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San Fernando
Thursday, Mar 28, 2024

Court Continues Anti-Business Perception

By GREGORY N. LIPPE Guest Columnist In 2002 a Court of Appeals decision in Salazar v. Diversified Paratransit, Inc.., 103 Cal. App. 4th 131 (2002) held that workers in California are not protected against workplace sexual harassment perpetrated by customers, vendors and other third parties. In 2003 AB 76 (Corbett), which was approved by then Gov. Davis on October 3, 2003 and signed into law as one of the governor’s last acts in office, repudiated the reasoning of the appellate court and rejected the 2002 decision. AB 76 provided that California employers could be held liable for sexual harassment committed against their workers by clients, customers and other third parties if the employers new or “should have known” of the harassment and failed to take immediate and appropriate corrective action to stop the harassment. There is no requirement to notify the employer and there doesn’t appear to be specific or objective criteria for determining whether the employer “should have known.” This bill added one more reason for employees to sue their employers thereby increasing the unfriendly business climate and costs of doing business in California. Now, as if the legislature’s and prior governor’s actions regarding AB 76 weren’t enough to exacerbate the negative aspects of doing business in California, on Thursday June 8, 2006 the California Supreme Court joined the apparent movement to drive more businesses out of California by holding, in direct opposition to the 2002 Court of Appeals decision, that the state’s sexual harassment law in existence prior to the passage of AB 76 already authorized workers to sue their employers for failing to stop harassment by customers, clients, patients, students and other non-employees thereby opening the flood gates to allow numerous lawsuits to be filed against employers for alleged harassment by third parties. California Supreme Court Justice Ming W. Chin, writing for the court, said, that the Legislature, in approving AB 76, merely clarified existing law. One case that will be affected by this ruling was reported in the Los Angeles Times (June 9, 2006 edition). It involves an 84 year-old male patient who was an in-patient in a Barstow hospital in the late 1990s. The patient, who was recovering from penile implant surgery, allegedly badgered a nurse for sex and spread rumors of having slept with the nurse at a local Motel 6. The anticipated cost to the employer consists of a monetary award to the nurse in the amount of $180,000, fees to the nurse’s attorney and court costs totaling $380,000 and an undisclosed amount for the defendant’s (employer’s) legal defense fees. It appears that the hospital could be facing a total cost of close to $1 million for an act that the administration didn’t control and may not have even known about. Clear rules Sexual harassment cannot and should not be tolerated. The laws with respect to such harassment in the workplace are relatively clear. Most employers have a sexual harassment policy to limit their liability which provides a procedure for notification and correction. When the perpetrator is not an employee, the employer does not have control. Because of this lack of control, it would seem that an employer should be subject to liability for the actions of non-employees only in situations where the employer participated in the harassment or clearly knew of it and didn’t take corrective action. I believe that the only accurate means of determining whether the employer clearly knew of the harassment would be to require written notification. I believe that AB 76, as written, is very dangerous to businesses and will perpetuate the perception that California is unfriendly to business. Therefore we must concentrate on changing the law as soon as possible instead of applying it to time periods prior to its existence. The following are the “Business/Job Killer” bills that I have chosen to profile this month: SB 1489: This bill would require the court to award the Attorney General (“AG”) all reasonable costs of investigating and prosecuting specified civil actions in cases where the AG prevails. The term prevail could include settlements, changes in operation by a defendant and nominal monetary awards. The bill would encourage the AG to bring actions, knowing that it would be relatively easy to get his/her entire costs paid for. SB 1489 provides a potential for harassment of employers by a governmental agency and provides a disincentive for doing business in California and could result in the loss of jobs. Status: Passed Senate, 4/27/06, Currently in Assembly. Valley Senators voting for bill: Kuehl, Scott. Valley Senators voting against bill: Margett, McClintock, Runner. Valley Senators absent, abstaining or not voting: Alarcon. SB 109: Currently, when civil penalties are recovered for minor violations of air quality, criminal penalties cannot be assessed and vice versa. This bill allows the assessment of both civil and criminal penalties for the same minor violation. If passed, it could result in increased costs of litigation and a potential increase in the number of lawsuits. It is a disincentive for business and could result in the loss of jobs. Status: Passed Senate, 5/31/05, Failed Assembly 9/7/05, returned to Assembly for reconsideration. Valley Legislators voting for bill: Senate, Alarcon, Kuehl, Scott; Assembly, Frommer, Koretz, Levine, Montanez, Pavley. Valley Legislators voting against bill: Senate, Margett, McClintock, Runner; Assembly, Sharon Runner, Strickland. Valley Legislators absent, abstaining, or not voting: Assembly, Richman. Gregory N. Lippe, CPA, is managing partner of the Woodland Hills-based CPA firm of Lippe, Hellie, Hoffer & Allison, LLP and a director and vice-chair of the Valley Industry and Commerce Association. (VICA).

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