Flait v. North American Watch Corp.

Facts

Stuart Flait went to work as a sales representative for North American Watch Corporation (NAWC) on February 1, 1984, under an employment agreement stating that “it is not a contract of employment for a definite period.” (Flait v. North American Watch Corp. (1992) 3 Cal.App.4th 467, 471 (Flait).) He increased NAWC’s sales within his territory — in 1987 by 58 percent over the previous year, a fact NAWC did not deny. (Ibid.) The company was nevertheless dissatisfied, “purportedly because he exhibited greater allegiance to his customers than to his employer, did not require customers to carry all segments of NAWC’s line, and did not adequately service some stores”; NAWC’s president James Reilly, its human resources vice-president, and Flait’s supervisor, senior vice-president John Pistner, spoke to Flait about what they termed an “attitude problem” in 1986 and 1987, and he agreed to improve. (Ibid.) Flait countered that NAWC itself controls the makeup of each customer’s line because the company must approve and accept every order — “a fact conceded by NAWC.” (Ibid.)

Flait supervised a NAWC marketing representative named Pamela Berger. In March 1987 Berger called Flait and complained that, during a sales meeting and in front of other employees, Pistner had called her “a vulgar slang expression for female genitals.” (Flait, supra, 3 Cal.App.4th at p. 471.) Flait told Pistner it was improper to speak to a female employee that way; Pistner “did not confront the issue and hung up the telephone.” (Ibid.) In March or April 1987 Berger reported that Pistner had commented to her about his oral sex habits; Flait called Pistner again, told him it was inappropriate for “a senior vice-president” to make sexual comments to Berger, and said “this had to stop.” Pistner’s response: “Next subject. Next subject.” (Id. at pp. 471–472.) Berger later told Flait that Pistner had telephoned her and asked, “in crude terms,” whether she had had sexual relations the previous evening; in August 1987 Flait called Pistner a third time and told him to cease bothering Berger. (Id. at p. 472.) Flait then noticed Pistner “turned against him” despite his business success. (Ibid.)

Berger never used the phrase “sexual harassment,” but Flait was convinced she felt harassed because she reported the incidents “time and again”; he believed the conduct was creating a hostile work environment for her, and he “thought he was responsible for taking care of Berger’s dissatisfaction because he was her supervisor and she had reported the incidents to him directly.” (Flait, supra, 3 Cal.App.4th at p. 472.) Critically, “NAWC does not have any established policy or guidelines under which complaints of employee harassment or discrimination may be addressed.” (Ibid.)

In early January 1988 Flait was summoned to NAWC’s main office. He expected a promotion — Pistner had mentioned the possibility of a regional manager position, and Flait had opened new accounts, increased sales, trained new salesmen, and never received a letter of criticism. Instead he was fired for not being a “company man.” (Flait, supra, 3 Cal.App.4th at p. 472.) Pistner made the termination decision, telling Reilly he was “continually” dissatisfied with Flait’s performance — though Reilly “could not, however, recall any instances of dissatisfaction with Flait that he discussed with Pistner,” Pistner had never voiced criticisms of Flait to his own assistant sales manager (to whom Flait reported), and Pistner could not recall reviewing Flait’s sales record before firing him. (Ibid.) When Flait told Reilly he believed he was being punished for protesting Pistner’s abuse of Berger, Reilly “was taken aback” — but after Pistner denied making the statements, “Reilly did not look any further into the matter.” (Ibid.)

Berger’s evidence cut both ways. Shortly after the termination she handwrote a statement, at Flait’s request, confirming Pistner’s vulgar epithet and comments, her reports to Flait, and that she resigned in January 1988 “because she was unable to tolerate the harassment.” (Flait, supra, 3 Cal.App.4th at p. 473.) At her subpoenaed deposition she acknowledged the statement was “accurate, true and correct” and made freely, and confirmed the incidents — but testified Pistner had apologized, that this was satisfactory “knowing Mr. Pistner,” who had “a dirty mouth,” and that although his comments “made me not respect my bosses too much, and it’s hard to do a good job for a company when you don’t respect them,” they did not in her opinion affect her job performance or create a hostile work environment. (Ibid.) Contrary to her written statement, she denied feeling harassed and said she quit over NAWC’s travel demands. (Ibid.) The court noted the context: Berger was upset at being subpoenaed, feared for her reputation and new job, had parents in the watch industry who had “expressly forbidden her from participating in Flait’s lawsuit,” was admittedly angry, and wanted to “retract everything” — yet when pressed, the only change she would make to her handwritten statement was changing “occasions” to “occasion.” (Id. at pp. 473–474.)

