July2018, Bancorp filed suit against KMTG for malpractice regarding its representation in a suit against Bancorp. The complaint also alleged claims against Fowler for negligence, breach of fiduciary duty, concealment, and fraud based on Fowler’s actions as a Bancorp director. Specifically, the suit alleged Fowler breached his fiduciary duty by persuading Bancorp to hire KMTG for the suit against Bancorp.
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The Court of Appeal agreed with the trial court. The Court explained that Section 1602 grants broad rights to inspection, but not necessarily an absolute right. The Court identified other court opinions that identified circumstances in which inspection rights may be curtailed. For example, courts limit inspection rights when a director intends to misuse those rights to harm the corporation, when there is evidence that the director intends to use the documents to commit a tort against the corporations, and to protect attorney-client privileged documents when the director requesting inspection intends to misuse the privileged documents in a suit against the corporation.
Bancorp also argued that Fowler’s attempts to obtain the corporate records as part of discovery in the malpractice lawsuit proved Fowler’s intent
The trial court agreed with Bancorp, reasoning that the requests were overbroad, irrelevant to the malpractice lawsuit and invaded third-party privacy rights. Fowler filed a writ of mandate to enforce his right to inspect Bancorp’s books and records, and the trial court granted the writ petition. In its ruling, the court ruled that a director’s inspection rights can be curtailed only in “extreme circumstances” in which a corporation establishes that the director intends to commit a tort against the corporation with the requested records. The trial court held that
Bancorp did not produce sufficient evidence to curtail Fowler’s absolute right to inspection. Bancorp appealed.
Bancorp primarily relied on evidence that Fowler previously breached his fiduciary duties in connection with the malpractice lawsuit.
The Court of Appeal held that this evidence consisted of largely unsupported allegations and had little persuasive value on the question of whether Fowler was likely to use the requested corporate records to breach his fiduciary duties or commit a tort against the corporation.
Director’s Right To Inspect Corporate Records Was Not Curtailed By Litigation
Fowler v. Golden Pacific Bancorp (2022) 80 Cal.App.5th 205.
Kim Robinson comes to us after serving as the Vice-President of Human Resources and Administration for Child360 (formerly LAUP), a non-profit organization. Prior to her time at Child360, Kim acted as the Manager of HR and Administration at a national law firm for 5 years and the HR Administrator for an international law firm for over 15 years, respectively.
Please join us in welcoming Kim to the firm!
We are thrilled to announce that Kim Robinson has joined LCW’s management team as the Director of Human Resources!
4 • Los Angeles • San Francisco • Fresno • San Diego • Sacramento • to harm the corporation. The Court of Appeal rejected this argument because the trial court in the malpractice lawsuit ruled that the corporate records Fowler sought were irrelevant to the litigation; therefore, there was no support for Bancorp’s vague assertion that allowing Fowler access to the records would “severely undermine” Bancorp’s position in the lawsuit.
To LCW!
Note: Corporations Code Section 1600 governs for profit corporations. Sections 6330-6338 and 9510-9514 have substantially similar provisions that give directors of nonprofits a broad right to inspection. This case demonstrates California’s strong policy of allowing a director broad access to records unless there are “extreme” circumstances that warrant a limitation of this right, such as attorney-client privileged documents, documents that intrude on privacy rights, or when a director intends to use the records to commit a tort against the nonprofit or commit a breach of their fiduciary duty.
“With her background in law and human resources, Kim is a leader in her field. We welcome her to the firm and look forward to her contributions,” LCW Managing Partner J. Scott Tiedemann stated. “I have no doubt she will be a key player in shaping our employee’s experience and upholding our LCW values.”
The Court of Appeal also noted that the trial court credited Fowler’s declaration that the purpose of the inspection was related to his continuing duties as a member of Bancorp’s board of directors, and that it deferred to the trial court’s determinations of credibility.
The Internal Revenue Code.
Substantiation Requirements Of
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Albrecht filed a Form 1040, an Individual Income Tax Return, in which she reported the donation on Schedule A, Itemized Deductions. She attached a copy of the deed to the return. The Internal Revenue Service issued Albrecht a notice of deficiency disallowing the donation on the ground that the requirements of Internal Revenue Code Section 170 were not met.
Albrecht sought review in federal tax court.
In order to obtain a charitable contribution tax deduction, various substantiation requirements must be made based on the type of gift and the amount being claimed. For contributions of $250 or more,
The CWA must include (1) the amount of cash and a description (but not value) of any property other than cash contributed; (2) whether the donee organization provided any goods or services in consideration, in whole or in part, for any such property; and (3) a description and good faith estimate of the value of any such goods or services. The taxpayer must also receive the CWA from the donee organization on or before the earlier of the date the taxpayer files their return or the due date for filing the return.
Note: This case is an important reminder of the rigid standards for charitable contributions under the Internal Revenue Code. Donors are responsible for obtaining a written acknowledgement from nonprofit organizations, such as private K-12 schools, colleges, and universities that have 501(c)(3) status, for contributions of $250 or more before
Albrecht v. Comm’r, T.C. Memo 2022-53.
