West v. Bechtel Corp.

Facts

The California Fair Employment and Housing Act provides: “It is an unlawful employment practice for an employer to refuse to hire or employ, or to discharge, dismiss, reduce, suspend, or demote, any individual over the age of 40 on the ground of age, except in cases where the law compels or provides for such action.” (Gov. Code, § 12941, subd. (a); quoted at West, supra, 96 Cal.App.4th at p. 978.) As the court would frame it, “[a] discharge is not ‘on the ground of age’ within the meaning of this prohibition unless age is a ‘motivating factor’ in the decision.” (Id. at p. 978.)

William West was an engineer who “worked his entire career for Bechtel-affiliated companies.” (West, supra, 96 Cal.App.4th at p. 970.) “Bechtel” is a trademark of an organization of roughly 150 engineering and construction companies headquartered in San Francisco; it maintains a worldwide personnel database (HRIS) tracking continuous service, and West had been honored for his 30th anniversary in 1994. (Ibid.) Bechtel’s practice was not to retain employees residing abroad — to avoid foreign laws and taxes — so West’s many overseas assignments were performed through other Bechtel entities, though “West testified that he always regarded himself as an employee of Bechtel.” (Ibid.) When work ran short he was placed on “holding status” for up to 90 days, retaining benefits and continuous-service eligibility. (Id. at p. 971.)

In September 1997, while working short-term projects in San Francisco, West, then 62, was approached about a position as manager of engineering on the Jubail Project in Saudi Arabia. (West, supra, 96 Cal.App.4th at p. 971.) Work on Jubail — described in Bechtel literature as “the largest single industrialization program ever” — was performed by Saudi Arabian Bechtel Company (SABCO), a Saudi limited-liability company owned by a Saudi entity and a Bechtel foreign subsidiary; “the client was the Royal Commission for Jubail and Yanbu (Royal Commission), an organ of the Saudi government.” (Ibid.) West understood the position to be a two-year posting and accepted it as the final “jewel” in the “crown” of his career, anticipating roughly $240,000 after taxes and expenses. (Ibid.)

West signed a “Recital of International Employment Conditions,” to which were attached SABCO’s Jubail “International Employment Conditions”; permanent international assignees were “employed by [SABCO].” (West, supra, 96 Cal.App.4th at pp. 971–972.) Critically, under SABCO’s contract with the Royal Commission, the Commission “retained ‘the right in its absolute discretion to reject or require the removal or replacement of personnel at any level,’” and West “acknowledged that all of his overseas assignments . . . were contingent on his acceptability to the clients.” (Id. at p. 972.)

SABCO project director Norm Shotwell submitted West’s résumé to the Royal Commission, whose director general approved West’s retention — “[a]lthough the document disclosed that West was 62 years old.” (West, supra, 96 Cal.App.4th at p. 972.) West testified that when he arrived on November 1, 1997, Shotwell “immediately remarked that West was going to have a problem because his gray hair showed that he was over age 50, and people over 50 ‘were regarded with suspicion’” — a remark West understood “to refer to perceptions of the Royal Commission.” (Ibid.) As late as November 30, 1997, Shotwell co-signed a memo asking West to reschedule holidays and work additional days, and SABCO “had no intention of terminating West.” (Ibid.)

That same day, however, the Royal Commission’s deputy director, Jasim Al-Hejji, sent Shotwell a memo directing that West be fired: “the Royal Commission has decided that Mr. William West does not satisfy our requirements as Engineering Manager, and should be replaced as soon as possible.” (West, supra, 96 Cal.App.4th at pp. 972–973.) Shotwell informed West on December 9, 1997. West’s diary recorded the “[r]eason given was my age and lack of display of energy,” that “Shotwell claimed that there was no recourse,” and that Al-Hejji “had full support of [the Director General].” (Id. at p. 973.) On cross-examination, West read his own EEOC charge — “My Director, Norman Shotwell, told me that I was not acceptable to the Saudi Arabian clients because I was over fifty years of age” — and ultimately confirmed he was “[u]nacceptably old to the Royal Commission.” (Id. at pp. 973–974.) West’s recurring grievance was that Shotwell “‘adopted the Royal Commission’s opinion’” and failed to “‘go to bat’” for him. (Id. at pp. 974, 981.)