Procedural history

Flait filed a complaint with the Department of Fair Employment and Housing, allegedly received a right-to-sue letter on March 27, 1988, and sued NAWC in April 1988, alleging he was discharged in retaliation for his efforts to prevent Berger from being sexually harassed. (Flait, supra, 3 Cal.App.4th at p. 474.) In December 1990 NAWC moved for summary adjudication of issues, and in January 1991 the trial court adjudicated five issues in NAWC’s favor: (1) Berger was not sexually harassed and Flait could not reasonably have believed she had been; (2) Flait was terminated for good cause, not for statutorily protected activity; (3) his implied covenant claim was preempted or barred by his at-will status; (4) his accounting demand had been satisfied; and (5) his emotional distress claim was preempted by the workers’ compensation act. (Ibid.) The court entered judgment for NAWC on March 4, 1991, and awarded NAWC attorney fees and costs of $153,957.61. Flait appealed a month later. (Ibid.) The Court of Appeal reversed the judgment and fee award, directed reinstatement of the retaliation cause of action, and modified the opinion on denial of rehearing March 5, 1992. (Id. at pp. 467, 481.)

Issue

Whether summary adjudication could extinguish a FEHA retaliatory-termination claim on the grounds that the underlying harassment did not occur and that the plaintiff could not reasonably have believed it occurred — where the plaintiff-supervisor thrice confronted the harassing executive, that executive later made the termination decision, and the employer’s asserted business justifications were contradicted by its own concessions. Subsidiary questions: whether a supervisor’s informal, direct-to-the-harasser intervention is protected activity under the FEHA; whether the workers’ compensation act bars emotional distress damages flowing from a FEHA violation; and whether the implied covenant and fee rulings could stand. (Flait, supra, 3 Cal.App.4th at pp. 471, 474–481.)

Holding

Reasoning

The 1992 summary judgment standard. Writing under the pre-1993 version of Code of Civil Procedure section 437c, the court stressed that the moving party’s papers are strictly construed, the opponent’s liberally, and that “‘… [I]ssue finding rather than issue determination is the pivot upon which the summary judgment law turns.’” (Flait, supra, 3 Cal.App.4th at p. 474.) A moving defendant “must conclusively negate a necessary element of the plaintiff’s case or establish a complete defense and thereby demonstrate that under no hypothesis is there a material factual issue which requires the process of a trial.” (Id. at pp. 474–475.)

The statutory framework: a duty to act, and protection for acting. The court grounded its analysis in the text of Government Code section 12940 as it then read. The harassment provision (then subdivision (h), now subdivision (j)) requires that an employer, its agents, or supervisors who know or should have known of harassing conduct “take immediate and appropriate corrective action,” and obligates the employer to take all reasonable steps to prevent harassment; “[l]oss of tangible job benefits is not necessary in order to establish harassment.” (Flait, supra, 3 Cal.App.4th at p. 475.) The opposition provision (then subdivision (f), now subdivision (h)) makes it unlawful “to discharge, expel, or otherwise discriminate against any person because the person has opposed any practices forbidden under this part.” (Ibid.) The court quoted at length the Legislature’s 1984 declaration that harassment “whether intentional or unintentional is a violation of the civil rights of California citizenry,” and that employers must “establish affirmative programs which include prompt and remedial internal procedures and monitoring so that worksites will be maintained free from prohibited harassment.” (Ibid., quoting Stats. 1984, ch. 1754, § 1.)