Deduction For A Donation Fails
The second page of the deed specified the conditions governing gifts to the museum. One of conditions stated that the donation was “unconditional and irrevocable” and that all rights, titles, and interest held by Albrecht in the property are included in the donation, unless otherwise stated in the Gift Agreement. The final three pages of the deed listed the items of donated property. However, no Gift Agreement was included with the deed, despite reference in the second page of the deed.
The Tax Court agreed with the Internal Revenue Service and held that Albrecht failed to meet the substantiation requirements for her donation. Specifically, the deed did not state whether the Wheelwright Museum provided any goods or services with respect to the donation. The deed provided that “all rights, titles and interests held by the donor in the property are included in the donation, unless otherwise stated in the Gift Agreement.” The terms of the deed were subject to a separate agreement but the Wheelwright Museum did not provide Albrecht with this agreement before the return was filed. The deed left open the question of whether the parties entered into a side agreement that included additional or superseding terms; therefore, the deed failed to meet the strict terms of the CWA requirements. The Court noted that Albrecht made a good faith attempt to substantially comply with the Internal Revenue Code by executing the deed, but substantial compliance does not satisfy the strict requirements of Section 170.
Because Taxpayer Did Not Meet
Martha Albrecht and her husband acquired a large collection of Native American jewelry during their marriage. In December 2014, Albrecht and her husband donated about 120 items of this collection to the Wheelwright Museum of the American Indian in Santa Fe, New Mexico. In connection with the donation, Albrecht executed a five page “Deed of Gift.” The first page of the deed stated that Albrecht “hereby donates the material described below to the Wheelwright Museum of the American Indian under the terms stated in the Conditions Governing Gifts to the Wheelwright Museum of the American Indian.”
Gifts Section 170 requires that a taxpayer obtain from the donee organization, and maintain in their files, a “contemporaneous written acknowledgement” (CWA).
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6 • Los Angeles • San Francisco • Fresno • San Diego • Sacramento • the donor can claim the charitable contribution on their income tax return. The gift deed in this case failed to meet the strict substantiation requirements for contributions over $250 and therefore, the taxpayer could not claim the charitable deduction. Tax-exempt nonprofits should carefully review gift deeds and agreements to ensure they comply with the Internal Revenue Code. LCW previously wrote about the requirements to provide a written acknowledgment to donors here onPremiumGoLiebertLibrary!
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employeesWage&Hour
Employer Was Not Required To List Hours And Rates Next To Its Calculation Of Employee’s “True-Up”
After significant litigation, the trial court held that Pacific Bell’s wage statements complied Labor Code Section 226, concluding that “an employer must only identify on the wage statement the hourly rate in effect during the pay period for which the employee was currently being paid and the corresponding hours worked.” Meza appealed.
Pacific Bell violated this section by failing to include rates and hours attributable to its “true-up” overtime payments. The overtime true-up payments were calculated using a complex formula involving bonus amounts and hours from prior pay periods. Under Pacific Bell’s incentive program, each month employees earned “points” that could be exchanged for merchandise based on achievement of specified metrics. Pacific Bell assigned the points a cash value for tax purposes and calculated the additional income taxes owed on the points. Pacific Bell generally listed these monetary amounts on the first wage statement of the month after the employee earned them.
As required by law, Pacific Bell included the value of the points (which was a form of a bonus) in the regular rate of pay for purposes of calculating the employee’s overtime pay. Because the employees earned the bonus over the course of the month and the bonus amount was not known until the end of that month, there was no way to determine the overtime owed in relation to that bonus on a payperiod by pay-period basis. Instead, Pacific Bell calculated the additional overtime owed - the overtime true-up - after the close of the month.
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The Court of Appeal agreed with the trial court and held that Labor Code Section 226 does not require Pacific Bell to list the rates and hours from prior pay periods underlying the overtime true-up calculation. The Court reasoned that Section 226, subdivision (a)(9) is explicit that it requires a list of hourly rates “during the pay period.” Therefore, Pacific Bell was not required to include the rates and hours from prior pay periods, especially because the overtime true-up was an after-thefact calculation based in significant part on the amount of bonus the employee earned the prior month.
The Court of Appeal affirmed the trial court’s order dismissing Meza’s wage statement claim.
Meza v. Pac. Bell Tel. Co. (2022) 79 Cal. App. 5th 1118. Note: Under federal and state law, employers must include bonuses and incentives to the regular rate of pay for calculating overtime. The Court of Appeal held that Pacific Bell was not required to list the wage rate or hours worked for an overtime true-up payment for the prior month’s work based on a bonus paid that month. This case serves as a reminder that private K-12 schools, colleges, and universities must strictly adhere to California’s wage statement requirements.