West needed a Saudi work permit and “had no choice but to leave” once the Royal Commission did not want him. (West, supra, 96 Cal.App.4th at pp. 974–975.) He declined offers by Shotwell and a Royal Commission engineer to intercede, believing reversal “would be futile.” (Id. at p. 974.) Back in San Francisco he was, in his wife’s words, “a broken man,” but “never sought any treatment for his mental health.” (Id. at p. 975.) West “conceded that he never felt discriminated against by anyone at Bechtel other than Shotwell,” and that he was “‘welcomed back,’” “flattered” by a steady stream of offers — a two-to-three-week assignment in Argentina, a two-year Chile position at comparable pay, and a San Francisco–based role on the Antamina Project at his prior salary. (Id. at pp. 975–976.) He turned them all down, accepted holding status, drew unemployment benefits “on the basis that he was able to work,” and retired effective July 8, 1998, with a net worth exceeding $1.9 million. (Id. at pp. 976–977, 985.) “West acknowledged that he never looked for work” and admitted at the 1999 trial that “he could be working for Bechtel ‘today’ if he wanted to.” (Id. at p. 977.)

Procedural history

West sued Bechtel alone, having dismissed an earlier suit against SABCO. (West, supra, 96 Cal.App.4th at p. 977.) The complaint pleaded twelve causes of action, but only age discrimination under FEHA and breach of contract were tried to a San Francisco jury, which “deliberated over the course of six days, and twice reported being at an impasse, before rendering its special verdicts.” (Ibid.)

On the discrimination claim, the jury found that West was a Bechtel employee in Saudi Arabia, that “Bechtel or one of its agents removed West,” that “age was a motivating factor in Bechtel’s decision to remove West,” and that he sustained $50,000 in emotional-distress damages and $100,000 in lost salary. (West, supra, 96 Cal.App.4th at p. 977.) On the contract claim, the jury found a two-year contract, breach, $216,852.27 in lost salary, and that West “through reasonable efforts could have earned $165,000 by comparable employment.” (Ibid.) Judgment was entered for West for $101,852.27 — $51,852.27 in net lost salary plus $50,000 for emotional distress. (Id. at pp. 977–978.) The trial court denied Bechtel’s motions for new trial and for judgment notwithstanding the verdict, and Bechtel appealed. (Id. at p. 978.)

The Court of Appeal reversed “with directions to enter judgment for Bechtel Corporation,” with costs on appeal to Bechtel. (West, supra, 96 Cal.App.4th at p. 985.) The opinion was modified on denial of rehearing on April 5, 2002. (Id. at p. 985.)

Issue

Two questions, each resolved as a matter of law on the sufficiency of the evidence. First, on the FEHA claim: where a foreign-sovereign client not bound by antidiscrimination law orders an employee’s removal “because he was too old,” and the employer’s agent conveys and effectuates that order, is there substantial evidence of age discrimination by the agent sufficient to support a verdict against the employer — or may the client’s admitted bias be imputed to the agent? Second, on the contract claim: where the employer repeatedly offered the plaintiff comparable employment that he admittedly refused without ever looking for work, can a damages award survive the duty to mitigate? (West, supra, 96 Cal.App.4th at pp. 978, 984.)

The court narrowed the FEHA inquiry sharply. Bechtel raised four alternative grounds — FEHA’s extraterritorial reach, agency, the absence of discrimination evidence, and a compulsion defense — but the court resolved the appeal on the third alone: “We find no substantial evidence of discrimination by Shotwell, and therefore do not reach the other arguments.” (West, supra, 96 Cal.App.4th at p. 978.)