The title VII analogy and the burden-shifting architecture. The FEHA “prohibits an employer from terminating any employee, including at-will employees, for attempting to comply with its provisions forbidding racial, sexual or other forms of job harassment,” and retaliation claims under it “are analogous to federal ‘title VII’ claims” and evaluated under federal law. (Flait, supra, 3 Cal.App.4th at pp. 475–476, citing Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 606.) The court set out the now-familiar three-stage sequence from Texas Dept. of Community Affairs v. Burdine (1981) 450 U.S. 248, 252–253: a prima facie case, the employer’s legitimate nonretaliatory explanation, and the plaintiff’s showing of pretext. (Flait, at p. 476.) And it stated the prima facie elements in the formulation California courts have used ever since: “the plaintiff must show that he engaged in a protected activity, his employer subjected him to adverse employment action, and there is a causal link between the protected activity and the employer’s action.” (Ibid., citing Fisher, at p. 614.)

Protected activity: the supervisor’s duty makes his opposition protected. The trial court had adjudicated the claim on the theory that Berger was not harassed and Flait could not reasonably have believed she was. The Court of Appeal reframed the inquiry. Both the state and federal statutes “are designed to foster open communication between an employer and its employees regarding perceived misconduct,” and the FEHA “goes even further than the federal statute” by affirmatively requiring supervisors to “take immediate and appropriate corrective action” when harassment is brought to their attention — and it “then protects the supervisor who properly takes immediate corrective action from retaliation.” (Flait, supra, 3 Cal.App.4th at p. 476.) Flait, as Berger’s supervisor, “therefore had a statutory duty to take immediate action to end sexual harassment,” defined as “verbal, physical, or sexual behavior directed at an individual because of her, or his, gender,” including verbal insults such as epithets, derogatory comments, or slurs. (Id. at pp. 476–477.)

The critical inquiry is good faith and reasonableness — not whether harassment in fact occurred. Borrowing from the Seventh Circuit’s decision in Rucker v. Higher Educational Aids Bd. (7th Cir. 1982) 669 F.2d 1179, 1182, the court held an employer may not “fire an employee because he opposed discrimination against a fellow employee, even if he was mistaken and there was no discrimination,” so long as the mistake is sincere and reasonable: “it is good faith and reasonableness, not the fact of discrimination, that is the critical inquiry in a retaliation case.” (Flait, supra, 3 Cal.App.4th at p. 477.) “Thus, the fundamental question posed by this case is the reasonableness of Flait’s belief that he was opposing unlawful harassment,” and Flait “may prevail even if the harassment was not sufficiently severe or pervasive that it altered Berger’s work environment, and even if Berger had some unarticulated belief that she had not been harassed.” (Ibid.) That reasonableness is “a credibility question that cannot be resolved by summary judgment.” (Ibid.) As for Berger’s deposition retreat from her handwritten statement — given her admitted fear and anger — “[i]t is entirely unsuitable to unravel Berger’s tangled web of motivations on a motion for summary judgment. It is enough that she does not dispute Pistner made the statements to her and that she reported them to Flait.” (Ibid.)

An employer without a complaint procedure cannot demand procedural perfection from its supervisors. NAWC argued Flait should have waited to act “until the harassment became pervasive, continual and systematic.” The court called the argument “antithetical” to section 12940’s command of immediate and appropriate corrective action. (Flait, supra, 3 Cal.App.4th at p. 477.) “It hardly behooves NAWC to complain that Flait did not take ’appropriate’ remedial action by confronting the issuer of the remarks when the company admittedly failed to promulgate any guidelines or policy instructing its supervisors how to handle harassment claims, in violation of the Legislature’s express mandate.” (Id. at pp. 477–478.) Given that institutional failure, “it was appropriate for Flait to go directly to the source of the problem,” and “[a] jury could find that Flait was entirely successful in his ‘whistle-blowing’ efforts because the sexual comments ceased after he confronted Pistner.” (Id. at p. 478, citing Meritor Savings Bank v. Vinson (1986) 477 U.S. 57, 72–73.)

Causation: the harasser was the decisionmaker, and the timing was close. Circumstantial evidence sufficed for the causal link: “The evidence showed that the same highly placed corporate officer who made the offending comments was also responsible for Flait’s termination, which is probative of NAWC’s knowledge that Flait had engaged in protected activity. The evidence also showed that Flait was terminated only a few months after he last confronted Pistner, though he had worked for the company for four years.” (Flait, supra, 3 Cal.App.4th at p. 478.) Direct evidence of intent is not required “so long as improper motive can be inferred from circumstantial evidence.” (Ibid., citing U.S. Postal Service Bd. of Govs. v. Aikens (1983) 460 U.S. 711.) In sum, all three prima facie elements were established, with the good-faith question reserved for the trier of fact. (Ibid.)