Overtime Under Labor Code Section 226. Pacific Bell hired Dave Meza in January 2014 as a premises technician. Meza left Pacific Bell in October 2015. Meza filed a class action lawsuit against Pacific Bell alleging several Labor Code violations, including failure to provide itemized wage statements in violation of Labor Code Section 226, subdivision (a)(9). Section 226, subdivision (a)(9) provides that an employee wage statement must include “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the Mezaemployee.”alleged
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Angie Moriana entered into a mandatory arbitration agreement when she was hired by Viking River Cruises (Viking), a company that offers ocean and river cruises around the world. The arbitration agreement waived her and Viking’s right to class, collective, or representative action. The agreement also included a severability clause providing that any invalid portion would be stricken and that any portion of the waiver that remained valid would be enforced in arbitration.
the motion, and the Court of Appeal and California Supreme Court affirmed. The California Supreme Court held that pre-dispute agreements that waive the right to “representative” PAGA claims are invalid as a matter of public policy. Other California state courts previously held the Federal Arbitration Act (FAA) does not preempt state law that prohibits waiver of PAGA actions in an employment contract and that PAGA actions cannot be divided into individual and non-individual Theclaims.U.S. Supreme Court reversed the California Supreme Court. The Court held that PAGA claims could be divided into individual and non-individual PAGA claims, and that the FAA preempts state law that PAGA precludes the division of PAGA actions into individual and non-individual claims in arbitration agreements. As a result, Viking was entitled to enforce the agreement insofar that it mandated arbitration of Moriana’s individual PAGA claim. Additionally, the Court held that non-individual claims must be dismissed for lack of standing if the individual claims have been compelled to arbitration, as the individual claim is severed from the other employee’s claim in the representational action. The Court explained that a plaintiff can maintain a non-individual PAGA claim only by maintaining an individual claim in the same action. Accordingly, the Supreme Court ordered the representative claims to be dismissed.
Viking River Cruises, Inc. v. Moriana (2022) 142 S. Ct. 1906. Note: Under Viking River Cruises, employers in PAGA cases may now enforce arbitration agreements for individual PAGA claims. Arbitration of individual claims will now deprive employees of standing to bring a representative PAGA action on behalf of other aggrieved employees. However, the Court left many unanswered questions in its opinion. It remains unknown how an “individual” PAGA claim will be litigated for Labor Code violations an employee personally suffered when the representative action is arbitrated outside of court. Moreover, the state legislative may amend the PAGA to address the standing requirements under Viking River Cruises, as Justice Sonia Sotomayer noted in her concurring opinion.
Vikingviolations.filed
After leaving her position, Moriana filed a Private Attorneys General Act (PAGA) action against Viking. She alleged Viking violated several provisions of the California Labor Code related to minimum wage, overtime, meal and rest periods, and pay statements. The PAGA allows employees to act as agents of the state of California and bring suit against employers for Labor Code violations. The default penalties against employers set by PAGA are $100 for each aggrieved employee per pay period for the initial violation of the Labor Code and $200 for each aggrieved employee per pay period for subsequent violations. Potential penalties in a PAGA action can be significant when they are brought on a representational basis. PAGA also provides for attorneys’ fees for the representative plaintiff. However, PAGA does not authorize employees to pursue individual or private claims for relief. Instead, in a successful PAGA action, the state is entitled to 75 percent of civil penalties recovered and the remaining 25 percent is distributed among the employees affected by the Labor Code violations at issue. Therefore, plaintiffs often assert both PAGA claims and claims on the underlying Labor Code a motion to compel arbitration of Moriana’s individual PAGA claim - meaning the claims that arose from the violations she personally suffered - and to dismiss her other PAGA claims. The trial court denied arbitration
Arbitration Of California Private Attorneys General Act Claims.
U.S. Supreme Court Rules The Federal Arbitration Act Preempts State Law That Prohibits
Then, eight months after Morgan filed the suit, Sundance filed a motion to compel arbitration under the Federal Arbitration Act (FAA). Morgan opposed the motion, arguing that Sundance waived its right to arbitration by litigating for so long. Under the test adopted by the Eight Circuit Court of Appeals, a party waives its contractual right to arbitration if it knew of the right and “acted inconsistently with that right,” and “prejudiced the other party by its inconsistent actions.”
The U.S. Supreme Court reversed the Eight Circuit, and overruled the eight other courts of appeal that also adopted the requirement of prejudice. The Supreme Court held that federal courts “cannot condition a waiver of the right to arbitrate on a showing of prejudice” and the Eight Circuit’s arbitration-specific rule runs afoul of the FAA. The Supreme Court reasoned that the FAA’s policy is to make arbitration agreements as enforceable as other contracts and therefore, the FAA does not authorize federal courts to invent procedural rules regarding arbitration. Moreover, the text of the FAA makes clear that courts cannot make up arbitration-specific procedural rules
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Cisco Systems, Inc. hired John Doe in September 2015 to work as an engineer. Doe was required to sign an arbitration agreement as a condition of his employment. Under the agreement Cisco and Doe must arbitrate “all disputes or claims arising from or relating to” Doe’s employment, including claims of discrimination, retaliation, and harassment.
Several years after signing the agreement, Doe filed a complaint with the Department of Fair Employment and Housing (DFEH), which investigates violations of the California Fair Employment and Housing Act (FEHA). When the DFEH receives complaints of employment discrimination, it has authority to investigate and informally resolve the complaint if it finds it has merit. If the matter is not resolved informally, the DFEH can decline to pursue it further and issue a right to sue notice to the complainant, which allows the employee to file a civil lawsuit against the employer. The DFEH can also file suit against the employer, and the plaintiff has a right to participate but is not required to do so.