Holding

Reasoning

The statutory standard: age must be a “motivating factor,” and the plaintiff bears the initial burden. The court began with the operative text of Government Code section 12941, subdivision (a), and its settled gloss: a discharge is not “on the ground of age” “unless age is a ‘motivating factor’ in the decision.” (West, supra, 96 Cal.App.4th at p. 978, citing Caldwell v. Paramount Unified School Dist. (1995) 41 Cal.App.4th 189, 198.) Quoting Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 362, the court reiterated that “‘an employer would be entitled to judgment as a matter of law if the record conclusively revealed some other, nondiscriminatory reason for the employer’s decision.’” (West, supra, at p. 978.) And the burden of proof is the employee’s: he “must offer substantial evidence that the employer’s stated nondiscriminatory reason for the adverse action was untrue or pretextual, or evidence the employer acted with a discriminatory animus, or a combination of the two.” (Id. at p. 978, quoting Hersant v. Department of Social Services (1997) 57 Cal.App.4th 997, 1004–1005.)

The pivotal move: a culpable principal’s bias cannot be imputed downward to an innocent agent. The court conceded the obvious — the Royal Commission was biased — but located the legal fault line precisely: “that bias cannot be imputed to Shotwell.” (West, supra, 96 Cal.App.4th at p. 978.) It adopted the reasoning of the Tenth Circuit in Brownlee v. Lear Siegler Management Services Corp. (10th Cir. 1994) 15 F.3d 976, decided “on the same facts presented here,” where the Royal Saudi Air Force barred contractor employees on age grounds and the contractor capitulated. (West, supra, at pp. 978–979.) Brownlee held that while “discriminatory practices of an agent may be imputed back to a principal,” there was “no authority for imputing statutory liability in the opposite direction, from a culpable principal to an innocent agent.” (Id. at p. 979, quoting Brownlee, supra, 15 F.3d at p. 978.) Invoking Guz’s instruction that California discrimination law is guided by pertinent federal precedent, the court found Brownlee “persuasive where the principal is a foreign sovereign,” drew on Restatement Second of Agency section 343 (an agent commanded by a privileged principal owing no duty to the harmed person is not liable), and noted both that Saudi law does not prohibit age discrimination and that the Royal Commission was not bound by FEHA. (Id. at p. 979.) Because “West’s presence in the country was contingent on the approval of the Saudi government,” Shotwell “had no choice but to relieve West of his duties”; following the client’s wishes was “a ‘neutral business decision.’” (Ibid.)

Rejecting West’s effort to distinguish Brownlee. West argued Brownlee was distinguishable because the contractor there had tried to dissuade the Saudis. The court found nothing in Brownlee suggesting that fact bore on the holding; to the contrary, Brownlee had rejected the very theory that “‘[h]aving knowledge that your boss wants to discriminate and acquiescing in his discrimination . . . makes the subordinate equally liable.’” (West, supra, 96 Cal.App.4th at pp. 979–980, quoting Brownlee, supra, 15 F.3d at p. 977.) The question, therefore, narrowed to Shotwell’s own state of mind, a point West’s counsel had conceded at trial: “‘[i]t’s an essential element for us to prove some sort of personal animosity’ on Shotwell’s part.” (West, supra, at p. 980.)

No direct evidence of Shotwell’s own bias. Applying the deferential substantial-evidence standard — “‘we must resolve all conflicts in favor of the verdict, and indulge in all reasonable and legitimate inferences in order to uphold [it]’” — the court still found nothing. (West, supra, 96 Cal.App.4th at p. 980, quoting Caldwell, supra, 41 Cal.App.4th at p. 207.) “There is no evidence of any statement by Shotwell indicating that he personally thought West was too old for the job.” (Ibid.) The “suspicion” remark and the firing-day statements alike, on “all of the evidence” — diary, deposition, trial testimony, and EEOC charge — showed that “Shotwell ascribed the concerns about West’s age only to the Royal Commission.” (Ibid.) Borrowing the direct-evidence framing of Justice O’Connor’s concurrence in Price Waterhouse v. Hopkins (1989) 490 U.S. 228, 277, the court found no statement reflecting Shotwell’s own “explicit consideration” of age. (West, supra, at p. 980.)