Legitimate reasons, and a record from which a jury could find them “bogus.” NAWC’s evidence that Flait was fired for not being a “company man,” for excessive customer loyalty, and for failing to enforce “balanced representation” of the product line was “sufficient to permit a trier of fact to conclude that its employment decision may not have been motivated by animus” — but not sufficient for judgment as a matter of law in the face of pretext evidence. (Flait, supra, 3 Cal.App.4th at p. 479.) The pretext analysis is a model of record-driven skepticism. NAWC conceded it alone approves customer orders, yet claimed Flait “continually” submitted deficient purchase orders; there was “no supporting documentary or testimonial evidence” of that, and “no explanation offered as to how Flait’s sales could have increased by nearly 60 percent in the year before he was terminated if his orders were ‘continually’ rejected.” (Ibid.) “In short, a trier of fact could find that the ‘balanced representation’ justification was bogus, that the purportedly excessive customer allegiance was in fact the key to Flait’s nearly 60 percent increase in sales for NAWC, and that by saying Flait was not a ‘company man,’ NAWC meant it wanted salesmen who did not complain about the sexual remarks directed at female employees by a company senior vice-president.” (Ibid.)

The pretext factors: timing, identity of the decisionmaker, and prior performance. Citing Miller v. Fairchild Industries, Inc. (9th Cir. 1989) 885 F.2d 498, the court explained that “[p]retext may also be inferred from the timing of the company’s termination decision, by the identity of the person making the decision, and by the terminated employee’s job performance before termination.” (Flait, supra, 3 Cal.App.4th at p. 479.) Each factor pointed Flait’s way: Pistner — “issuer of the offensive sexual remarks” — was “the sole person charged with the decision to terminate,” Reilly deferred to him, and the decision “came only four months after Flait last confronted Pistner”; no one could recall reviewing Flait’s sales records; the few verbal criticisms were “counterbalanced by compliments,” including Pistner’s own statements that Flait was “doing a good job,” that the company was lucky to have him, and that he might be promoted to sales manager. (Id. at pp. 479–480.) “Viewing the evidence in the light most favorable to Flait, a reasonable trier of fact could conclude that NAWC’s articulated reasons for terminating Flait’s employment are not worthy of credence.” (Id. at p. 480.)

Workers’ compensation exclusivity does not swallow FEHA remedies. The trial court had also erred in holding Flait’s emotional distress claims barred: “The Legislature, in enacting CFEHA, did not intend that its objective of providing relief from civil rights violations would be defeated by the exclusive remedy provision of the workers’ compensation act.” (Flait, supra, 3 Cal.App.4th at p. 480.)

The implied covenant claim fails — but the fee award falls. Because Flait’s contract disclaimed any definite term, employment was terminable at will under Labor Code section 2922, and Flait identified no contractual term or company policy assuring continued employment; under Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, the covenant protects the contract’s express promises, “not … some general public policy interest not directly tied to the contract’s purposes,” and contractual remedies are unaffected by the breaching party’s motive. (Flait, supra, 3 Cal.App.4th at pp. 480–481.) Summary judgment on that cause of action was proper — though the court observed in a footnote that Flait, with leave to amend, “may be able to succeed on a public policy theory” of tortious discharge. (Id. at p. 481, fn. 2.) Finally, the $153,957.61 award of fees and costs under Government Code section 12965, subdivision (b), was reversed “because respondent is no longer the prevailing party on Flait’s cause of action for retaliatory termination.” (Id. at p. 481.)

Significance

Flait is one of the foundational opinions of California retaliation law. Its statement of the prima facie case — protected activity, adverse employment action, causal link (Flait, supra, 3 Cal.App.4th at p. 476) — became the standard California formulation, repeated in Akers v. County of San Diego (2002) 95 Cal.App.4th 1441, Iwekaogwu v. City of Los Angeles (1999) 75 Cal.App.4th 803, and ultimately by the Supreme Court in Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, which framed the elements in materially identical terms: a plaintiff must show “(1) he or she engaged in a ‘protected activity,’ (2) the employer subjected the employee to an adverse employment action, and (3) a causal link existed between the protected activity and the employer’s action.” (Yanowitz, at p. 1042.) Yanowitz likewise cemented the reasonable-belief principle at Flait’s core: “a retaliation claim may be brought by an employee who has complained of or opposed conduct that the employee reasonably believes to be discriminatory, even when a court later determines the conduct was not actually prohibited by the FEHA.” (Id. at p. 1043.)