Federal Courts May Not Make Up New ProceduralArbitration-SpecificRules.
Robyn Morgan worked as an hourly employee at a Taco Bell franchise owned by Sundance. When she applied for the job, Morgan signed an agreement to arbitrate any employment dispute. Despite that agreement, Morgan filed a class action suit alleging Sundance had violated the Fair Labor Standards Act regarding overtime Sundancewages.initially defended itself as if no arbitration agreement existed - it moved to dismiss the suit because it was duplicative of a class action previously brought by other Taco Bell employees. The trial court denied the motion, and Sundance raised a number of affirmative defenses, but none mentioned the arbitration agreement. Sundance also settled the other suit, but Morgan’s suit did not settle.
The trial court found this test was met in this case. On appeal, the Eight Circuit disagreed and sent the case to arbitration. The majority of the Eight Circuit panel reasoned that the parties had not begun formal discovery or contested the suit on the merits. Eight other federal courts of appeal also adopted an additional requirement that a plaintiff had to show they suffered from prejudice or harm by a defendant’s delay in enforcing an arbitration provision in litigation, while two courts of appeal rejected such a rule.
like the Eight Circuit’s test, as it directs federal courts to treat motions regarding arbitration in accordance to the usual federal procedural rules, such as rules relating to a motion’s timeliness.
DFEH Could Not Be Compelled
To Arbitrate Claim For Racial Discrimination Brought Against Employer.
Morgan v. Sundance, Inc. (2022) 142 S. Ct. 1708. Note: The Supreme Court held that arbitration agreements must be treated like any other enforceable contract. In other words, arbitration agreements cannot be disfavored or favored by virtue of requiring arbitration. Therefore, legal defenses to arbitration agreement should be treated the same as other legal defenses to other types of contracts. The Court also makes clear the policy of the Federal Arbitration Act is one that favors arbitration.
Doe’s complaint alleged that Cisco discriminated against him on the basis of his ancestry or race. He alleged that two supervisors denied him opportunities and disparaged him because under the traditional caste system in India, he is from the lowest caste and the supervisors are from the highest caste. He also alleged that Cisco retaliated against him when he complained about the unfavorable treatment.
The Court of Appeal rejected Cisco’s argument that the DFEH is bound by the arbitration agreement because it is Doe’s proxy in the lawsuit and is not acting independently. While the Court of Appeal did acknowledge that arbitration agreements can be enforced against third parties in certain situations - for example, when an agency relationship exists between the non-signatory and the signer. However, here, the state legislature gave the DFEH and the employee the ability to sue an employer for violating the FEHA. Therefore, the DFEH acts independently when it sues for FEHA violations and is not a proxy of an aggrieved employee.
The Court of Appeal explained that its conclusion is consistent with state and federal case law. It noted a California Supreme Court case that held an employee’s claim for employment discrimination in violation of FEHA is not categorically exempt from arbitration. The Supreme Court noted that its opinion should not be interpreted to mean that an arbitration agreement can restrict an employee from filing a complaint with the DFEH or that the DFEH is prevented from carrying out its function to file civil lawsuits against employees.
The Court Appeal also cited Viking River Cruises v. Moriana (2022) 142 S.Ct. 1906, where the U.S. Supreme Court reaffirmed that arbitration is a matter of consent and a party cannot be compelled to arbitrate without a contractual basis that evidences that the party agreed to do Ultimately,so. the Court of Appeal affirmed the trial court’s denial of Cisco’s motion to compel arbitration.
Note: Third-parties may be bound by an arbitration agreement when the nonsignatory assumes the obligations of the party who signed the agreement, when an agency relationship exists between the nonsigantory and the signer, or the nonsignatory is the “alter ego” of the signer. Here, the DFEH was not bound by the arbitration agreement because it acted independently of the parties by exercising its authority to sue for violations of the FEHA.
The DFEH investigated the complaint and concluded it had merit. The informal resolution process was unsuccessful and the DFEH filed suit against Cisco and the two supervisors. Doe was not a party to that suit.
Cisco moved to compel the DFEH to arbitration based on the arbitration agreement Doe signed. The trial court denied the motion and Cisco appealed.
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The Court of Appeal held that the arbitration agreement does not bind the DFEH to resolve disputes with Cisco by arbitration. The Court of Appeal reasoned that a contract cannot exist unless there is mutual assent, i.e., both parties agreed to the same thing. As a result, parties cannot be compelled to arbitrate a dispute they have not agreed to resolve in that way.
Dep’t of Fair Emp. & Hous. v. Cisco Sys. Inc. (Cal. Ct. App. Aug. 5, 2022) 2022 WL 3136003.