No inferential proof either — and the same-actor inference cut hard against West. Turning to circumstantial proof, the court reasoned that “[i]f Shotwell were biased against West because of his age, then presumably he would not have hired West in the first place.” (West, supra, 96 Cal.App.4th at p. 980.) It invoked the same-actor inference from Horn v. Cushman & Wakefield Western, Inc. (1999) 72 Cal.App.4th 798, 809: “‘where the same actor is responsible for both the hiring and the firing of a discrimination plaintiff, and both actions occur within a short period of time, a strong inference arises that there was no discriminatory motive,’” because it “‘“hardly makes sense to hire workers from a group one dislikes . . . only to fire them once they are on the job.”’” (West, supra, at pp. 980–981.) Though rebuttable and subject to attenuation over time, the presumption “applies with particular force here because Shotwell fired West scarcely more than a month after he hired him.” (Id. at p. 981.) The November 30 memos reinforced the point: Shotwell was soliciting West’s future work “on the very day that directive was sent,” strongly implying he “was not planning to terminate West before he received the order to do so.” (Ibid.)

The “only one in the room” inference and the failure-to-protest theory both fail. The court engaged West’s two best inferences and rejected each. West testified Shotwell must have been biased because Shotwell “was the only one in the room” when he called West’s age unacceptable; but because Shotwell consistently “said that he was conveying the Royal Commission’s opinion,” “the words Shotwell used when he fired West did not support that inference.” (West, supra, 96 Cal.App.4th at p. 981.) Nor did Shotwell’s failure to protest the removal supply proof of bias: “the issue was not whether Shotwell was a loyal or admirable employer, the question was whether Shotwell was personally biased against West.” (Ibid., citing Guz, supra, 24 Cal.4th at p. 358.) His silence was “at least as plausibl[y]” explained by a belief that protest was futile or a reluctance to offend the client — “reasons having nothing to do with any personal discriminatory animus.” (Id. at pp. 981–982.) Even crediting West’s speculation that the Commission might have relented, a failure to object “might simply have been a bad business decision,” and the “‘issue is discriminatory animus, not whether the employer’s decision was “wrong or mistaken.”’” (Id. at p. 982, quoting Guz, supra, at p. 358.) Because any inference of bias “would be entirely speculative,” it was not substantial evidence. (Ibid.)

The evidentiary and affirmative-defense arguments are beside the point. West argued that, having testified to Shotwell’s statements, Bechtel could not rebut the inference of bias without producing Shotwell, and that the jury could draw an adverse inference from his absence. The court found these “unavailing”: Shotwell’s statements about West’s age were not hearsay (not offered for their truth, West’s competence not being in question); the Royal Commission’s statements relayed by Shotwell were “either a command . . . or an opinion . . . or both,” and Shotwell’s stated reasons, though hearsay, were admissible to show his state of mind. (West, supra, 96 Cal.App.4th at pp. 982–983.) Given “West’s burden of proof and failure to sustain that burden,” any defense weakness was “immaterial.” (Id. at p. 983.) For the same reason, Bechtel’s asserted failure to prove business-necessity or BFOQ defenses was irrelevant: “since West did not present substantial evidence of discriminatory intent on Shotwell’s part, Bechtel was not required to establish an affirmative defense.” (Ibid.) The court added, in dicta, that business necessity is a disparate-impact doctrine inapplicable to this disparate-treatment discharge, and that any BFOQ analogy to Abrams v. Baylor College of Medicine (5th Cir. 1986) 805 F.2d 528 would fail because, unlike the employer there that merely assumed a Saudi policy, “the Saudi governmental entity had expressed its opinion of West.” (Id. at pp. 983–984.)

The contract claim collapses on mitigation. The court reached the contract claim only through the dispositive failure-to-mitigate argument, declining the other three. (West, supra, 96 Cal.App.4th at p. 984.) A wronged employee “‘has a duty to take steps to minimize the loss by making a reasonable effort to find comparable employment,’” and recovery is reduced by what the employer proves the employee could have earned in “comparable, or substantially similar” work. (Ibid., quoting Parker v. Twentieth Century-Fox Film Corp. (1970) 3 Cal.3d 176, 181–182.) The undisputed facts allowed only one conclusion: “Bechtel gave West every opportunity to resume working,” offering “projects, foreign and domestic, large and small, which suited his abilities and met his salary expectations,” and West was “‘flattered’” by them yet “‘made no effort whatsoever to pursue such employment.’” (Id. at pp. 984–985.) While mitigation is ordinarily a fact question, “issues of fact become those of law where, as here, the facts are undisputed and permit of only one conclusion.” (Id. at p. 985.) The court rejected West’s disability-style excuse: he applied for unemployment “on the basis that he was able to work,” accepted holding status as available for assignment, and there was “no evidence of a disability.” His discouragement and fear of further discrimination were feelings “anyone suffering breach of an employment contract could be expected to have,” and to excuse all effort on that basis “would [make] the duty to mitigate damages . . . wholly illusory.” (Ibid.)