Three of Flait’s moves have proven durable. First, the opinion recognizes that a supervisor — not just the harassment victim — holds a retaliation claim when he is punished for performing his statutory duty to take “immediate and appropriate corrective action,” a holding that protects the managers on whom FEHA compliance actually depends. (Flait, supra, 3 Cal.App.4th at p. 476.) Second, it decouples the retaliation claim from the merits of the underlying harassment: the victim’s equivocation, or even her denial, does not defeat the opposing employee’s claim so long as his belief was sincere and reasonable — a rule that removes the perverse incentive to ignore misconduct until it ripens into an airtight case. (Id. at p. 477.) Third, its pretext toolkit — decisionmaker identity, timing against a long tenure, undocumented justifications contradicted by the employer’s own concessions, and strong performance — remains a template for opposing summary judgment, and its insistence that a witness’s “tangled web of motivations” is unsuitable for resolution on paper anticipates the modern treatment of credibility at summary judgment. (Id. at pp. 477, 479–480.) The opinion also supplied an early, clean statement that workers’ compensation exclusivity does not bar emotional distress damages flowing from FEHA violations. (Id. at p. 480.) Note the statute has since been relettered: the opposition clause the court applied as former subdivision (f) of section 12940 is today’s subdivision (h), and the corrective-action provision then at subdivision (h) is today’s subdivision (j).

Key quotes

“CFEHA goes even further than the federal statute by requiring that supervisors ‘take immediate and appropriate corrective action’ when harassment is brought to their attention. (Gov. Code, § 12940, subd. (h).) The statute then protects the supervisor who properly takes immediate corrective action from retaliation.” (Flait, supra, 3 Cal.App.4th at p. 476.)

“He may prevail even if the harassment was not sufficiently severe or pervasive that it altered Berger’s work environment, and even if Berger had some unarticulated belief that she had not been harassed.” (Flait, supra, 3 Cal.App.4th at p. 477.)

“It is entirely unsuitable to unravel Berger’s tangled web of motivations on a motion for summary judgment. It is enough that she does not dispute Pistner made the statements to her and that she reported them to Flait.” (Flait, supra, 3 Cal.App.4th at p. 477.)

“Pretext may also be inferred from the timing of the company’s termination decision, by the identity of the person making the decision, and by the terminated employee’s job performance before termination.” (Flait, supra, 3 Cal.App.4th at p. 479.)

Read the full opinion (Justia) →

Practice pointer

Open questions

Flait decided only that a trier of fact must resolve the claim; it did not hold that Berger was harassed, that Flait’s belief was in fact reasonable and sincere, or that NAWC retaliated — each was expressly committed to the fact finder. (Flait, supra, 3 Cal.App.4th at pp. 477–478.) The opinion predates the definitional debates its own elements later generated: it had no occasion to define “adverse employment action” (a termination plainly qualified), a gap California courts filled a decade later in Akers v. County of San Diego (2002) 95 Cal.App.4th 1441 and that the Supreme Court settled in Yanowitz. Nor did it address how an employee’s opposition must be communicated to put the employer on notice — the question Yanowitz later answered by requiring that complaints, read in their totality, convey opposition to prohibited discrimination, without “legal terms or buzzwords.” (Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1047.) The court left Flait’s own path forward partially open as well: his implied covenant claim failed on at-will grounds, but footnote 2 flagged — without deciding — that he might amend to plead tortious discharge in contravention of public policy. (Flait, supra, 3 Cal.App.4th at p. 481, fn. 2.) And because the opinion analyzed a supervisor performing a statutory duty, it left undecided how far the reasonable-belief rule extends to employees with no supervisory responsibility who intervene informally on a coworker’s behalf — a question the “opposition” clause’s broad text invites but this record did not present.