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After Panagos’ report Jorgensen learned that sometime in Fall 2019, Alex used the N-word in the Hopkins’ lunchroom. This incident was not reported to the administration and was not immediately investigated. In accordance with the school’s Handbook, Jorgensen relayed Panagos’ report to John Roberts, the Assistant Head of School. Several more students came forward with their own reports of Alex’s use of the N-word, and Jorgensen and Roberts undertook an investigation into the allegations. As part of the investigation, Jorgensen and Roberts met with Alex and his parents to inform them of the reports of Alex’s use of the N-word. In response, Alex and his parents insisted that Panagos coerced other students into falsely accusing Alex of using the N-word because Alex rejected Panagos romantically and Panagos disagreed with Alex’s political beliefs and support for President Donald Trump. The students told Jorgensen and Roberts that they waited to report Alex because they did not want Alex to get into trouble, but they had grown increasingly uncomfortable and concerned with Alex’s continued use of the racial slur. The students also denied being bullied into reporting Alex.
Court
RacialRepeatedDismissingAgainstParent’sDismissesLawsuitSchoolForSonForUseOfSlurs.
In October 2020, Lily Panagos, a student at Hopkins, reported to Lars Jorgensen, the Dean of Students and the Head Advisor for the class of 2023, that Alex used the N-word multiples times on FaceTime and at social gatherings in the spring and summer of 2020. Panagos said she and her classmates were fed-up with Alex’s continued use of the N-word, despite their requests that he stop using the racial slur. Jorgensen told Panagos that if other students shared her concerns, they should come forward and make their own reports.
The Hopkins School (Hopkins) is an independent day school in New Haven, Connecticut. Alex Ranciato enrolled in Hopkins in Fall 2019. Alex’s parents signed an enrollment contract agreeing, on Alex’s behalf, that he would abide by the School’s Handbook. The Handbook prohibits “offensive language and/or behavior that is harassing, discriminatory, threatening, or directed at another individual based on any other protected class.”
On October 22, 2020, a Discipline Committee convened for Alex’s hearing. The Committee was comprised of Jorgensen, a drama teacher, the Director of Community Engagement, four students from the Hopkins senior class, and Roberts who served as the chair of the Discipline Committee. Alex, his parents, and his advisor were present at the hearing. During the hearing, Alex admitted to using the N-word in the lunchroom in 2019 but denied using the word since that incident. Both Alex and his parents expressed their concern that Panagos was targeting Alex for rejecting her romantically and because of his political beliefs. The Committee did not find Alex’s denials credible and found the five students who reported Alex were credible. The Committee found that it was likely Alex continued use of the N-word after the lunchroom incident. The Committee concluded that Alex’s misconduct warranted expulsion and forwarded this recommendation to Dr. Kai Bynum, Head of School.
On October 24, 2020, Roberts called Alex’s parents to inform them of the recommendation for expulsion. The next day, Roberts emailed Alex’s parents that Dr. Bynum decided to allow Alex to withdraw from Hopkins instead of being expelled.
studentscontracts
On December 29, 2020 Alex’s parents filed a lawsuit against Hopkins, alleging various causes of action, including negligence and breach of contract. Specifically, Alex’s parents alleged that Hopkins failed to provide Alex with a fair disciplinary
Alex’s parents responded to this email, and withdrew Alex from Hopkins. On November 20, 2020, Roberts sent a written confirmation of the Discipline Committee’s decision that Alex no longer remain a student at Hopkins.
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Ranciato v. Hopkins Sch. (Conn. Super. Ct. July 1, 2022) 2022 WL 2426313.
The court noted that the Discipline Committee found the students’ allegations credible, and Alex’s parents did not present any evidence to contradict the evidence that was before the Discipline Committee.
12 • Los Angeles • San Francisco • Fresno • San Diego • Sacramento • process and failed to abide by express promises not to discriminate against Alex; failed to protect Alex from discrimination on the basis of his sex and disability; failed to protect Alex from sexual harassment, bullying, and racial harassment by Panagos; expelled Alex for serious misconduct despite Hopkins’ failure to produce evidence that using the N-word constituted serious misconduct; punished Alex on the basis of his race because as a white, conservative student, he was retroactively forbidden from using the N-word; and failed to issue a timely written decision as promised in the Handbook in cases of expulsion.
The court rejected the parents’ argument that Hopkins failed to investigate the allegations against Alex in violation of the Handbook.
court ruled in favor of Hopkins. The court found that Hopkins undeniably demonstrated its compliance with its rules and procedures. The court rejected Alex’s argument that he was expelled for misconduct not prohibited by the Handbook. The Handbook specifically defines offensive language or behavior that is discriminatory as “very serious misconduct” and prohibits “communications or behavior that is disrespectful, offensive, profane, threatening, harassing or disruptive” to Hopkins.
Hopkins’ administrators asked students who accused Alex whether they were pressured or bullied into reporting Alex’s behavior. Therefore, Hopkins did in fact investigate Alex’s claims that Panagos convinced other students to falsely accuse him of using the N-word. The court also rejected the parents’ argument that Hopkins failed to notify them of the Committee’s decision because they failed to identify a Handbook provision that required Hopkins to send written notice within a specified time period.