Significance

West is California’s leading authority for the proposition that a principal’s discriminatory motive cannot travel downward to fix statutory liability on an innocent agent who merely executes the principal’s command — the mirror image of the familiar rule that an agent’s bias is imputed upward to the employer. By importing Brownlee into FEHA through Guz’s federal-guidance principle, the court supplied a doctrinal answer to a recurring problem in globalized employment: what happens when a third party — here a foreign government client wielding contractual removal power — is the true source of the bias, and the defendant employer is structurally unable to resist. The decision’s reach is deliberately fact-bounded. The court stressed that the principal was “a foreign sovereign who is able to compel the employee’s discharge and is not bound by antidiscrimination laws” (West, supra, 96 Cal.App.4th at pp. 978–979) — features that made the agent’s compliance “a ‘neutral business decision’” (id. at p. 979). The opinion does not immunize an employer that shares or rubber-stamps a client’s prejudice; it holds only that, on this record, there was no evidence the agent did so.

Two further contributions endure. First, West is a workhorse precedent on the same-actor inference, applying Horn’s “strong inference” with “particular force” where barely a month separated hire and fire — a powerful defense tool whenever the decisionmaker who terminated also did the hiring. (West, supra, 96 Cal.App.4th at pp. 980–981.) Second, its mitigation holding is among the more emphatic statements that an employee who concededly never looked for work, while turning down comparable offers, fails to mitigate as a matter of law — a rare instance of the fact question collapsing into a legal one on summary appellate review. (Id. at pp. 984–985.) The decision tracks what is now CACI No. 2570 (age discrimination — disparate treatment), whose “motivating reason” element is the very predicate the court found missing as to Shotwell.

Key quotes

“Substantial evidence showed that the Royal Commission was biased against West because of his age, but that bias cannot be imputed to Shotwell.” (West, supra, 96 Cal.App.4th at p. 978.)

“[W]e know of no authority for imputing a principal’s discriminatory intent to an agent to make the agent liable for his otherwise neutral business decision. Similarly, while discriminatory practices of an agent may be imputed back to a principal . . . , we have found no authority for imputing statutory liability in the opposite direction, from a culpable principal to an innocent agent.” (West, supra, 96 Cal.App.4th at p. 979, quoting Brownlee v. Lear Siegler Management Services Corp. (10th Cir. 1994) 15 F.3d 976, 978.)

“Since it is indisputable that West was offered comparable, or substantially similar, employment, and he admittedly made no effort whatsoever to pursue such employment, it must be concluded that he failed to mitigate his damages as a matter of law.” (West, supra, 96 Cal.App.4th at p. 985.)

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Practice pointer

Open questions

By resolving the FEHA claim on the absence of evidence of Shotwell’s personal animus, the court “d[id] not reach” three substantial questions it expressly reserved: whether the FEHA reaches “acts and omissions in foreign countries”; whether Shotwell acted as Bechtel’s agent so as to subject Bechtel to liability; and whether Bechtel had a compulsion defense because Shotwell “had no choice but to terminate West when directed to do so by the Royal Commission.” (West, supra, 96 Cal.App.4th at p. 978.) The extraterritoriality question in particular remained unsettled by this opinion. On the contract side, the court likewise “d[id] not reach” whether the contract was for a two-year or indefinite term, whether the duration representations were attributable to Bechtel, or whether the removal order itself precluded any breach finding — resting solely on mitigation. (Id. at p. 984.) The court also signaled, without deciding, that “the result would be different where the evidence showed that the plaintiff suffered from a disability,” leaving open how a genuine disability defense to mitigation interacts with these facts. (Id. at p. 985.)