The court also held that Hopkins was unaware of Alex’s need for an accommodation, and therefore could not have discriminated against him because of his disability. The court also found that Hopkins did investigate Alex’s claims of harassment and bullying. Alex’s parents told Jorgensen that Panagos sent Alex sexual memes on Instagram and posted a video on TikTok with audio of a gun being fired and text calling Alex a racist and accusing him of racial slurs. However, Panagos reported herself to Jorgensen and admitted she sent Alex inappropriate social media posts and posted the TikTok video. Jorgensen then met with Alex and told him that his allegations of harassment against Panagos would be subjected to a separate disciplinary procedure.
The Handbook also expressly states that students may be dismissed for “very serious misconduct.” The court held that Alex’s use of the N-word is “undeniably offensive, discriminatory, disrespectful, and profane” and thus is in violation of the TheHandbook.courtalsorejected
The court rejected the parents’ argument that Hopkins failed to address the allegations of bullying and harassment because Hopkins did not discipline Panagos. Rather, the court found, the Handbook does not guarantee that Hopkins would impose discipline for every report of Themisconduct.courtalso denied the parents’ negligence claim on similar grounds as the breach of contract and discrimination claims. The court stated that Hopkins showed “diligence, thoroughness, patience, and fairness” because it followed its Handbook, investigated the allegations, and uniformly enforced its rules and procedures when reports of misconduct were made.
Note: The court in this case commended the school for following its handbook closely, and thoroughly investigating and taking appropriate action for each report of misconduct. The case is a reminder that private K-12 schools, colleges, and universities should closely follow their written policies and procedures in response to reports of student misconduct.
Hopkins filed a motion for summary judgment, arguing that all of its decisions were entitled to deference because it is an educational decision or in the alternative, there was no dispute of fact supporting the parents’
the parents’ argument that Hopkins breached its contract by expelling Alex despite the lack of evidence of Alex using the N-word. The court found this argument unsupported by the evidence, which included five students who came forward to report Alex for using the N-word over FaceTime and at social gatherings.
The court found there was evidence that Jorgensen and Roberts followed up on the reports against Alex by meeting with multiple students.
Theclaims.trial
13 2022August • www.lcwlegal.com • Whether you are looking to impress your colleagues or just want to learn more about the law, LCW has your back! Use and share these fun legal facts about various topics in labor and employment law.
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• On June 15, 2022, the Ninth Circuit Court of Appeals reversed the Court of Appeals in Brach v. Newsom LCW previously reported on this case, where the Court of Appeals ruled in favor of the private school parents who alleged the state’s schoolclosure orders in response to the COVID-19 pandemic violated their children’s constitutional right to minimum education under the Due Process Clause of the U.S. Constitution. The Ninth Circuit held the issues raised in the case were moot because the orders were rescinded and the trajectory of the pandemic had been altered by the introduction of vaccines and expanded treatment options.
An organization called “Let Them Breathe” filed two separate lawsuits against San Diego Unified School District and Los Angeles Unified School District. Last December, a judge in San Diego ruled that San Diego USD could not require COVID-19 vaccinations of students. This case is currently on appeal. On July 5, 2022 a Los Angeles superior court judge reached the same conclusion. Both judges held that the Health and Safety Code requirements that set out the mandatory vaccinations “occupied the field.” In other words, the legislative intent was to set out only those vaccines that were required for students to attend school and to prevent school districts from setting their own standards. Accordingly, if COVID-19 vaccinations were going to be mandatory, the legislature would need to add the COVID-19 vaccine to the list of required vaccinations for enrollment in school. It’s not clear how these cases might impact private K-12 schools, colleges, and universities, who should consult with an LCW attorney to assess the risks of vaccine mandates in light of these decisions.
• Effective July 1, 2022, the Department of Fair Employment and Housing (DFEH) is now the California Civil Rights Department (CRD). Beginning August 15, the department began updating its website and materials to reflect this change, with more materials to be updated in the coming months. The new website can be found here.
• Private K-12 schools, colleges, and universities may be eligible for the Employee Retention Tax Credit (ERTC). The ERTC is a credit that provides tax relief for employers who lost revenue in 2020 and 2021 due to the COVID-19 pandemic. Employers, including tax-exempt organizations, are eligible for the credit if they operated a trade or business during the calendar year 2020 and experienced either a significant decline in quarterly gross receipts, or a full or partial suspension of the operation of their business due to governmental orders limiting, commerce, travel or group meetings due to COVID-19. Private K-12 schools, colleges, and universities should consult with their accountant or tax professional to see if they qualify for this credit and to understand any implications of seeking such credit.
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• Whether the taxpayer would not have incurred the expense but for the taxpayer’s medical condition.
Section 213(a) of the Internal Revenue Code allows tax deductions for expenses paid for medical care that have not been paid for by insurance. Section 213(d)(1)(a) defines “medical care” as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. The Treasury Regulations limit deductions to expenses paid primarily for the prevention or alleviation of a physical or mental defect or illness. Taxpayers are prohibited from deducting personal, family or living expenses as “medical care” if they do not fall within Section 213’s definition.
Qualifies As “Medical Care” For Reimbursement Under A Health FSA.
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• A physician’s diagnosis of a medical condition and recommendation of the item as treatment or mitigation;
benefitscorner
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• Whether the costs are incurred for diagnosing, treating, mitigating, preventing, or alleviation of the taxpayer’s disease;
IRS Issues Guidance On What
The IRS issued Information Letter 2022-0005 providing guidance about what qualifies as “medical care” that can be reimbursed under a health flexible spending account (health FSA) or health savings account (HSA). Since the expenses permitted to be reimbursed by health FSAs and HSAs have changed over time, the IRS guidance provides welcome clarification on how to determine what expenses may be reimbursed.
• Whether the costs are merely beneficial to the taxpayer’s general health such that they might be considered the taxpayer’s personal expense; and
• The relationship between the treatment and the illness;
• The treatment’s effectiveness;
• The proximity in time to the onset or recurrence of a disease;
In IRS Information Letter 2022-0005, the IRS was asked whether health and wellness coaching for alleviation or prevention of a disease or chronic health risk qualified as “medical care.” While the IRS did not answer that specific question, the IRS provided guidance that taxpayers should use objective factors to determine whether an expense that is typically personal in nature was incurred for medical care. The factors may include:
The IRS’ guidance will help employers and third party administrators determine what expenses are reimbursable as “medical care” for employer-offered health FSAs and HSAs. For more information, the IRS Information Letter 2022-0005 can be found here: https:// www.irs.gov/pub/irs-wd/22-0005.pdf.
The taxpayer’s motive or purpose for making the expenditure;
Troy M. Heisman, an associate in our San Francisco office, provides advice and counsel regarding a variety of employment law matters as an experienced investigator and litigator. Troy litigates in both state and federal court and has experience from pre-litigation through trial.
15 2022August • www.lcwlegal.com •
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Aleena Hashmi, an associate in our Los Angeles office, is a skilled trial attorney who provides representation and counsel to clients in all litigation matters. Before joining LCW, Aleena gained legal expertise through her work at the Office of the Attorney General and the Los Angeles County District Attorney’s Office, where she conducted preliminary hearings, jury trials, and authored appellate briefs.
John LaCrosse is an associate in LCW’s San Diego office.
As an experienced litigator, John assists clients with matter including labor and employment, governance, student discipline issues, and special education. He is also has experience in all aspects of the discovery process, including interviewing witnesses, and regularly conducts extensive and in-depth research.
LCW In The News
To view these articles and the most recent attorney-authored articles, please visit: www.lcwlegal.com/news
Kiyoshi Din is an associate in our San Francisco office who provides representation and counsel to public agencies, educational institutions and non-profit organizations across the state. He is a litigator with experience in all aspects of the discovery process, including conducting pre-trial interviews and extensive in-depth research.
• Senior Counsel Dave Urban authored an article in IPMA-HR titled “High Court Ruling: Football Coach’s Prayers Amount to Private Speech.” Dave states, “This case not only involves free speech rights of a public school football coach to engage in prayer at games, but involves issues of establishment of religion and free speech as it applies in the entire public employment and education sector. The court’s opinion squarely addresses the current framework for speech law as it applies to talking about religion in or around the workplace.”
• Senior Counsel Dave Urban shared his thoughts on Kennedy v. Bremerton, along with other hot-button issues that have arisen in 2022 in Law360’s “4 Key Employment Rulings In First Half of 2022.” He notes that “the ruling is directly applicable for public employers like counties, cities and schools where situations often arise in which employees engage in potentially problematic speech.”
• Senior Counsel Dave Urban authored an Expert Analysis published by Law360 which speaks on the Kennedy v. Bremerton School District ruling.
Dave states that employee speech “on a matter of public concern that is outside official duties has First Amendment protection if the speech survives the applicable balancing test of interests, which courts test on a case-by-case basis.”
(a) All names, whether real or fictitious, of the person, firm, association, partnership, or corporation under which it has done and is doing business.
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1. The attendance of the pupils in a register that indicates clearly every absence from school for a half day or more during each day that school is maintained during the year (Education Code Section 48222.)
NOVEMBER THROUGH JANUARY Issue Performance Evaluations
• Consider using Performance Improvement Plans but remember it is important to do the necessary follow up and follow through on any support the School has agreed to provide in the Performance Improvement Plan.
lcw timelinebest
(b) The address, including city and street, of every place of doing business of the person, firm, association, partnership, or corporation within the State of California.
(c) The address, including city and street, of the location of the records of the person, firm, association, partnership, or corporation, and the name and address, including city and street, of the custodian of such records.
(d)
• We recommend that performance evaluations be conducted on at least an annual basis, and that they be completed before the decision to continue employment for the following school year is made.
Schools that do not conduct regular performance reviews have difficulty and often incur legal liability terminating problem employees - especially when there is a lack of notice regarding problems.
OCTOBER 1ST THROUGH 15TH File Verification of Private School Instruction
(e) The school enrollment, by grades, number of teachers, coeducational or enrollment limited to boys or girls and boarding facilities.
The names and addresses, including city and street, of the directors, if any, and principal officers of the person, firm, association, partnership, or corporation.
(f) That the following records are maintained at the address stated, and are true and accurate:
2. The courses of study offered by the institution.
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Every person, firm, association, partnership, or corporation offering or conducting private school instruction on the elementary or high school level shall between the first and 15th day of October of each year, file with the Superintendent of Public Instruction an affidavit or statement, under penalty of perjury, by the owner or other head setting forth the following information for the current year:
(g) Criminal record summary information of applicants that have been obtained pursuant to Section 44237.
3. The names and addresses, including city and street, of its faculty, together with a record of the educational qualifications of each.
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Each month, LCW presents a monthly timeline of best practices for private and independent schools. The timeline runs from the fall semester through the end of summer break. LCW encourages schools to use the timeline as a guideline throughout the school year.
Tax-exempt organizations whose annual gross receipts are less than $200,000, and total assets are less than $500,000 can file either form 990 or 990-EZ.
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The School should make its IRS form 990 available in the business office for inspection.
Annual review of finances (if fiscal year ended January 1st)
File all tax forms in a timely manner: Forms 990, 990EZ
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• Form 990-EZ
The Board is obligated to ensure fair and reasonable compensation of the Head of School and others. The Board should appoint a compensation committee that will be tasked with providing for independent review and approval of compensation. The committee must be composed of individuals without a conflict of interest.
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The School’s financial results should be reviewed annually by person(s) independent of the School’s financial processes (including initiating and recording transactions and physical custody of School assets). For schools not required to have an audit, this can be accomplished by a trustee with the requisite financial skills to conduct such a review.
• Form 990: Tax-exempt organizations must file a Form 990 if the annual gross receipts are more than $200,000, or the total assets are more than $500,000.
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Review employee health and other benefit packages, and determine whether any changes in benefit plans are needed. If lease ends at the end of the school year, review lease terms in order to negotiate new terms or have adequate time to locate new space for upcoming school year. Review tuition rates and fees relative to economic and demographic data for the School’s target market to determine whether to change the rates. Review student financial aid policies. Review, revise, and update enrollment/tuition agreements based on changes to the law and best practice recommendations.
A School below college level affiliated with a church or operated by a religious order is exempt from filing Form 990 series forms. (See IRS Regulations section 1.6033-2(g)(1)(vii)).
Other required Tax Forms common to business who have employees include Forms 940, 941, 1099, W-2, 5500
Compensation Committee Review of Compensation before issuing employee contracts
The 990 series forms are due every year by the 15th day of the 5th month after the close of your tax year. For example, if your tax year ended on December 31, the e-Postcard is due May 15 of the following year. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is the next business day.
• Schools should consider following the California Nonprofit Integrity Act when conducting audits, which include formation of an audit committee:
The School should have within its financial statements a letter from the School’s independent accountants outlining the audit work performed and a summary of results.
Although the Act expressly exempts educational institutions from the requirement of having an audit committee, inclusion of such a committee reflects a “best practice” that is consistent with the legal trend toward such compliance. The audit committee is responsible for recommending the retention and termination of an independent auditor and may negotiate the independent auditor’s compensation. If an organization chooses to utilize an audit committee, the committee, which must be appointed by the Board, should not include any members of the staff, including the president or chief executive officer and the treasurer or chief financial officer. If the corporation has a finance committee, it must be separate from the audit committee. Members of the finance committee may serve on the audit committee; however, the chairperson of the audit committee may not be a member of the finance committee and members of the finance committee shall constitute less than one-half of the membership of the audit committee. It is recommended that these restrictions on makeup of the Audit Committee be expressly written into the Bylaws. revise/update audits of vacant positions to determine whether positions are correctly designated as exempt/ non-exempt under federal and state laws.
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JANUARY/FEBRUARY Review and
current and
ON-DEMANDTRAINING Today.Train VISIT OUR WEBSITE FOR ALL OUR ON-DEMAND WWW.LCWLEGAL.COM/EVENTS-AND-TRAINING/ON-DEMAND-TRAININGOFFERINGS:
annual employment contracts. Conduct
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Members of Liebert Cassidy Whitmore’s employment relations consortiums may speak directly to an LCW attorney free of charge regarding questions that are not related to ongoing legal matters that LCW is handling for the agency, or that do not require in-depth research, document review, or written opinions. Consortium call questions run the gamut of topics, from leaves of absence to employment applications, disciplinary concerns to disability accommodations, labor relations issues and more. This feature describes an interesting consortium call and how the question was answered. We will protect the confidentiality of client communications with LCW attorneys by changing or omitting details.
A school administrator asked whether an employee who was scheduled to return from medical leave must submit a fitness for duty certification from their doctor before returning to work.
ConsortiumCallOfTheMonth
The attorney advised the school that a fitness for duty certification is not required for a return from family medical leave. The attorney advised that a school may only require a fitness for duty certification as a condition of reinstatement if it uniformly requires fitness-for-duty certifications for all employees returning from work after illness, injury or disability. In other words, if the school chooses to require or has required the certification, it must do so on a consistent basis. In addition, in order to require a fitness for duty certification, the school must have notified the employee of this requirement in the family leave designation notice and provided the employee a list of the employee’s essential job functions.
Question:Answer:
Liebert Cassidy Whitmore
